Seamless Steel Tube and Pipe Market Tracker · April 2013 Seamless Steel Tube and Pipe Market Tracker 3 Metal Bulletin Research Seamless prices approach near-term trough Seamless

Seamless Steel Tube and Pipe Market TrackerAnalysis of seamless global tube and pipe markets

Issue 9122 April 2013www.metalbulletinresearch.com

ContentsNorth America 3Europe, Middle East and Africa 6Asia 9Energy Markets 11Seamless Capacity Developments 12

US producers see prices retreat with costs: page 3 North Africa may provide demand growth: page 6 Another spring slump in China: page 9

Prices remain under pressure at the start of the second quarter

Seamless steel tube and pipe producers in the USA have had little success in maintaining price increases since the recession started and the prevailing fundamentals suggest these conditions will persist at least through the first half of 2013. Falling costs and oversupply continue to weigh on a market characterised by stable but underwhelming demand. Seamless OCTG prices failed to maintain any of the announced increases last month. API 5CT J/K55 material is hovering along a perceived floor as higher-quality tonnage registered steeper cuts. We do not expect further steep declines for domestic material as mills would prefer to restrict supply rather than experience more price falls.

For the Chinese steel market, the spring recovery began late and seems to have ended early. Steel market prices have weakened generally and the prices of a number of categories of seamless tube and pipe have been marked down. A106B has lost more than last month’s modest gain, reaching prices last seen in January. The export price for low carbon A106B has fallen about $50/tonne, but most other export prices are reported to be stable. The weakness may be explained by a cooling off of demand for construction supplies, the result of the government’s selective restraints on credit for the property sector. This has slowed sales for lower priced structural grades, but the boiler grades have been buoyed by steadier demand from manufacturing.

Demand for EU seamless pipe and tube is expected to primarily be sustained by activity in eastern and sub-Saharan Africa, as political turmoil takes some support away from oil production across the MENA region. Recent drilling operations in East Africa, along with projects in Nigeria, Algeria, and Angola will provide a steady base of demand for seamless pipe producers.

Source: Metal Bulletin Research

MBR is expecting a modest second-quarter bump in pricing The outlook for the EU is muted by a continued poor economic forecast

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US OCTG API J55 - casing

US API 5L B

W.Europe Linepipe API 5L B

China OCTG API J55 - casing

Forecast

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2 Seamless Steel Tube and Pipe Market Tracker April 2013

Metal Bulletin Research

Seamless market indicators — April 2013

Global seamless tube and pipe prices — April 2013


Seamless demand indicators month-on-month* performance, Chinese motor vehicle output fell strongly this year during the holiday period


Seamless raw materials month-on-month performance cost pressures declined in April

Global seamless tube and pipe prices

Linepipe Mechanical Boiler tube Stainless Stainless

Casing J/K55 Casing N80 Q Casing L80* API 5L B** ASTM A519 ASTM A106 b TP 304 Cr13 (OCTG)

