In this edition, Fastmarkets’ research team delivers analysis of seamless OCTG and linepipe across international markets:
Covid-19 underscores pipe outlook
Unsurprisingly, the concern in the seamless pipe markets across the regions is the effect of the spread of Covid-19 on public health and economic activity. Europe and North America just recently instituted measures to control the speed of the spread of the outbreak while China looks to be past the peak of the disease progression. Meanwhile, energy prices tumbled strongly to where the Brent and WTI crude oil prices are now half of their January levels. This has now put further pressure on the energy operators who will look to adjust investment spending in response, although there tends to be a lag between oil prices and drilling rates, and then further on to OCTG and linepipe demand.
Inventories are the immediate concern
With that, the energy price collapse is more of a medium term concern. At the front of the line is the oversupply of pipe tonnage in inventory, especially in China as the country comes back to work and is looking to ship material. As stocks grow, producers are yet to cut prices while raw material prices remain elevated and there is still hope of recovering demand in other regions. Other Asian suppliers have already cut prices in an attempt to stimulate business, but actual transaction activity remains low. Prices appear to have little direction to go but down for the time being.
Shutdowns still coming in Europe and Americas
There is uncertainty regarding operations. We would realistically expect that steelmakers, pipe producers and other market participants may potentially shutter operations in other affected economies, as part of social distancing policies. As a result, logistics will be affected as regional quarantines are imposed. So, there may be a situation whereby both production and purchasing are obstructed. When these operations do reopen, there will be a need for immediate cashflow so we expect steep discounts on spot sales.
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