With the softening demand and falling raw material costs, US pipe prices continue to trend down.
On the standard pipe side, buyers indicate that import offers for ERW A53 BPE in the US are now at a level of $45.00 cwt. to $47.00 cwt. ($992 /mt to $1,036 /mt or $900 /nt to $940 /nt) duty-paid, FOB loaded truck, in US Gulf ports, down a significant $20.00 cwt. ($441 /mt or $400 /nt) from their peak in August. India, Turkey, and East Asia are still the main sources offering, though there are not a great number of offers out there, traders say.
The main market for welded standard pipe, commercial construction, remains depressed in the US, so while there are not a significant amount of imports coming in, and existing inventories are still on the low side, demand for standard pipe is very weak despite the slim supplies.
"Business has certainly gotten a lot quieter," one Gulf area pipe trader told SteelOrbis this week. "This is a quiet time of year to begin with, so things are especially slow. Customers are certainly only buying what they need."
The credit crunch is the major factor affecting the demand for standard pipe for construction, as projects are unable to get the funding to get off the ground. For this reason, the market is not anticipated to recover until the credit situation eases.
Domestic ERW A53 pipe prices have also seen tremendous price decline after peaking in the $90s cwt. last summer. Most offers for BPE are now at around $60.00 cwt. ($1,323 /mt or $1,200 /nt) ex-mill, buyers say.
In addition to the weak demand, the raw material for welded pipe, flat rolled sheet, has weakened a great deal in recent months. Hot rolled coil prices in the US are now below $30.00 cwt. ($661 /mt or $600 /nt) ex-mill. This compares to their high point of $55.00 cwt. ($1,213 /mt or $1,100 /nt) just three months ago. While pipe producers are at least seeing some relief in their raw material costs, the stark demand situation has forced them to lower their prices by at least as much as their raw material costs have decreased.
Even the once red-hot OCTG market has weakened this autumn along with the rest of the steel markets. Demand has, as one pipe trader put it, "flattened" due to the reduced drilling activity in the US and the abundance of Chinese imports. There are also said to be significant stocks of import line pipe. Though energy-related tubulars, a category which includes seamless pipe in addition to welded OCTG and line pipe, is still a much stronger market than standard pipe or square and rectangular tubing, the economic slowdown has taken a toll on the energy market, with oil prices now below $60/per barrel.
Still, despite the general slowdown, the outlook for certain sectors of the pipe industry, energy being a major one, remain relatively bright going into 2009. Argentine seamless pipe producer, Tenaris, said last week that it expects that North American demand for its products will be sustained by the energy industry in 2009 despite the global financial crisis. "We believe the energy sector will be impacted less than most other sectors of the economy due to constraints on the supply base," the company said.
Domestic pipe producer Northwest Pipe is also optimistic for 2009. In its third quarter earnings announcement, CEO Brian Dunham said that while sales in its water transmission group are expected to drop in the fourth quarter after a major project was postponed, its tubular products group is expected to perform strongly again in Q4 because of sales in the energy markets. "Looking into next year, we see mixed signals but we continue to be optimistic about our 2009 prospects given that the outlook for our two largest product lines, water transmission and energy, continues to be positive," Dunham said.
US Department of Commerce data show that standard pipe imports to the US (category includes welded and seamless) have remained relatively stable in the past year, with Preliminary Census Data showing 100,982 mt in September 2008, compared to 89,376 mt in August and 93,650 mt in September 2007. The main import sources for standard pipe in September were: Canada, at 31,974 mt; Thailand, at 20,909 mt; South Korea, at 11,624 mt; China, at 10,007 mt; and India, at 8,202 mt.
OCTG imports, however, swelled in September, to 424,013 mt. This figure compares to 289,382 mt in August, and 147,552 mt in September 2007. The vast majority of OCTG imports in September 2008 originated from China, with 275,159 mt. Other import sources were South Korea (33,156 mt); Canada (16,315 mt); Japan (15,224 mt); and Columbia (13,285 mt).
Line pipe imports rose slightly in September, to 252,105 mt (compared to 169,805 mt in August and 198,356 mt in September 2007), with India accounting for the largest amount of imports at 67,375 mt. Other import sources for line pipe in September were China (50,566 mt); South Korea (25,292 mt); Germany (18,271 mt); and Mexico (16,612 mt).