US ERW under pressure through 2021
Electric-resistance welded oil country tubular goods prices are not expected to rebound in the United States this year while demand continues to fall. Only modest price gains are expected in the first half of next year, until inventories are brought in line with demand. We expect an annual drop in consumption in the US of nearly 840,000 tons this year, after a 220,000-ton year-on-year drop in 2019.

That said, steep price drops are unlikely in the third quarter as firm HR coil prices are already cutting into margins, but stock holders could be tempted to discount in the fourth quarter.

Asian margins also under pressure
Nominal prices in Asia are set to improve, but this will largely be driven by rising substrate prices that will squeeze margins for Asian mills. There has already been a noticeable narrowing of the differentials between various suppliers, with the “quality” premium already disappearing in a market that - from a consumer perspective - is dominated by plans to minimize capital expenditures.

Middle East mills get squeezed
The Middle East-North Africa region remains oversupplied, with spiral and ERW pipe looking for a home while global demand from the energy sector will likely remain muted for at least the rest of the year. And longitudinal submerged arc welded mills in the Middle East are getting squeezed as API plate is being quoted at higher prices from Asian suppliers while integrated Asian pipe suppliers in Asia are cutting prices. 

European demand remains slow
The return of post-Covid-19 business activity has led to a moderate upturn in European hot-rolled plate, although that has not yet carried through to coil prices in the European Union. We expect a small recovery there in the near term. There are few major projects that are close to being awarded in Europe, and we expect aggressive bidding to accompany any significant orders since limited demand would force mills to consider tighter margins in order to win business.

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