Global market trends: OCTG and large diameter linepipe

Tube & Pipe Group

Global market trends: OCTG and large diameter linepipe

Abu Dhabi, United Arab Emirates8 September 2014

Roman Filimonov

Consultant, Metal Bulletin Research’s Tube & Pipe Group

Tube & Pipe Group

Contents

MBR’s new Tube and Pipe Group Global OCTG market trends and implications for Middle East Global large diameter linepipe market overview

INTERNATIONAL STEEL TUBE & PIPE FORUM - SEPTEMBER 8-9 2014

Tube & Pipe Group

Contents



A new team with a familiar face…

MBR’s TUBE AND PIPE TEAM

CIS:Roman [email protected]: +44 207 827 6443

Americas:Kim [email protected]: +1 610 404 0801

Europe/MENA/Asia:James [email protected]: + 44 207 779 8521

Metal Bulletin Research, Nestor House, Playhouse Yard, London, EC4V 5EX UK

mailto:[email protected]



New tracker reports published by the Tube & Pipe team

Industrial and Structural Tube & Pipe Market Tracker, covering the market for HSS, mechanical tubing, precision tubing and standard pipe

Re-launched the Seamless OCTG & Linepipe Market Tracker and the Welded OCTG & Linepipe Market Tracker.

“I have read your trackers, this is really good stuff.” - Industry association

“The new Seamless OCTG & Linepipe tracker has brought global OCTG analysis to a whole new level.” - Pipe division, Duferco

MBR’S TUBE AND PIPE TEAM

Tube & Pipe Group

Contents



The Global OCTG market has recovered from its 2009 lows driven by growth in all four major markets: North America, China, CIS and MENA – welded now has just under a 30% share

2009 2010 2011 2012 2013

5000

10000

15000

20000

North America China CIS MENA

South East Asia Other Africa South America Europe

Source: MBR

GLOBAL OCTG MARKET TRENDS AND IMPLICATIONS FOR MIDDLE EAST

Global OCTG consumption by region and type 2009-2013 (kt)

2009 2010 2011 2012 2013

5000

10000

15000

20000

Seamless Welded

18%

24%31% 31% 27%

17.4Mt

10.7Mt

CAGR = 13%

Tube & Pipe Group

The US market is unique with its high percentage of ERW usage


``

Total shipments ~ 17,400 kt

Africa360 kt

India, SEA & Australasia

970 kt

China4.1Mt

CIS2.4Mt

Europe390 kt

N. America

6.6Mt

S. America1Mt MENA

1.5Mt

Welded OCTG

Seamless OCTG

Global OCTG consumption by region in 2013

Tube & Pipe Group

There is no shortage of OCTG capacities worldwide

`` Africa

100 kt

Other Asia4 Mt

China11.7 Mt

CIS3 Mt

Europe1.9 Mt

N. America

8 Mt

S. America2 Mt

Middle East 1.2Mt

Welded OCTG

Seamless OCTG

Total capacity = 32Mt

Estimated OCTG capacities by region in 2013 (kt)


Tube & Pipe Group

European capacity is nearly 5 times of the demand within its region however because of the absolute capacity size in China this is the global threat

Africa

MENA

N.America

CIS

S.America

China

India, SEA and Australia

Europe

0.0 1.0 2.0 3.0 4.0 5.0 6.0

0.3

0.8

1.2

1.3

2.0

2.9

4.1

4.9

Ratio of Installed regional capacity to regional demand


Tube & Pipe Group

``

USA and Middle East are two biggest import markets with net imports accounting for 2.9Mt and 1.5Mt accordingly

2.9Mt1.5Mt


Tube & Pipe Group

``

S.Korea was the largest supplier the USA followed by combined Europe and Canada

Source: ISSB and MBR

2.9Mt 370kt

160kt

240kt

280kt

140kt

140kt

890kt

Major OCTG exporting regions to the USA in 2013


Tube & Pipe Group

``

China provided over 30% of OCTG imports in MENA region followed by Europe and Japan

Source: ISSB and MBR

1.5Mt

520kt

290kt

38kt

327kt

135kt

61kt


Tube & Pipe Group

There’s been a lot of pressure on Middle East prices from China and anywhere else

Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-140

500

1000

1500

2000

2500

3000

USA P110 premium ME L80 premium W.Europe L80 premiumJapan L80 premiun China P110 premium

Source: MBR

Regional prices for casing with premium connections, $/tonne


Tube & Pipe Group

While OCTG imports are perceived as a threat to the domestic market, can the USA export its shale drilling technology (new threading/stock facilities) to other parts of the world?

