US demand shrinks
Demand projections call for a continued retreat in US electric-resistance welded (ERW) line pipe and oil country tubular goods (OCTG) consumption as drill rigs and the number of wells drilled per rig are cut. Project demand in the large-diameter line pipe market is also shrinking with deferred or canceled projects. Fastmarkets MB research forecasts that the rig count decline will end at around 250 units before stabilizing in the third quarter and then rise modestly with firmer oil prices.
Hot-rolled coil price trends reversed course in May, with steelmakers having some success in posting price hikes, but falling ERW pipe demand leaves no upside for prices.
European LSAW prices hold in May
Longitudinal submerged arc welded (LSAW) line pipe prices were largely unchanged in Europe in May as substrate costs remained stable and long lead times provided some protection. That said, orders have stopped and mills will have to cut output later in the year.
Smaller-diameter ERW line pipe and OCTG suppliers are already pricing aggressively and have cut production to try and match demand.
Asian mills may cut prices further
Asian HR plate and coil prices have dropped to a greater extent than pipe prices, which bodes poorly for future pipe prices.
With pipe purchasing sharply lower in the remainder of 2020, mills will begin to bid more aggressively and push prices (and margins) lower to fill operations. And after initially seeking to hold prices at elevated levels, Japanese mills in particular have now cut prices to chase new business as existing projects are completed.
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