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PIPE & STEEL MARKET ANALYSIS & INSIGHTS (31 OCT 2017)

PIPE & STEEL MARKET ANALYSIS & INSIGHTS (31 OCT 2017)

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INAUGURAL OCTG AND LINE PIPE FORECASTING SUMMIT

OCTG & Line Pipe Forecast Summit review – Last week Preston held the inaugural OCTG and Line Pipe Forecast Summit in Houston, Texas. It was a sold out show with 133 delegates and speakers. Forecasts of drilling, oil and gas prices, and pipeline activity were followed by a presentation regarding what’s coming down the pike from a technology standpoint. After lunch, Preston presented the steel and pipe and tube picture for the next 3 years. > http://www.prestonpipe.com/octg-and-line-pipe-forecast-summit/


Pipe Logix Line Pipe Report – September 2017

(by Kurt Minnich, www.pipe-logix.com) Line pipe prices in September increased 0.7% with the Pipe Logix Index now at $1,563/ton. Domestic prices were down slightly, -0.2%, while import prices gained 2.1%. This is the eleventh month of price increases in the Pipe Logix Index, providing a cumulative gain of 38%. Distributor’s sentiment drifted lower with the NASPD Index at 57 in September compared to 66 the previous month. While new orders have strengthened, inventories appear to be mostly balanced and the time to fulfill new orders is shortening. This is the nineteenth month that the Index has been over 50, indicating an expanding market, though it has declined significantly from the peak of 82 realized in January, 2017. Shipment volumes were 283,000 tons in July, 80% greater than the volumes of a year ago. The rig count was down for the second consecutive month in September. The average ratio of shipments to rigs has drifted lower in 2017 compared to 2016 but it remains elevated compared to the ratio in 2015 and before.


Preston Pipe Report – The Line Pipe Market September 2017

(by Paul Vivian and Rick Preckel, www.prestonpipe.com) Market Monitor – 16” and Under Diameters: Based on historical data, peak small OD line pipe shipping months are more or less behind us for 2017. Seasonality is one component, demand the other. In most regions of the country we’ve seen production declines from the peak and while gathering systems were not necessarily built out to full production levels prior to the oil price crash, lower production is not likely to stimulate additional construction. In the Permian and select other regions however, production has continued to grow. Current Permian production, according to the EIA, is about 2.5 mbpd after averaging about 2.0 mbpd from early ’15 to late ’16. The Marcellus and the Utica are two other regions with production that is at levels not seen previously. While gathering construction has occurred in these regions, there is more to come. Greater than 16” Outside Diameter: According to an article in the Washington Post, a carbon-capture bill gaining momentum in the Senate, along with a House companion, could lead to new pipelines that would ship carbon dioxide from industrial emitters to oil fields to be used in extraction. Members in both chambers are pressing ahead with a legislative effort to strengthen a tax credit for carbon capture and storage. Tax credits are viewed by advocates of the technology as crucial toward making sequestering carbon dioxide  economically viable. Sequestering carbon dioxide has much across-the-aisle appeal because not only can the captured carbon dioxide reduce the impact humans are having on warming the planet, but that gas can be useful to the oil industry to push out pockets of oil underground in enhanced oil recovery applications. Under current law, carbon emitters get a $20 tax credit for each metric ton of carbon dioxide stored underground and $10 for each metric ton used in enhanced oil recovery. But the carbon-capture lobby says that those tax credits are not high enough to spark private investment. Conaway’s bill raises that tax credit to $35 per ton across-the-board.


Zekelman Industries Steel Snapshot for October 2017

(by Mike Mechley, Executive VP of Strategic Procurement, www.ZekelmanIndustries.com) Platts Oct HR Coil is $599, down $31 from Sept Domestic planned maintenance programs for the fourth qtr. will reduce production by 1 million tons. World steel prices have moved lower in line with the US price reductions, imports will stay low. China reducing steel  production for the winter months to improve air quality. HR lead time 2-5 weeks,CR lead time 4-6 weeks. US Mills capacity utilization rate is 74.7%. Platts Oct CR Coil is $797, down $8 from Sept. Zinc is currently $1.49lb. Inventories remain low. October Chicago #1 Bush $325 down $40. $1 U.S. Dollar = $1.25 Canadian Dollar.


