Nucor and some other domestic steel mills raised hot-rolled coil by $30 per ton the week of February 24th.  It’s too early to tell how much of an impact this will have on tubulars, though with this market trending up, it’s hard to see how the increase won’t be passed along. American Metal Market (AMM) pegged hot-rolled coil prices at an average of $522 per ton in 2016 and predicted a rise to around $610 in 2017. That would be the highest level since 2014 but still well below pricing prior to 2014.

Steel prices are expected to continue gaining in 2017, but will be restrained by relatively low mill capacity utilization rates and the likely continued growth of Chinese steel production, according to a Metal Bulletin Research (MBR) analyst.  MBR principal consultant Amy Bennett told delegates on February 1st at AMM’s 22^nd annual Mexican Steel Forum that crude oil prices and domestic hot-rolled coil tags show a “strong correlation.” However, she opined that steel prices are now “getting ahead of themselves” by outstripping crude oil prices significantly. Said Bennett, “We expect that prices will overshoot sustainable levels once again in the second quarter (of 2017) onwards.” 

In January, 2017, U.S. service center steel shipments increased by 9.4 percent from January, 2016, according to the Metals Service Center Institute (MSCI).  Meanwhile, steel product inventories decreased 8.3 percent from January a year ago.

Finished steel imports into the U.S. rose 5.9 percent in January over December and were 2.5 percent higher than the same period a year ago, said the American Iron & Steel Institute (AISI), based on preliminary data from the U.S. Census Bureau.  Significant import increases in January compared to December included standard pipe up 45.0 percent and oil country goods up 10.0 percent.

China keeps saying it will cut steel capacity to alleviate the global glut, but China’s crude steel production rose by 1.2 percent in 2016, according to the World Steel Association (WSA). The environmental group Greenpeace published a study finding that most of China’s reported shutdowns were already idle, and China also restarted some 54 million tons of previously idled capacity while adding 5.8 million tons of new steelmaking capacity.
 

World crude steel production jumped 7.0 percent in January compared with January, 2016, for the 67 countries reporting to the World Steel Association (WSA).  China’s production rose 7.4 percent in that comparison.  U.S. crude steel production rose 6.5 percent compared to January, 2016.  The crude steel capacity utilization ratio of the 67 countries in January, 2017, was 68.5 percent.  This was 3.4 percentage points higher than in January, 2016.

Weld Fittings & Flanges

Market conditions have continued to improve for weld fittings and flanges.  Price increases on carbon steel flanges have averaged 10.0 percent.  Prices have increased 5.0-15.0 percent for carbon butt weld fittings.  There appear to be early signs of supply tightening as inventories are getting replenished.

The Baker Hughes Rotary Rig Count on March 10, 2017, reflects the year over year improvement in operating rigs.  The current rig count in North America is 1,083 oil and gas rigs compared to 578 at the same time in 2016.  Oil rigs stand at 617 versus 386 a year ago, and gas rigs are 151 versus 94 in 2016.  The biggest changes are in Permian, which is at 309 versus 152 a year ago.  Eagle Ford is at 68 versus 25 a year ago, and Cana Woodford is at 49 versus 12 at the same time last year.

At the time of this writing, WTU Crude is $48.56 per barrel, and it is unclear whether there will be additional reductions in drilling to improve prices.  Natural gas, as priced at the Henry Hub, is $2.98 per Dekatherm. 

Forged Steel Fittings

The outlook remains unchanged (flat) since last month’s report.  Pricing has been stable for an extended period of time, and there is a sufficient supply of both import and domestic fittings in the market.  Import lead times are favorable and consistent, lending to strong supply.  There is more stability and activity in the oil field; however, not enough to affect pricing.  Other key markets, like the industrial segment, are gaining momentum but have not hit historic levels.  Both manufacturers and distributors are competing for a smaller piece of available market share creating very competitive conditions.