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ASA MATERIALS MARKET DIGEST | 1 © 2012 American Supply Association. All Rights Reserved.
ASA MATERIALS MARKET DIGESTNovember, 2012 • Jim Olsztynski, Editor • Published monthly by the American Supply Association • www.asa.net • [email protected] • 630.467.0000
ROUTE TO
This report is published as a member service of the American Supply Association. Its contents are solely for informational purposes, and any use thereof or reliance
thereon is at the sole and independent discretion and responsibility of the reader.
While the information contained in this report is believed to be accurate as of the date of publication, ASA and the author disclaim any and all warranties, express or
implied, as to its accuracy and completeness.
© 2012 American Supply Association. All Rights Reserved.
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In the Spotlight: Our Bountiful Planet
This writer was intrigued by the news last spring of some undaunted (some would say “crazy”) entrepreneurs concocting a scheme to mine asteroids for precious metals. Not in some far-off future but using present technology.
The more one looks into it, the more implausible the quest appears. Technology aside, the basic economic premise is that precious metals are so pricey one could actually make money at space mining. This presents a conundrum in that the volume of materials that need to be extracted to justify the enormous expense of harnessing and mining asteroids would result in a glut of the astro-metals, and thus, lower their prices dramatically.
In any case, this writer was equally intrigued by John Miller’s article appearing on June 4, 2012, in the Wall Street Journal that points out our own planet, Earth, harbors maybe 10,000 years’ worth of most precious metals, although much of it is uneconomical or technologically unfeasible to get at with today’s market pricing. Yet, just as with shale oil and gas, prices eventually could reach a level that would enable clever people to figure out a way to extract them profitably. Click here to read the full article.
Carbon Steel
U.S. steel service center shipments declined for the second month in a row during September, decreasing 9.5 percent from September, 2011, according to the Metals Service Center Institute (MSCI). For 2012 year-to-date, steel shipments were up 3.3 percent from the same period in 2011. Steel product inventories were up 4.2 percent at the end of September, 2012, from September a year ago and increased 0.5 percent from August, 2012. At the current shipping rate, this represents 3.5 months of supply in inventory.
U.S. steel mill shipments in August increased 5.9 percent from the previous month and 0.9 percent year-on-year, according to data from the American Iron and Steel Institute (AISI). However, September and October figures indicate production declines since August, AISI added.
More signs of a slowing economy: AISI indicated that steel imports and finished steel imports dropped 9 percent and 8 percent, respectively, in September from the previous month, although annualized totals show gains of 19 percent and 21 percent versus 2011. AISI’s data shows OCTG imports were down 1.2 percent in September from August, although year-to-date, they were up 31.4 percent. Standard pipe imports jumped 16.1 percent in September, gaining 13.4 percent year-to-date.
Iron ore prices spurted upward in mid-October thanks to a surge in demand from China, although many analysts attributed it to an upsurge in steel production leading into a Chinese holiday period. The longer view is that China’s growth will continue to slow and with corresponding impact on China’s steel industry. The country is plagued by overcapacity and high inventories at mills and throughout the supply chain. The excess is being shipped to foreign markets at cut-rate prices, translating into price pressure for domestic producers.
“As with other commodities, China dominates the iron-ore market, accounting for about 60 percent of global demand for the ore. The U.S., by comparison, accounts for about three percent of global iron-ore demand,” according to American Metal Market (AMM).
High-carbon ferromanganese prices plunged in early October to their lowest levels in almost three years thanks to slack demand and cheap imports. Through August, imports of the product gained 15.6 percent. Prices firmed a bit as the month progressed, and other ferro-alloys were reported doing even worse, price-wise.
Despite the economic slowdown, British metals tracking firm MEPS expects world steel production to increase by 1.9 percent this year with further gains anticipated in 2013. MEPS expects that steelmaking in the European Union will decline by 4.5 percent in 2012, but other global suppliers will more than pick up the slack
Stainless Steel
Boosts in stainless surcharges for most grades were announced for November by major domestic stainless steel producers AK Steel, North American Stainless (NAS) and ATI Allegheny Ludlum. The increases ranged up to 3.8 percent and were attributed to rising nickel prices.
ASA MATERIALS MARKET DIGEST | 3 © 2012 American Supply Association. All Rights Reserved.
