Lack of 232 clarity casts haze over US pipe and tube market

Uncertainty surrounding the final form of the Section 232 tariff to be imposed by the United States against steel imports is raising pricing questions in the pipe and tube market, a situation that will likely persist over the next few months.

Without knowing what countries or products are receiving exemptions, the market has entered a period of doubt, panelists said this past week at American Metal Market’s 11th Pipe & Tube Conference in Houston, Texas.

“The market is seizing up… how many more adjustments will be made [to the tariff] before this thing is finalized?” Jim N. Owsley, vice president of supply chain at DistributionNOW, asked during a distributors’ panel on Wednesday March 14.

“The dynamics of the market today make it extremely difficult to try to plan past May,” according to Jack McCarthy, vice president of carbon steel pipe, fittings and flanges at MRC Global. 

The Section 232 investigation has moved away from a steel focus and is now being used as a negotiating tactic with things such as the North American Free Trade Agreement and the North Atlantic Treaty Organization, according to Joe Phillips, president of Sooner Pipe. “This makes it quite uncertain.”

Meanwhile, consumers are confusing the lack of price direction with a tightness in availability, leading them to purchase whatever they can get their hands on and creating a false sense of demand for the mills, B&L Pipeco Services president and chief executive officer Steve Tait said.

“It’s hard to convince your customers this is strictly a price issue and we don’t have the visibility to determine that price,” he said.

But Phillips said that the investigation into steel imports has been going on for nearly a year and “since then pipe mills have been putting disclaimers on quotations.” Consumers have been aware of the situation for quite some time and the situation shouldn’t be a shock.

But all members of the panel were confident that prices for line pipe and oil country tubular goods (OCTG) would continue to rise in the near term in response to the tariff despite uncertainty surrounding product and country exemptions.

Indeed, prices for all 10 categories of OCTG and the three grades of US domestic line pipe assessed by American Metal Market rose in February. The assessment for US domestic X52 line pipe increased to a range of $1,175-1,210 per ton fob mill on February 27 from $1,100-1,125 per ton in January. US domestic seamless high-collapse P110 casing climbed to $1,400-1,500 per ton fob mill from $1,300-1,350 per ton in the same comparison.

“Prices will escalate further. No question on line pipe. It’s not a debate. The debate is how high they will go and for how long,” McCarthy said, adding that he expected them to level out at a price higher than today’s at some point.

Prices have increased so much for line pipe with a diameter larger than 16 inches “that it’s hard pulling the trigger from an inventory position,” McCarthy said. “I’m concerned about supply from that standpoint. Not a lot out there today.”

With the higher prices and uncertainty, there must be transparency and trust between domestic producers of line pipe, distributors and customers, Tait said. “Everyone has to be realistic that nobody can eat [a] 25% [spike in prices].”

One market that has been dominated by imports over the past 10 years is small-diameter tubing, he said. Although a 25% tariff on these products “is not what customers want to hear, it’s not restrictive. I haven’t heard of any customers planning to back up [any projects in the pipeline].” 

OCTG prices will increase, but the extent to which they do is unclear due to the lack of “control on how much supply can come into the US,” Owsley said, noting that domestic OCTG manufacturers need to be cautious with their prices moving forward since pricing will likely rise up to 25%. But they “probably want to gain market share back.”

A few years ago there was concern that too many domestic mills were coming online, but with the changed circumstances “we might see more of that. It depends on how long this lasts for that to materialize,” Phillips said.

Aside from the Section 232, anti-dumping and countervailing duties will also likely have an impact on sourcing and prices in the pipe and tube market, he added. 

For example, the American Line Pipe Producers Association filed trade petitions in January complaining that imports of large-diameter welded line pipe from six nations were being dumped and that some received unfair support from government subsidies.