The US domestic pipe market remains stable for the time being; however, the steep decreases in domestic scrap prices and the large amount of low-priced imports are both factors that will hinder any price increases from taking place.
While domestic pipe prices were expected to mirror the raw material-based price hikes for hot rolled coil offers, now that scrap has fallen by nearly as much as it increased earlier this year, the price increases for hot rolled coils are unlikely to go through. The flat rolled pricing trend has flattened out and is even showing some signs of weakening again.
As for pipe demand, market sources tell SteelOrbis this week that pipe sales and consumption are stable, but not excellent. The market for standard welded pipe is decent, with the majority of demand coming from the commercial construction sector. However, domestic producers' order books are not completely full, indicating that demand is not as strong as it could be, due in part to the state of the housing market and also due to import competition. The pricing trend for standard pipe remains flat with domestic offers for A53 ERW standard pipe continuing to range from $47.50 cwt. to $48.50 cwt. ($1,047 /mt to $1,069 /mt or $950 /nt to $970 /nt) ex-mill.
The market for domestic seamless line pipe and OCTG has been most affected by import competition, with prices remaining depressed for this reason.
However, there is some new hope for domestic pipe makers, as rumors have been circulating that the Chinese government will reduce the VAT rebate for standard pipe and tubing. The rumored reduction is not likely to cut back the rebate all the way to zero, but could drop to as low as five percent (from thirteen percent). Nothing definite has been announced yet, and the reduction is not likely to happen within 2007. However, it remains to be seen whether or not it will happen at all, since there has been talk in the past of reducing the VAT rebate for pipe but nothing ever came of it.
Although demand for domestic API and OCTG pipes is reduced by the cheaper import offerings, US consumption of these pipes is still steady due to the robust energy market. North American drilling activity is as steady as ever, with the Baker Hughes North American Rotary Rig Count showing 1,843 rigs as of May 11, compared to 1,836 rigs one week earlier, and 1,826 rigs the same day of the previous year. The data show that oil and gas drilling are both slightly up from last year, with the largest year-on-year variance taking place in the state of Texas, where the number of rigs rose to 819 as of May 11, compared to 740 rigs the year before.
The pricing trend for import pipe offers to the US is still slightly up due to the rising flat rolled prices in China, in contrast to the downward trend in other markets across the globe.
While the pricing trend is slightly up for ERW pipes ex China, most import offering prices have not changed in the past week. Chinese offers for A53 ERW standard pipe still range from $600 /nt to $640 /nt ($661 /mt to $705 /mt or $30.00 cwt. to $32.00 cwt.) FOB loaded-truck, Houston, Texas. Chinese offering prices for large diameter ERW standard pipe range from $670 /nt to $710 /nt ($739 /mt to $783 /mt or $33.50 cwt. to $35.50 cwt.) FOB loaded-truck, Houston. This price range is also valid for most West Coast ports.
Chinese line pipe (API 5L X42) offers still range from approximately $680 /nt to $730 /nt ($750 /mt to $805 /mt or $34.00 cwt. to $36.50 cwt.) FOB loaded-truck in Houston.
Chinese galvanized fence tubing offerings range from $740 /mt to $760 /mt CFR FO Gulf and West Coast ports.