Nickel prices were softening as October drew to a close,
leading some observers to wonder if the aforementioned
stainless increases would stick. Stainless demand remains slack.
According to MSCI, stainless steel product shipments during
the first nine months of 2012 were down 2.3 percent compared
with the same period of 2011.
Presently, Nickel is in oversupply globally, though longer
term analysts see the potential for deficits, if several big mining
projects in the planning stages don’t get underway soon.
Tubular Products
OCTG prices continued to slide thanks to oversupply, especially
from cheaper imports, coupled with a slowdown in natural
gas drilling. Authoritative Pipe Logix, Inc. calculated average
domestic OCTG prices at $1,811 per ton in September, down 2.2
percent from August. Welded OCTG prices averaged $1,677 per
ton in September, down 1.5 percent from the previous month,
while seamless OCTG prices dropped 2.7 percent in September.
U.S. OCTG producer prices dropped 4.7 percent in September from August, and 5 percent compared with September, 2011.
Unfair imports were blamed for the shutdown of two U.S. OCTG plants operated by Allied Tube & Conduit and Welded Tube Co. during a U.S. International Trade Commission (ITC) hearing in mid-October. Petitioners JMC Steel Group, Allied Tube & Conduit and U.S. Steel Corp., along with the United Steel Workers union, said that while domestic OCTG shipments increased by about 10 percent during the period 2009-2011, imports increased by more than 90 percent. The market share of imports rose to 13.9 percent from 8.6 percent in 2009.
In response, anti-dumping duty margins were levied by the U.S. Commerce Department’s International Trade Administration (ITA). Margins totaled 48.43 percent for Indian producers, 5.81 percent for Omani companies, 3.85 to 11.71 percent for UAE firms and 3.9 to 27.96 percent for Vietnamese pipe makers; countervailing duty margins of 285.95 percent were assigned to Indian companies, 4.13 percent for Omani producers, and 2.06 to 6.17 percent for UAE companies. The ITA found that the Vietnamese producers did not receive any subsidies.
U.S. Pipe & Tube ImportsLanded duty-paid value (in $1,000s)
Annual & Year-To-Date Data (Jan. - Aug. 2012) 2011 YTD 2011 YTD 2012 % Change YTD % Change 2007-11
Total Carbon and Alloy Pipe & Tube 9,898,742 6,465,344 8,833,396 36.6% 5.8%
Carbon Seamless Tubular Products (Other than OCTG) 1,965,444 1,255,951 1,626,310 29.5% 45.7%
Carbon Seamless OCTG 2,612,205 1,727,043 2,384,080 38.0% 58.9%
Welded Tubular Products (Other than OCTG) 2,253,821 1,503,655 2,185,049 45.3% -49.4%
Welded OCTG 1,556,185 995,212 1,406,567 41.3% 153.0%
Flanges, Fittings & Tool Joints 1,239,362 792,549 1,073,009 35.4% 29.0%
Stainless Seamless Tubular Products (Jan. - July 2012) 920,190 523,279 545,243 4.2% -3.1%
Stainless Welded Tubular Products (Jan. - July 2012) 438,209 249,025 279,300 12.2% -30.9%
Stainless Flanges, Fittings & Tool Joints (Jan. - July 2012) 558,825 290,626 395,785 36.2% 2.8%
Source: U.S. International Trade Commission/U.S. Department of Commerce
4 | ASA MATERIALS MARKET DIGEST © 2012 American Supply Association. All Rights Reserved.
In their defense, foreign firms blamed premium pricing by domestic producers for the discrepancy. A pre-hearing brief filed by Universal Tube & Plastic Industries and Prime Metal Corp. USA (companies with ties to the UAE) stated, “Domestic producers have the significant competitive advantage of greater proximity to the market and much shorter lead times, which translates into a market premium for domestic (circular-welded pipe). The observed underselling merely reflects this markup.”
In a separate trade case, U.S. Steel Corp. and Wheatland Tube Co. appealed the lowering of duty margins by the ITA in its final determination in an anti-dumping duty investigation of circular welded steel pipe from China. The ITA had amended its margins to 45.35 percent from 69.2 percent for specific producers/exporters, and the China-wide rate to 68.24 percent from 85.55 percent, following a ruling by the World Trade Organization’s Dispute Settlement Body.