AISI – Press Release on Latest U.S. Imports of Steel Products

(American Iron and Steel Institute, www.steel.org – October 4, 2017) Based on the Commerce Department’s most recent Steel Import Monitoring and Analysis (SIMA) data, the American Iron and Steel Institute (AISI) reported today that steel import permit applications for the month of September totaled 3,026,000 net tons (NT)*. This was a 15.7% decrease from the 3,591,000 permit tons recorded in August and a 9.6% decrease from the August preliminary imports total of 3,349,000 NT. Import permit tonnage for finished steel in September was 2,377,000, down 1.9% from the preliminary imports total of 2,422,000 in August. For the first nine months of 2017 (including September SIMA permits and August preliminary data), total and finished steel imports were 29,587,000 NT and 22,778,000 NT, up 19.3% and 15.1%, respectively, from the same period in 2016. The estimated finished steel import market share in September was 26% and is 27% year-to-date (YTD). Finished steel imports with large increases in September permits vs. the August preliminary included light shapes bars (up 185%), standard rails (up 140%), hot rolled bars (up 34%), oil country goods (up 21%), tin plate (up 16%) and line pipe (up 12%). Products with significant year-to date (YTD) increases vs. the same period in 2016 include oil country goods (up 254%), line pipe (up 55%), standard pipe (up 45%), mechanical tubing (up 32%), cold rolled sheets (up 28%), sheets and strip all other metallic coatings (up 27%), structural pipe and tubing (up 22%), sheets and strip hot dipped galvanized (up 21%) and hot rolled bars (up 21%). In September, the largest finished steel import permit applications for offshore countries were for South Korea (343,000 NT, down 2% from August preliminary), Japan (158,000 NT, up 24%), Germany (139,000 NT, up 41%), Taiwan (134,000 NT, up 11%) and Brazil (98,000 NT, up 21%). Through the first nine months of 2017, the largest offshore suppliers were South Korea (2,963,000 NT, down 1% from the same period in 2016), Turkey (1,919,000 NT, up 4%) and Japan (1,224,000 NT, down 15%).

Amy Anderson No Comments

PIPE & STEEL MARKET ANALYSIS & INSIGHS (September 2017)

PIPE & STEEL MARKET ANALYSIS & INSIGHTS  (September 2017)

INAUGURAL OCTG AND LINE PIPE FORECASTING SUMMIT
Preston Publishing extends the following invitation to join them, along with World Steel Dynamics and oil and gas industry experts at their inaugural “Forecasting Summit” in Houston, TX on Tuesday, October 10, 2017 at the Hilton Houston Post Oak by the Galleria. This one day workshop and evening networking reception will be a fact-driven event showcasing expert views on oilfield activity in North America for the next 3 years. Forecasts of oil and gas demand, price, sources of oil and gas supply, and pipeline activity will provide the basis for the presentation of Preston’s detailed North American OCTG and line pipe demand and supply forecasts for the next 3 years. World Steel Dynamics’ presentation of steel pipe raw material supply factors will address key drivers of sources of pipe supply such as steel price, trade, steel availability, etc. which are key drivers of OCTG and line pipe pricing and sourcing. Hear the leading experts and get your questions answered about North America’s oil and gas activity and OCTG and Line Pipe outlook along with core inputs, to help build your forecasts and budgets, assess risks and investment opportunities, understand the drivers in the ever-changing oil and gas industry.

 Pipe Logix Line Pipe Report – September 2017
(by Kurt Minnich, www.pipe-logix.com)
Line pipe prices in September increased 0.7% with the Pipe Logix Index now at $1,563/ton. Domestic prices were down slightly, -0.2%, while import prices gained 2.1%. This is the eleventh month of price increases in the Pipe Logix Index, providing a cumulative gain of 38%. Distributor’s sentiment drifted lower with the NASPD Index at 57 in September compared to 66 the previous month. While new orders have strengthened, inventories appear to be mostly balanced and the time to fulfill new orders is shortening. This is the nineteenth month that the Index has been over 50, indicating an expanding market, though it has declined significantly from the peak of 82 realized in January, 2017. Shipment volumes were 283,000 tons in July, 80% greater than the volumes of a year ago. The rig count was down for the second consecutive month in September. The average ratio of shipments to rigs has drifted lower in 2017 compared to 2016 but it remains elevated compared to the ratio in 2015 and before.