Source: MBR

The global development of shale drilling outside the USA in 2014

Saudi Arabia – exploring and appraising shale gas resrves in the Empty Quarter, NorthWest/Red Sea and South Ghawar

Argentina - Vaca Muerta – one of the worlds largest shales both oil + gas. Chevron working here with YPFSA

China – Sinopec/CNPC now developing Fuling field – first commercial shale field coming into operation

Russia – Rosneft and BP sign agreement to develop shale oil in the Volga region

UK- Ukraine crisis could push the UK and others in Europe quicker into shale drilling, although several political and environmental constraints remain

India - 2013 OGNC started drilling exploratory wells for shale gas – planning to drill 30 in the next 2 years

Australia - Chevron, Conoco, Statoil, Total, BG and Hess now investing over $1,5bn in shale gas drilling in Australia


Tube & Pipe Group

Domestic US capacity growth could lead to even higher competition in the Middle East

Source: MBR

Company Location Type Product '000 tons start-up

Vallourec Star Youngstown, OH seamless OCTG 350 2013Welded Tube of Canada Lackawanna, NY ERW OCTG 350 2013

OMK Houston, TX ERW OCTG 175 2013

EnergeX Blytheville, AR ERWOCTG/Linepipe/

Structural 300 2013

Borusan Baytown, TX ERW OCTG 300 2014

Prolamsa Bryan, TX ERWOCTG/Linepipe/

Structural 300 2014California Steel Industries Fontana, CA ERW Linepipe/OCTG 400 2014

Halo Steel Pipe McCleary, WA ERW OCTG 150 2014

Benteler Caddo, LA seamless OCTG/Linepipe/other 300 2015

Alita USA Buffalo, NY ERW OCTG 150 2015

PTC Hopkinsville, KY seamless OCTG 100 2015

Tejas Tubular Norfolk, NE seamless OCTG 150 2015

TPCO Gregory, TX seamless OCTG 550 2016

Tenaris Bay City, TX seamless OCTG 640 2016

Up to 4.2Mt of new OCTG capacity slated for US market 2013 - 2016


Tube & Pipe Group

Contents



Tube & Pipe Group

Global LSAW mills utilisation rates have dropped sharply in 2013 due to there being very few MEGA projects in the market

Source: Company interviews and MBR estimates

GLOBAL LINEPIPE OVERVIEW

2008 2009 2010 2011 2012 2013

5,000

10,000

15,000

North America South America Middle East Africa

CIS Europe Asia ex China China

2008 2009 2010 2011 2012 2013

10000

20000

30000

North America South America MENA CIS Europe

Other Asia China

Global LSAW production by region 2008 – 2013 (kt) Global LSAW capacity by region 2008 – 2013 (kt)

CAGR = -3.3%CAGR = 6%

Tube & Pipe Group

HSAW market didn’t suffer to the same extent as LSAW

Source: Company interviews and MBR estimates

2008 2009 2010 2011 2012 2013

2000

4000

6000

8000

10000

North America South America Middle East

Africa CIS EU

Other Asia China

2008 2009 2010 2011 2012 2013

5000

10000

15000

20000

China Other Asia CIS EU MENA

North America South America

Global HSAW production by region (kt) Global HSAW capacity by region (kt)

CAGR = -1.2% CAGR = 5.5%

6.7Mt 6.3Mt


Tube & Pipe Group

Middle East is almost 50/50 split between HSAW and LSAW for large-diameter linepipe applications

Source: MBR

North America South America EU Middle East CIS China Other Asia0

500

1000

1500

2000

2500

3000

3500

4000

HSAW LSAW

Market split between LSAW and HSAW consumption in each region in 2012 (kt)