In still another trade dispute, the ITA issued weighted-average margins of 0.92 percent for Saha Thai Steel Pipe Public Co., 8.23 percent for Pacific Pipe Public Co. and 15.67 percent for all other firms in an anti-dumping duty administrative review of circular welded carbon steel pipe and tube (0.375 to 16 inches in diameter) from Thailand from March 1, 2010, to Feb. 28, 2011. Domestic petitioners included Allied Tube & Conduit, TMK Ipsco, U.S. Steel Corp. and Wheatland Tube Co.
A glut of OCTG product may be an even greater problem for domestic producers than cheap imports, and supply is about to get another big boost with the plan announced by Germany’s Benteler Steel/Tube GmbH to build a $900-million seamless tube mill in Caddo, Louisiana. Groundbreaking is scheduled for the spring of 2013, with construction expected to be completed by the second half of 2015.
Luxembourg’s Tenaris SA said that its previously announced new $1.5-billion seamless pipe mill will be located in either Texas or Louisiana, chosen for proximity to the oil industry’s unofficial capital of Houston.
TMK Ipsco’s parent company reported North American steel pipe and tube shipments down 7.5 percent in the third quarter, blaming imports and a decline in natural gas drilling. Russia’s OAO TMK said, however, that year-to-date shipments through nine months were up 12 percent year-on-year.
London-based Evraz plc also saw its North American tubular sales slump in the third quarter by 8.2 percent compared with a year ago.
China’s WSP Holdings Ltd. entered into a definitive agreement to sell its U.S. OTCG business for $43 million to Southern Tube LLC, an affiliate of Tokyo’s Nippon Steel & Sumitomo Metal Corp.
Natural gas prices surged in October, rising about 24 percent
from their early September lows and creating potential for an
upsurge in OCTG demand. On the other hand, some observers
view the price rise as temporary and likely to be reversed in
part because of power plants switching back to coal once gas
becomes less economical. Much also depends on the weather
as the heating season comes into its own.
Copper
Where does a 500-lb. gorilla sit? In China, economically
speaking. According to the International Monetary Fund,
global demand for the major commodity metals aluminum,
copper, lead, nickel, tin and zinc rose 2.3 percent in this year’s
second quarter. Less China’s consumption, demand would
have dropped a whopping 2.6 percent.
Copper prices started to surge in mid-October, thanks to a
housing rebound that saw starts rise to their highest monthly
level since 2008 in September. But, after hitting $3.7525/lb. on
the Comex, copper retreated to the $3.50 range as the month
drew to a close.
The Producer Price Index for copper pipe and tube dropped 4.7 percent in September from the previous month and was
down 17 percent compared with September, 2011 (reference
accompanying chart on the last page of this report).
Austin, TX-based Prestige Economics forecasts Comex copper prices to average $3.95 per pound in 1Q2013 and
reach $4.15/lb. by 2014.
A global copper deficit persists, according to the International
Copper Study Group. ICSG’s data indicated a production deficit
of 524,000 tons for the first seven months of 2012, compared
with a deficit of 73,000 tons for the same period of 2011. World
apparent usage grew by 6.2 percent through July, compared
with January thru July, 2011.
ASA MATERIALS MARKET DIGEST | 5 © 2012 American Supply Association. All Rights Reserved.
Scrap
Ferrous scrap prices appear poised for a rebound after steep declines in October, say various industry sources. Low inventory levels were cited as the main reason, due to dealers sitting tight and waiting for prices to go up. The export market also appears to be picking up steam.
Stainless scrap prices are still scraping bottom with little light at the end of that tunnel. Continued slack demand and soft nickel prices are to blame for prices dropping each week in October.
The copper scrap market also appears moribund, thanks to a flood of material when prices were rising. The recent slump may change the supply equation, though most copper scrap market analysts predict a tough fourth quarter.
Beginning January 1, it will be illegal to pay cash for any amount of copper scrap in California. That’s when the state’s new Metal Theft Prevention Act takes effect.
Plastics
Tight resin inventories and upward pressure from feedstocks were two factors pushing prices of PE, PP, and PVC higher during September, according to an article in the October issue of Plastics Technology magazine. At the same time, soft to slack domestic demand, declining exports, ample supplies (in most cases), and lower feedstock prices contributed to lower prices of PS and popular engineering resins, such as ABS, nylon and PC.
