Domestic pipe
The market for seamless is very tight with limited tons available. Prices reflect the availability from mills and distributors’ inventories. This is due to the high demand in the OCTG segment, which commands a higher profit for the mills.
The mills are quoting September-October availability for welded. There have been slight increases due to the cost of HRC as well as the Trump administration’s pending Section 232 investigation. As the case now seems to be on the backburner, it’s likely we can expect a softening in the market for 4Q17.
Import pipe
Distributor inventories are running low in anticipation of the now-delayed rulings from the U.S. Department of Commerce on its Section 232 investigation, which were to have been delivered by June 30. Even though the case now seems to be on the backburner, foreign mills are quoting, “Subject to tariffs at time of shipment – prices may be adjusted or orders cancelled.” Look for slightly lower prices by year’s end as the mills have a window to ship pipe into the U.S.
Weld fittings & flanges
Market conditions remain as they have in the previous quarter. Price increases earlier in 2017 have only risen slightly on approved fittings, while import fittings have remained flat. Availability remains acceptable for current demand levels with some lead times stretching.
The Baker Hughes Rotary Rig Count on July 28, 2017, reflects the year-over-year improvement in operating rigs. The current rig count in North America is 1,178 oil and gas rigs compared to 582 at the same time in 2016. Oil rigs stand at 766 vs. 374 a year ago, and gas rigs are 192 compared to 86 last year. The top three areas for change are in Permian, which is up from 207 to 379 vs. 172 a year ago, Eagle Ford is at 76 vs. 33 a year ago and Cana Woodford is at 63 vs. 29 at same time last year.
At the time of this writing, WTI crude is $48.88 per barrel. Oil has traded in a narrow band for the last 12 months. Excess supply vs. demand has kept prices stable. OPEC production reductions have remained in place, while US shale production has increased. The July 2017, report from the U.S. Energy Information Administration forecasts WTI Crude at $47.80 per barrel.
At the time of this writing, natural gas on the New York Mercantile Exchange is $2.76 MMBtu. The July 2017 report from EIA forecasts industrial natural gas demand to rise 1.4% for all 2017 and 2.6% in 2018. The increase in demand is being driven by new chemical projects coming online. Natural gas is a feedstock in ammonia production for nitrogenous fertilizer and methanol manufacturers.
The lack of significant policy changes by the Trump administration continues to be a drag on the energy markets. Hype surrounding deregulation, health-care reform, corporate tax reductions and changes to immigration rules has turned into disappointment as little progress has been made in Washington, D.C.
Forged steel fittings
The outlook for forged steel fittings in 3Q17 is one of stability. Pricing has remained consistent with a sufficient supply of both import and domestic fittings in the market. Lead times range from one to five weeks with ample availability. The energy segment continues to improve and is the true driver of the market. Expect competition to remain brisk for the foreseeable future.
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