Tube & Pipe Group

The global large OD linepipe market is rapidly picking up into 2014

Source: MBR

Major large OD linepipe projects 2014 onwards

Iraq* – 1Mt pipeline to Jordan was in planning, current political situation likely to delay this

Turkey - TANAP – connecting into the South Caucus extension (300kt of LSAW) Azerbaijan – 1.2Mt large-diameter pipeline across the whole of the country to Greek border

China – Number of pipelines underway including 3rd & 4th Central Asia-China and at least 1Mt of CNPC network connecting to Russian gas

Russia – Giant gas deal signed with China. Power of Siberia pipeline moving ahead (2.5Mt). Altai pipeline could follow (2Mt)

South Stream*- Giant Russian pipeline some 3.2Mt – offshore across the Baltic Sea brining gas to Southern Europe – currently being delayed by EU

Greece/Italy - TAP – Final part of South Caucus pipeline. 470kt of LDP will be needed here

Japan – Sakhalin – Japan pipeline now in serious discussion to connect to Russian gas network


Tube & Pipe Group

Strengthening demand for LSAW into H2 2014 is forecast to lead to a gradual global strengthening in prices

Source: MBR

Q2-2011

Q3-2011

Q4-2011

Q1-2012

Q2-2012

Q3-2012

Q4-2012

Q1-2013

Q2-2013

Q3-2013

Q4-2013

Q1-2014

Q2-2014

Q3-2014

Q4-2014

Q1-2015

Q2-2015

800

1,000

1,200

1,400

1,600

1,800

2,000

2,200

US LSAW linepipe Japan LSAW linepipeW. Europe LSAW linepipe China LSAW linepipe

$ / t o n n e

Forecast

Global historic and forecast LSAW pipe prices by region ($/tonne)


Tube & Pipe Group

Thank you for your time

Roman Filimonov

Consultant - Tube and Pipe Group

Metal Bulletin Research

tel: +44 207 827 6443

[email protected]



Tube & Pipe Group

NEW AND UPDATED FOR 2014

This is the only study that provides independent by-country and regional analysis of OCTG market trends, and a medium-term forecast for supply, demand and pricing including:

• Demand for OCTG by-country, region and product group• Medium-term forecast for price out to 2022• Seamless and welded OCTG material global, regional and

country supply• and demand balance• Details of production for welded and seamless OCTG by-

country• Trade analysis for OCTG by-country• l Insights on drivers behind OCTG demand dynamics by

producing country• l Comprehensive detail on supply including product range• l Detailed discussion on the industry competitive dynamics

THE FIVE YEAR OUTLOOK FOR THE GLOBAL OCTG MARKET

Tube & Pipe Group

Strategic Prospects for the Global Transmission Linepipe Market by Type, Size Range and Grade

ORDER ONLINE TODAY at www.metalbulletinstore.com or contact us on +44 (0) 20 7779 8000 or email [email protected] if you have any questions and require more information on this study.

• Strategic view of how, where and when the world's energy demands will change

• Demand for linepipe over a 22 year forecast

• A proprietary database of how linepipe demand will develop by country/region

• An evaluation of how the world's transmission pipeline network has developed by country

• Identifying where significant growth has occurred and which countries have ageing networks

• Extensive analysis on the structure of the linepipe sector by country

• Detailed database of existing pipeline network

• Unique database that uses 8 different categories of fluid type, onshore and offshore, making 16 combinations in all to cover all possible options

http://www.metalbulletinstore.com/


Tube & Pipe Group

This study offers expert analysis, forecasting and independent guidance including:

The global/regional large-diameter linepipe market size

Historic and forecasted consumption data by country

and region

Large-diameter consumption trends by grade and type

Production and capacity data for all major producers

Competitive advantage and new producer market entrants

Potential new threats to the global large-diameter linepipe

industry

Historical and forecast regional product pricing

ORDER ONLINE TODAY at www.metalbulletinstore.com or contact us on +44 (0) 20 7779 8000 or email [email protected] if you have any questions and require more information on this study.

The Five Year Strategic Outlook for the Global Large-diameter Linepipe Market

http://www.metalbulletinstore.com/


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Global market trends: OCTG and large diameter linepipe