News of Note
ASA industrial PVF distributors enjoyed an average 9.7 percent sales gain in September compared with the same month of 2011. Over a rolling 12-month period, the increase was 10.1 percent, according to the data. Their average inventory increase was 6.2 percent in September. On the down side, 62.5 percent of industrial PVF respondents reported their gross margins were down for the month, compared with 31.3 percent who reported them up. The rest reported they stayed even.
The Producer Price Index for inputs to construction grew 0.9 percent in September, following a similar increase in August, according to the Associated General Contractors of America. The organization’s assessment covers materials that go into every type of project plus items consumed by contractors, such as diesel fuel. Please reference the accompanying PPI chart at the end of this report to review indices for various PHCP materials.
About Jim Olsztynski
For 35 years, Jim Olsztynski has covered the plumbing-heating-cooling-piping and industrial and mechanical pipe-valves-fittings (PHCP-PVF) industry as an award-winning journalist and editor for a variety of industry publications. He is an accomplished author having published several Essentials courses for ASA University as well as his own book, entitled: Bumps on the Road to Riches: How to Avoid Big Mistakes that Kill Small Businesses. Jim has also made numerous appearances and presentations about the industry and its rich history before live audiences as well as on television.
6 | ASA MATERIALS MARKET DIGEST © 2012 American Supply Association. All Rights Reserved.
Producer Price Index - Key Industry Products
Pipe, Valves & FittingsProduct
CodeAugust 2012
September 2012
% Change% ChangeSeptember
2011
Metal valves, except fluid power 1149-02 276.0 276.1 0.0 3.8
Gates, globes, angles, and checks 1149-0201 316.2 316.3 0.0 3.1
Ball valves 1149-0202 319.9 319.9 0.0 7.8
Butterfly valves 1149-0203 196.4 196.4 0.0 2.7
Industrial plug valves 1149-0204 205.6 205.6 0.0 1.0
Plumbing and heating valves (low pressure) 1149-0205 N/A 276.1 N/A 3.8
Solenoid valves 1149-0208 N/A 280.4 N/A 2.0
Other industrial valves, including nuclear 1149-0209 254.0 254.7 0.3 7.4
Automatic valves 1149-0211 156.2 156.2 0.0 2.5
Steel pipe & tube 1017-06 275.3 269.9 -2.0 -3.4
OCTG, standard, line pipe, carbon 1017-0671 115.2 109.8 -4.7 -5.0
Steel pipe & tube, alloy 1017-0673 109.5 109.3 -0.2 2.6
Steel pipe & tube, stainless steel 1017-0674 103.4 101.7 -1.6 -5.8
Metal pipe fittings, flanges and unions 1149-0301 300.4 296.6 -1.3 0.0
Copper & copper-base alloy pipe and tube 1025-0239 205.8 215.4 -4.7 -17.0
Plastic pipe 0721-0603 102.8 104.0 1.2 1.3
Plastic pipe fittings & unions 0721-0604 135.2 135.1 -0.1 0.7
Plumbing Fixtures, Fittings & Trim 1054-02 279.4 281.1 0.6 1.8
Vitreous china fixtures 1052 N/A 145.8 N/A 0.3
Bath & shower fittings 1054-0211 224.5 228.0 1.6 1.8
Lavatory & sink fittings 1054-0218 139.6 139.6 0.0 1.8
Miscellaneous brass goods 1054-0223 290.2 290.4 0.1 1.9
Enameled iron & metal sanitary ware 1056 201.8 201.7 0.0 0.9
Steam & Hot Water Equipment 1061 261.1 264.7 1.4 4.3
Cast iron heating boilers, radiators and convectors 1061-0106 164.9 167.9 1.8 4.0
Steel heating boilers, all classes 1061-0112 166.4 166.4 0.0 5.6
Domestic water heaters 1066-01 338.3 340.7 0.7 5.4
Electric water heaters 1066-0101 320.9 320.9 0.0 4.6
Non-electric water heaters 1066-0114 212.7 215.3 1.2 6.1
Warehousing, Storage, & Related Services 32 97.7 97.8 0.1 -3.2
Source: U.S. Department of Commerce Bureau of Labor & Statistics
