Carbon steel report: May 2017
The market for both domestic and import carbon steel pipe products has remained strong for 1Q17. On the domestic front, there remains a shortage of small diameter seamless (2.0” – 4.0”), which has created inflated prices. Also, the Trump administration is intent on promoting domestic manufacturing and, in particular, has focused on steel, which is putting more pressure on imports. Going forward, rulings on the outstanding trade cases have the potential to disrupt the general orderly flow of carbon steel pipe.
As for imports, prices are weakening for raw material prices along with Chinese hot-rolled coil, which should point to a softening market, at least in the welded pipe products. Also, due to dumping on OCTG pipe, some Korean mills are switching production to standard and line pipe in order to keep the mills running. More than likely, this will create a surplus that will soften pricing for the short term.
Weld fittings & flanges
Market conditions continue to slowly improve. Since 2016, price increases on carbon steel flanges have averaged 10% and 5-15% for carbon butt-weld fittings. Some distributors are reporting tightening supplies and longer lead times on some items.
The Baker Hughes Rotary Rig Count for April 2017, reflects the year-over-year improvement in operating rigs. The current rig count in North America is 959 oil and gas rigs compared to 451 at the same time in 2016. Oil rigs stand at 730 and gas rigs at 229. The biggest changes are in Permian, which is up 139 to 349 vs. 210 a year ago. Eagle Ford is at 83 vs. 49 a year ago and Cana Woodford is at 51 vs. 24 same time last year.
At the time of this writing, WTU crude is $47.93 per barrel. For the last 12 months, oil has traded in a narrow band from $47.34 to $48.22. There are inventory reports indicating a reduced supply, but concerns remain that increased production could quickly increase supply beyond demand, which could lower prices and slow investments. Natural gas as priced at the Henry Hub is $3.38 per Dekatherm. This is just a few cents from the 52-week high and low for natural gas, $3.39 and $3.27, respectively.
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. And although activity in energy has picked up, the list price remains unaffected since May 2011. Overall, both manufacturers and distributors continue to compete for a smaller piece of available market share, creating very competitive conditions.