USA $/ton 1,366 1,615 - 1,016 1,252 1,298 - -

$/tonne 1,505 1,780 - 1,120 1,380 1,430 - -

% monthly change 0.7% -0.6% - -0.9% -1.4% -1.4% - -

% yearly change -8.8% -7.8% - -8.6% -7.1% -7.7% - -

Western Europe €/tonne 1,165 1,321 1,544 1,033 953 1,050 - -

$/tonne 1,675 1,900 2,220 1,485 1,370 1,510 - -

% monthly change -0.3% -0.3% -0.3% -0.3% -0.7% -1.0% - -

% yearly change -5.9% -5.7% -5.7% -6.0% -8.7% -9.6% - -

Eastern Europe $/tonne 1,135 1,270 - 970 1,005 1,130 5,800 -

% monthly change -0.4% -0.4% - -0.5% -1.0% -0.9% 0.2% -

% yearly change -9.6% -8.6% - -9.3% -11.8% -10.3% - -

China export $/tonne 936 1,150 1,205 823 800 735 5,100 4,099

% monthly change 3.0% 1.3% 2.1% 0.4% 1.3% -0.7% - -

% yearly change -6.4% -2.1% -2.0% 0.4% -4.8% -15.0% - -

Japan $/tonne 1,850 2,300 2,650 1,575 - - - 6,775

% monthly change -2.6% 2.2% 0.0% 0.0% - - - -

% yearly change -1.3% 3.4% -1.3% 0.0% - - - -

Middle East $/tonne 1,305 1,530 - 1,140 - - - -

% monthly change -0.4% -0.3% - -0.4% - - - -

% yearly change -0.8% 8.1% - -2.1% - - - -

euro/$ rate: 1.30

OCTG API 5CT

Source: Metal Bulletin Research, prices FOB basis (except Middle East, which is CFR, and USA OCTG, which is local distributor prices); * including premium connections, except for China; ** Japan API 5L X52

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MB Iron Ore Index

Australia HCC

Chinese Coke

US HMS No.1

MB Scrap Index (Turkey)

Japan HMS No.2 (Tokyo)

Turkish billet export

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WTI

Henry Hub natural gas

US and Canada rig count

International rig count

US IP (y/y % ch)

EU IP (y/y % ch)

China IP (mv, y/y % ch)

*Unless otherwise noted

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April 2013 Seamless Steel Tube and Pipe Market Tracker 3

Metal Bulletin ResearchMetal Bulletin Research

Seamless prices approach near-term troughSeamless steel tube and pipe producers in the USA have had little success in maintaining price increases over the past few years, and the prevailing fundamentals that maintain these conditions persist. Seamless tubular prices were stable to down in April as falling costs and oversupply weigh on a market characterized by stable but underwhelming demand. Seamless OCTG prices failed to maintain any of the announced increases last month. API 5CT J/K55 material is hovering along a perceived floor as higher-quality tonnage registers steeper cuts. MBR’s benchmark price for seamless J/K55 casing is $1,505/tonne at distributors, up slightly from last month, only as distributors resisted any further price cuts. We do not expect any further declines for domestic material as mills would prefer to restrict supply rather than experience more cuts. Higher-grade seamless OCTG tonnage is still exhibiting price declines this month with API 5CT N80Q material down about $10/tonne so far.

With the shift in drilling over the past 12-18 months toward oil and natural gas liquids away from dry gas, there has been a shift in casing and tubing grades required toward the higher grades. But, the price of oil has leveled off or retreated lately, slowing drill rates at the margin. Meanwhile, the shift of seamless production toward higher-grade tonnage has managed to shift the oversupply up the value chain as well. We expect, however, that the decline in pricing in the higher grades will slow or stop within the next month as the premium over the commodity grades narrows and mills slow production rates.

Seamless tube and pipe prices are falling again in April as a result of weakening cost pressures. OCTG prices are mainly stable to down with JK55 tonnage at a near-term floor and the declines in higher grade material narrowing the premium of the high-value added tonnage over commodity tonnage. The fundamentals still do not support higher prices alone as supply remains well sufficient to satisfy demand. Seamless

output rates have been adjust downward in response, although OCTG output is slightly higher early in 2013 than in the latter half of 2012, on average. Imports of most product appear to be trending downward which will stem the rate of rising stocks that occurred last year. Mills expect a stronger second half of the year but given the ample supplies, MBR forecasts that price increases will be largely cost driven in the coming months.

Market Outlook

Source: customs statistics, AISISource: Metal Bulletin Research

US scrap prices ($/tonne)Scrap prices gave back most of the March increases in April

US Seamless mechanical tubing apparent consumption and import market share Monthly shipments have been running below average since mid-

year 2012 and have yet to recover this year

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Americas Market Analysis

l Prices give back any March price gains…l …as cost pressures recedel Mexican seamless exports poised to rise as domestic demand slows

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Costs continue to be the main driver of pricing movements as demand is not sufficient to bolster prices given the supply environment. As MBR expected, the March US scrap price hike was unsustainable as April settlements took back more than half of the March increases. Overseas scrap demand failed to absorb excess material while the transportation constraints that supported scrap prices in March were alleviated. Meanwhile, SBQ pricing, an indicator of seamless pricing as well, has been in decline this month owing to softening demand. The expectation is that pricing for both scrap and SBQ will decline into May as demand continues to correct downward. It is likely that scrap prices will give back the remainder of the March increase.

