The US Gulf Coast is excited about China LNG import rumors. Reports that China may agree to buy an immense amount of liquefied natural gas (LNG) exported from the United States has the energy industry in Texas and Louisiana - and its steel pipe suppliers - salivating about the revenue that would flow into the region.
A large commitment to source LNG from the US is being discussed as a possible no-lose concession for China to offer in bilateral trade negotiations. Word at the convention was that the commitment could be worth as much as $18 billion.
"That will help all the way up the supply chain," a southern distributor said.
An additional destination of that scale might help justify the burgeoning number of drilled-but-uncompleted wells that continues its climb to record highs, according to a second southern distributor.
Fastmarkets AMM's pricing assessment for US domestic welded high-collapse P110 casing stands at $1,325-1,395 per ton fob mill. The midpoint of that range was $1,650 per ton as recently as July. Since then, inventories have swelled for oil country tubular goods.
The US steel pipe business is getting riskier from a legal standpoint. Friday's General Session featured four substantive presentations, and two of those focused on the intensifying legal risk in steel pipe distribution. Aside from the normal warnings against price-fixing, making false claims and not paying invoices, the distributors heard a disturbing lesson about criminal prosecutions involving sham disadvantaged business enterprises (DBEs).
DBEs - companies owned by minorities, women or disabled veterans - often receive set-asides and other preferences in government infrastructure contracts. California attorney William Locher warned the distributors that they must take steps to ensure that they are not doing business with bogus DBEs that are set up just to be a "pass-through" to funnel benefits to a company that is not entitled to that status. He said suppliers who abet this activity can be charged with conspiracy.
"As distributors, I feel you guys are caught in the middle," Locher said. "The idea that you can say, 'I'm an innocent bystander doing business with a customer,' does not work."
In an earlier presentation, Tioga Pipe chief operating officer Bill Kotcher urged his fellow distributors to conduct business ethically - especially, to not cut corners on safety-related practices.
"You chase the dollar and something can happen, and somebody can get killed," said Kotcher, who teaches ethics at the University of Houston.
He recommended the creation of more written policies within companies and written documents confirming what is said verbally with outside partners and internally with problematic employees. More and more, dismissed employees retaliate by filing lawsuits that can make wild allegations, and the defendant is more vulnerable if documentation is lacking.
The US metals industry may face higher shipping costs. Steel distributors are aware of their higher trucking costs, but various trends involving maritime and rail also exert upward pressure on freight rates, said Bobby Landry, vice president and chief commercial officer at the port of New Orleans.
Metals shipments are usually break-bulk, but ports tend to invest more in containerization capacity - for example, acreage, equipment and stevedoring. That's because containerized goods tend to be of higher value on a per-ton basis, Landry said. With less focus on break-bulk, that handling capacity likely will tighten.
New requirements along the US shoreline and around the world that ships burn low-sulfur fuel adds to costs, he said.
The lack of US investment to expand highway infrastructure has boosted the importance of railroads, Landry said. Acreage for rail-car storage is becoming insufficient, for example.
A greater overall emphasis on rail transport means that the railroads are growing more influential, he said. That comment drew a few groans in the room.
Section 232 tariffs and trade wars will harm the US metals industry in the long run. It's a misconception that high tariffs ease trade deficits, economics author John Manzella said. Look no further than Brazil and India, nations with high tariffs and high trade deficits, and Germany and Singapore, which have low tariffs and yet run trade surpluses.
US-based companies realize that their long-term growth depends on their ability to competitively serve a new generation of customers in China and other countries in Asia as well as in the Middle East/North Africa. Trade wars jeopardize their ability to make inroads.
"We need access to these markets," Manzella said, accusing President Donald Trump's administration of "1960s and '70s thinking" on the idea of using protectionism to force investment to come home. Sixty percent of imports are "intermediate products that make US products more competitive," he added.
"New free-trade agreements are being struck without US participation," Manzella said, citing the Trans-Pacific Partnership (TPP) as Exhibit A. The United States pulled out of the pact but other nations were undeterred. As a result, Japan has lowered its tariffs on imports from TPP participants, and those Japanese tariffs are now lower than US tariffs.
US steel pipe executives are still high on Trump: Judging from the conversation at the convention, the president continues to receive unwavering support from most of the NASPD's American members. Even a US steel procurer who relies on foreign supplies is still on board.
"[Section 232] has made things a lot harder for me, but I'm still a big President Trump supporter," the buyer said.
People marketing imported steel are harmed less by Section 232 than they are by the extremely short lead times at domestic mills, that person said, adding that this year may not be as profitable as 2018 was.
That buyer - and multiple other people - cited corporate tax reform and the easing of environmental regulations on the oil and gas industry as reasons to support what Trump is achieving overall.
"Then again, it could all be undone by one tweet," a mill source said, referring to the president's frequent Twitter use..