(by Paul Vivian and Rick Preckel, www.prestonpipe.com) Market Monitor: 16” and Under Outside Diameters – Last month we gave just a few examples of several gathering and processing projects that were contributing to a boost in demand for pipe in this size range. We are expecting more. Construction of larger pipelines that we’ve written about in the large diameter section will require more gathering capacity to fill them.
Additionally, pad size, at least for some operators, is expanding. Assuming that practice expands, which we believe likely, this is likely to cause yet another ratchet upward in the pipe size required to carry that production to the transmission line. In this size range, whether defined as a ‘project’ or not, distribution has typically been the supply source but many of these gathering systems are being treated like a more traditional large OD project. The supply chain will have to adjust. Greater than 16” Outside Diameter – A look at the trendline since late ’16 in the chart below demonstrates the growth we are seeing in the large diameter market. Several regions have constrained takeaway capacity and the list of products is growing. The real question might be, why isn’t the trendline steeper? Like what a similar trendline might look like coming out of 2014? We think there are many factors at work but one is a shortage of labor up and down the line. Pipemakers have to ramp up, pipe coaters have to be hired, shippers need more workers, equipment operators, etc, etc. These companies are to some extent pulling from the same labor pool in a situation of nearly full employment according to the government. So then the next question is does the cycle extend or do we just fail to complete the projects in the hopper. In our view, a little of both. Depends on where and when the cycle occurs. Import Supply – June imports were just below the license level from last month at 162,075 tons. The July licenses show a big increase to 213,779 tons. The early forecast for August, with 12 of 20 days tallied, is a return to an even larger number at 225,099 tons. Project volume can really create wild swings in this data. The top item for the month of July is Carbon ERW over 24”, at 52,394 tons. The landed price was $970/ton. This is the Cactus II pipeline product.