Supplies more than sufficient…Despite the cost cuts for seamless production, the fundamentals continue to be unbalanced by excess supply from both domestic and overseas suppliers as well as what is available in inventories. US seamless OCTG shipments in January and February of this year are down slightly from the first quarter of 2012 but are on a par or higher than most of the months of shipments after the first quarter. This has helped maintain the seamless share of the OCTG market as imports of seamless material has taken a step back. Seamless OCTG imports in January and February are understood to be down about 16% from the same period of 2012. Overall OCTG imports, including welded, are trending downward through March and April, according to preliminary license data.

Seamless mechanical tubing shipments are down about 25% in the first two months of the year as opposed to the same time in 2012. Imports are also trending downward with average monthly

US shipments of seamless pipe (ton)

2009 2010 2011 Sep 12 Oct 12 Nov 12 Dec 12 Jan 13 year-to-date y-o-y % chg

Standard pipe 115,111 309,326 233,926 18,690 15,612 17,960 11,583 12,937 12,937 -28%

OCTG 717,371 1,357,318 1,628,670 128,185 139,636 127,531 161,417 141,149 141,149 -3%

Linepipe 59,872 47,496 146,088 10,805 8,916 10,382 14,329 7,983 7,983 33%

Mechanical tubing 156,905 243,209 364,591 22,113 24,445 18,297 16,346 22,924 22,924 -22%

Structural pipe & tubing 15,145 14,922 18,258 563 969 1,000 1,017 1,462 1,462 64%

Total 1,088,126 2,012,242 2,442,876 183,011 192,634 177,942 206,535 188,997 188,997 -7%% for export 8.6% 8.7% 7.0% 3.7% 3.6% 5.4% 8.8% 7.6% - -

Canadian seamless and welded OCTG shipments ('000 tonne)

2009 2010 2011 Sep 12 Oct 12 Nov 12 Dec 12 Jan 13

OCTG production* 321 826 798 44 48 81 44 45 45 -37%

OCTG casing inc. coupling* 289 628 614 31 40 63 34 35 35 -37%

OCTG tubing inc. coupling* 33 198 181 13 8 18 10 10 10 -37%0Source: AISI, Statcan, Metal Bulletin Research* including welded

Americas seamless production and trade data ('000 tonne)

2009 2010 2011 Sep 12 Oct 12 Nov 12 Dec 12 year-to-date y-o-y % chg

Argentina production 502 779 850 73 72 67 77 848 0%Net import -370 -479 -521 -46 -34 -48 -41 -452 -13%Apparent cons 132 300 329 27 38 19 36 396 20%

Brazil production *e 412 505 553 45 50 45 41 550 0%Net import -22 11 10 -15 -11 - - -44 -534%

Apparent cons 390 516 563 30 39 45 37 502 -11%

Ecuador production - - - - - - - - -Net import 104 107 191 16 17 17 16 161 -16%Apparent cons - - - - - - - - -

0Canada production *e 66 - - - - - - - -Net import 275 375 485 19 42 21 53 408 -16%Apparent cons 341 - - - - - - - -

Mexico production 586 671 769 65 82 72 74 883 15%Net import -186 -269 -342 -12 -34 -46 -30 -405 18%Apparent cons 400 402 428 53 48 26 44 478 12%

US production 969 1,785 2,215 166 175 161 187 2,163 -2%Net import 1,015 1,253 1,826 205 167 130 133 2,199 20%Apparent cons 1,984 3,037 4,041 371 342 291 320 4,362 8%Source: Customs Statistics, Various sources, Metal Bulletin Research

*e = estimate



imports about 15,000 tonne/month below the monthly average for 2012, according to license statistics.

