RESEARCH: Welded pipe prices surge on substrate costs

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Global welded pipe prices surged in May as strong demand and still-insufficient supply lifted flat steel prices.

The biggest jumps were seen in China, which was hit by the unexpected announcement of the elimination of export rebates on welded pipes in April. Chinese seaborne prices reached $1,570 per tonne fob for longitudinal submerged arc-welded (LSAW) material and $1,260 per tonne for electric resistance-welded (ERW) products, with jumps of $450 per tonne and $310 per tonne respectively. This effectively makes Chinese material the most expensive globally, rendering it largely uncompetitive.

But price surges were also marked in the rest of the world, with LSAW jumping by the equivalent of $252 per tonne fob in Europe, $275 per tonne fob in India and $125 per tonne ex-works in the United States.

Chinese government cracks down on prices
While flat steel prices surged through mid-May and then stabilized in Europe, the US and India, China was on a roller coaster as the government started taking steps to influence prices lower, such as raising fees on iron ore and coking coal futures trading and pressuring mills to lower prices.

Given strong demand amid supply constraints, the success of such measures to contain prices will likely be mixed but will have steep consequences on pipe prices. Fastmarkets expects at least a month or two of higher-than-normal volatility.

US and Europe seek support after flat steel peaks
Fastmarkets forecasts the end of the upward price trend in flat steel is approaching, although no steep decline is expected. Pipe producers will look to hold their prices steady in the aftermath in order to recover margins. In the US in particular, as demand for ERW oil country tubular goods and small-diameter line pipe is on a modest rise, producers will weigh competitiveness against the need to recover costs.

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