RESEARCH; Key takeaways from the latest Welded Linepipe, OCTG Market Tracker

Trading activity at a minimum
Welded pipe trading activity has been slow globally over July 2020, and while the holiday-period slowdown is partly to blame in several countries, disruptions to projects caused by the Covid-19 pandemic were obviously the main cause. In this context, substrate costs were driving much of the pricing because few mills were willing to cut their margins further.

US market participants at risk of squeeze
US welded pipe prices have followed substrate prices lower, with prices for electric-resistance welded (ERW) and helical submerged arc-welded (HSAW) materials falling more than those for longitudinal submerged arc-welded (LSAW) material, with plate prices more resilient. We expect price movements in linepipe and oil-country tubular goods (OCTG) to continue to track those of hot-rolled coil and plate in the near term but, by the fourth quarter, seasonal destocking and a need to generate cash will probably push for lower pipe prices, independent of the price trend in substrates.

China’s domestic market absorbs production
A number of Chinese producers have been exiting the seaborne market because they get better bids at home, amid strong infrastructure spending. Rising raw material costs contributed to the unattractive international market. LSAW export prices continued to rise this month, and have remained higher than Japanese prices since last month.

European prices firm
HSAW and ERW linepipe prices inched higher in Europe while LSAW prices held steady, but mills’ margins remained under pressure amid rising substrate costs. European mills were planning to push prices up after trading activity restarts in late-August-September, but we do not expect these increases to succeed until well into the fourth quarter.

Mena region prices hold
Delivered prices to Middle East-North Africa (Mena) region countries were steady, but a lack of demand persisted because national oil companies (NOCs) have been reviewing and delaying projects. With local market participants poised to secure a large share of the market, we expect some global integrated mills to try to generate sales by lowering their offers slightly this quarter, with raw materials costs expected to fall.

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