…for prevailing demand growthWhile there has been a general decline in new material overall, inventories are understood to still be too high for the prevailing demand. Distributors are not interested in building stocks and continue to buy on an as-needed basis. Overall rig counts are down more than 200 rigs from one year ago, although the decline in natural gas drilling appears to have ceased for the moment as the natural gas price rebounded recently. Oil drilling activity has slowed however on falling oil prices. The oil rig count dropped by 16 rigs in one week in mid-April.

Mexican industrial output continues to trend downMexican economic activity continued to trend lower in the first quarter of 2013, resulting in the 0.5% drop in interest rates by the Mexican central bank in March. Exports, industrial production, and construction declined at the start of the year, following retreating activity in late 2012. Total Mexican industrial production fell 1.2% year-over-year in February, after posting a slight increase the previous month. Nevertheless, most of the major contributing sectors registered declines. The steel-intensive machinery and equipment manufacturing component fell 7.4% month-on-month in February and 1.5% year-over-year. Transportation equipment is recovering from a dismal December measure, but remained 0.2% off February 2012 results.

Vehicle export growth fell into negative territory early this year, signaling that the important export sector is weakening, owing to muted demand growth from the major trading partners. Meanwhile, internal demand is not providing relief either as construction growth also declined from year-ago levels. Construction activity fell at an increasing rate in February – 2.3% year-on-year – from January with both months combining for a 0.9% drop from the first two months of 2012. The cutting of interest rates by the Mexican central bank is a step in stemming the declines, but even with the rate cut, it takes three to six months to see a response to interest rate adjustments in economic activity.

Nevertheless, Mexican crude steel output climbed 11% February from year-ago levels, while finished steel production was up 8%. MBR understands that seamless tube and pipe production reached 81,000 tonnes, an increase of 7,000 tonnes over February 2012. Last year, monthly Mexican seamless production averaged 73,500 tonnes, with net exports accounting for nearly 46% of the consumption of that material. With manufacturing and construction weakening in the country, domestic steel consumption, as well as seamless tube and pipe, will likely continue to decline. Moreover, exports may struggle as the prevailing fundamentals in the seamless markets of the major trading countries are leaning toward oversupply. MBR expects Mexican seamless producers to first offer highly competitive prices in order to make sales, but then it likely that output will be cut if stocks continue to grow.


US apparent supply of OCTG (% share) Seamless shipments have not been as affected by the weaker market as welded OCTG, and is holding ground in terms of share of supply


Mexican Industrial Production: Manufacturing (2003=100, NSA) Mexico’s late-2012 weakness carried over into 2013

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IPI: Mfg: Transport Equipment

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Europe, Middle East and Africa Market Analysis

l Oil and gas rig counts slip across countries in the Arabian Peninsulal European seamless markets are likely to underperform this quarterl Seamless tube and pipe producers look for support from global oil and gas industries

Market Outlook Seamless tube and pipe producers and consumers faced challenges over the first quarter of 2013, as fluctuations in raw material costs left seamless substrate costs subject to volatility, while revised IMF World Output forecast figures highlighted a slower than anticipated economic recovery across Europe, CIS, and MENA regions for the remainder of the year. MBR believes that seamless producers will continue to look toward the oil and gas markets for sustained growth in tube and pipe sales. Although the global supply of oil increased substantially in 2012, declines in production across the Arabian Peninsula in the fourth quarter raise our concerns regarding oil prices in the second quarter of 2013. Weakening demand fundamentals, combined with oversupply

issues, may put pressure on prices later this year, potentially undermining seamless OCTG production. Iraq and east Africa are anticipated to show promising developments in 2013, boosting the level of demand for seamless OCTG products. As the year progresses, we expect to see more policies throughout Europe in order to restore market confidence and support to business activity. Until such policies are introduced, we believe that the seamless tube and pipe markets will remain in a lull.