 Preston Pipe Report – The Line Pipe Market September 2017
(by Paul Vivian and Rick Preckel, www.prestonpipe.com)
Market Monitor – 16″ and Under Diameters: Based on historical data, peak small OD line pipe shipping months are more or less behind us for 2017. Seasonality is one component, demand the other. In most regions of the country we’ve seen production declines from the peak and while gathering systems were not necessarily built out to full production levels prior to the oil price crash, lower production is not likely to stimulate additional construction. In the Permian and select other regions however, production has continued to grow. Current Permian production, according to the EIA, is about 2.5 mbpd after averaging about 2.0 mbpd from early ’15 to late ’16. The Marcellus and the Utica are two other regions with production that is at levels not seen previously. While gathering construction has occurred in these regions, there is more to come. Greater than 16″ Outside Diameter: According to an article in the Washington Post, a carbon-capture bill gaining momentum in the Senate, along with a House companion, could lead to new pipelines that would ship carbon dioxide from industrial emitters to oil fields to be used in extraction. Members in both chambers are pressing ahead with a legislative effort to strengthen a tax credit for carbon capture and storage. Tax credits are viewed by advocates of the technology as crucial toward making sequestering carbon dioxide  economically viable. Sequestering carbon dioxide has much across-the-aisle appeal because not only can the captured carbon dioxide reduce the impact humans are having on warming the planet, but that gas can be useful to the oil industry to push out pockets of oil underground in enhanced oil recovery applications. Under current law, carbon emitters get a $20 tax credit for each metric ton of carbon dioxide stored underground and $10 for each metric ton used in enhanced oil recovery. But the carbon-capture lobby says that those tax credits are not high enough to spark private investment. Conaway’s bill raises that

tax credit to $35 per ton across-the-board.


Zekelman Industries Steel Snapshot for September 2017
(by Mike Mechley, Executive VP of Strategic Procurement, www.ZekelmanIndustries.com)
Platts Sept HR Coil is $630, up $5 from August. Stelco blast furnace maintenance complete. World steel prices up sharply due to reduced exports from China (pollution control), higher scrap, iron ore, coking coal and electrodes. China HRC pricing is up 28% from July. HRC imports in 4th quarter will be sharply lower. HR lead time 4-6 weeks,CR lead time 5-7 weeks. US Mills capacity utilization rate is 74.3%. Platts Sept CR Coil is $805, up $5 from August. Zinc is currently $1.38lb. Inventories are low. September Chicago #1 Bush $365 flat from Aug. $1 U.S. Dollar = $1.22 Canadian Dollar.

 AISI – Press Release on Latest U.S. Imports of Steel Products
(American Iron and Steel Institute, www.steel.org – August 2, 2017)
Based on the Commerce Department’s most recent Steel Import Monitoring and Analysis (SIMA) data, the American Iron and Steel Institute (AISI) reported today that steel import permit applications for the month of July totaled 3,458,000 net tons (NT)*. This was a 12.3% decrease from the 3,944,000 permit tons recorded in June and a 10.6% decrease from the June preliminary imports total of 3,868,000 NT. Import permit tonnage for finished steel in July was 2,785,000, down 5.3% from the preliminary imports total of 2,941,000 in June. For the first seven months of 2017 (including July SIMA permits and June preliminary data), total and finished steel imports were 23,099,000 NT and 17,809,000 NT, up 21.7% and 16.5%, respectively, from the same period in 2016. The estimated finished steel import market share in July was 28% and is 27% year-to-date (YTD). Finished steel imports with large increases in July permits vs. the June preliminary included standard rail (up 189%), standard pipe (up 51%), cut lengths plates (up 21%) and oil country goods (up 19%). Products with significant year-to-date (YTD) increases vs. the same period in 2016 include oil country goods (up 255%), cold rolled sheets (up 38%), standard pipe (up 50%), sheets and strip all other metallic coatings (up 37%), line pipe (up 37%), mechanical tubing (up 32%), hot rolled bars (up 29%), sheets and strip hot dipped galvanized (up 25%), tin plate (up 10%) and wire rods (up 10%). In July, the largest finished steel import permit applications for offshore countries were for South Korea (333,000 NT, down 14% from June preliminary), Turkey (211,000 NT, down 36%), Japan (149,000 NT, up 20%), Germany (144,000 NT, up 24%) and Taiwan (136,000 NT, down 17%). Through the first seven months of 2017, the largest offshore suppliers were South Korea (2,261,000 NT, down 5% from the same period in 2016), Turkey (1,681,000 NT, up 11%) and Japan (935,000 NT, down 12%).