Tenaris sees opportunity in ‘changed’ world

A shifting world energy landscape has sparked thoughts of sustainable improvement in the oil country tubular goods and line pipe marketplace, Tenaris chairman and chief executive officer Paolo Rocca said during an earnings call on Thursday April 28

Optimism for a strong pipe and tube market environment comes as Luxembourg-based Tenaris reported net sales of $2.37 billion in the first quarter of 2022, up by 15% from $2.06 billion in the fourth quarter of 2021 and by 100% from $1.18 billion in the first quarter of 2021.

Net income of $503 million was up by 50% from $336 million in the previous quarter and by 400% from $101 million in the first quarter of 2021.

“Since our last conference call, the world has changed,” Rocca said. “The Russian invasion of Ukraine is deeply affecting the global economy and markets.

“Energy markets are being disrupted, sanctions have been imposed on Russia and security of supply has become a prime concern. Tenaris has an important role to play in supporting oil and gas companies in their commitment to regional energy independence.”

The demand outlook for OCTG and line pipe products required to ensure that energy independence from Russian oil and gas is quickly overtaking a supply situation still attempting to ramp up following the Covid-19 pandemic, Rocca added.

An anticipated uptick in demand comes at a time when many OCTG and line pipe products are at, or near, record price levels.

Fastmarkets’ assessment for steel seamless OCTG API 5CT – Casing P110, fob mill US was $2,560-2,660 per ton on April 12, up by 6.53% from $2,400-2,500 per ton in March and its highest since March 2009.

The assessment for steel welded OCTG API 5CT – Casing P110, fob mill US rose by $150 month on month to an all-time high of $2,500-2,600 per ton on April 12, up by 6.25% from $2,350-2,450 per ton.

“Drilling activity is increasing around the world, led by North America and the Middle East,” Tenaris said in its earnings report. “Offshore drilling activity is also increasing, led by Latin America. Pipeline project activity is also increasing in the Middle East, South America and the Mediterranean and Black seas.

“The outlook for steelmaking raw materials has also changed. Russia and Ukraine have both been major suppliers of pig iron, ferro-alloys and semi-finished steel to European and American markets, and the costs of these materials have risen sharply since the invasion. OCTG prices are also increasing on higher consumption, while inventories have declined to low levels in key regions such as North America and the Middle East.”

Tenaris reported seamless tube sales of 772,000 metric tons in the first quarter, up by 56% year on year from 496,000 tonnes. Sales of welded tube totaled 50,000 tonnes, down by 29% from 71,000 tonnes in the same quarter.

Net sales in North America for the first quarter of this year hit $1.35 billion, an increase of 20% from the previous quarter ($1.12 billion) and a 162% increase from $514 million in the year-ago quarter.

Tenaris credited the increased North American sales to “higher prices throughout the region reflecting higher drilling activity and declining market inventory levels, with seasonally higher volumes of OCTG in Canada.”

Operating drill rigs in the United States were reported at 695 last week, the most since 728 were reported on March 27, 2020.

Anti-dumping

In response to questions regarding an ongoing anti-dumping investigation by the US Department of Commerce, Rocca said he remains confident in a favorable decision for Tenaris.

An anti-dumping petition was filed on October 6, 2021, by US Steel Tubular, Borussan Mannesman Pipe, PTC Liberty Tubulars, Welded Tube USA and representatives of the United Steelworkers union claiming OCTG imports from Mexico, Argentina and Russia were damaging the US domestic industry.

“Anti-dumping requires a determination of margin and injury,” Rocca said. “Frankly, I think in today’s market conditions, there is no way injury could be determined for an industry that is showing record results in the last quarter and in the coming quarters. It’s impossible. We’re very confident we’ll be able to continue imports that are required.”

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