Seamless tube and pipe producers look toward the oil and gas sector for support in 2013Seamless tube and pipe demand is expected to primarily be sustained by activity from the oil and gas industry over 2013, as drilling operations in the Middle East and Africa drive seamless OCTG production rates. MBR anticipates that primary strength in drilling activity will occur in eastern and sub-Saharan Africa, as political turmoil takes some support away from oil production across the MENA region. Recent drilling operations in East Africa, along with projects in Nigeria, Algeria, and Angola will provide a steady base of demand for seamless pipe producers. In the Middle East, a pick-up in drilling activity is expected in Iraq, as the country undergoes a substantial push to increase oil production. Over the last few years, infrastructure and investment opportunities have been opened for companies that evaluate old drill sites, in order to gauge the economic viability of pursuing further oil/gas production from the site. Looking forward, MBR expects to see substantial investments toward improving and developing energy transportation, extraction, and refining infrastructure across the country.

Sources: Metal Bulletin Research

International Rig Counts Rig counts in Africa are expected to increase throughout 2013, as drilling activities in east Africa progress

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CIS, MENA, Europe Billet Prices In the first quarter, billet prices in the CIS, Europe, and MENA regions were down 11-12% year-on-year

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European seamless production and trade data ('000 tonne)

2009 2010 2011 Jun 12 Jul 12 Aug 12 Sep 12 Oct 12 Nov 12 Dec 12 year-to-date y-o-y % chg

Austria production 345 377 381 34 18 30 34 36 33 22 380 0%Net import -126 -263 -362 -32 -33 -15 -23 -36 -30 -24 -352 -3%Apparent cons 219 114 19 1 -15 15 11 0 3 -2 28 45%

Czech production 254 331 386 33 31 28 31 35 32 18 367 -5%Net import -172 -221 -239 -22 -21 -17 -22 -26 -25 -10 -248 4%Apparent cons 82 110 147 11 10 11 9 9 7 8 119 -19%

France production 549 576 642 61 57 15 61 66 61 38 646 1%Net import -196 -168 -324 -19 -32 0 -19 -31 -27 -32 -272 -16%Apparent cons 353 408 318 43 26 14 42 35 34 6 373 17%

Germany production 1,067 1,187 1,274 111 90 92 119 118 123 88 1,283 1%Net import -613 -722 -651 -68 -76 -71 -66 -85 -71 -52 -796 22%Apparent cons 454 465 623 44 14 21 53 33 52 36 486 -22%

GreeceNet import 24 10 14 0.39 0.5 0.0 0.4 0.7 0.8 1.0 7 -48%0 #DIV/0!Italy production 564 760 771 66 63 17 62 67 64 - 661 -9%Net import -241 -178 -187 -37 -7 -32 -2 -17 -20 - -227 35%Apparent cons 323 582 584 28 56 -15 60 49 44 - 434 -22%Kazakhstan production - 127 150 7 6 7 7 11 11 11 100 -33%

Norway Net import 66 42 109 5 2 3 6 4 2 17 84 -23%

Poland production 103 27 - - - - - - - - - -Net import 34 60 67 8 5 5 4 3 4 3 57 -14%Apparent cons 137 38 - - - - - - - - - -0Romania production 318 430 417 - - - - - - - 417 17%Net import -184 -337 -391 -29 -30 -34 -37 -33 -32 -25 -374 -4%Apparent cons 134 93 99 - - - - - - - 99 21%

Russia production 2,139 2,649 2,918 264 260 266 260 267 271 271 3,149 8%Net import -87 6 49 -12 -13 -1 49 12 -9 7 9 -81%Apparent cons 2,052 2,655 2,967 252 246 265 309 278 262 277 3,158 6%

Spain production 199 292 296 23 18 18 24 24 23 18 272 -8%Net import -28 -69 -134 -17 -12 -6 -7 -4 -8 -12 -137 2%Apparent cons 171 223 162 7 5 12 17 20 15 6 135 -17%

Sweden production 40 - - - - - - - - - - -Net import -20 -18 -20 -2 -2 -1 -1 -1 -1 0 -19 5%Apparent cons 28 - - - - - - - - - - -

Turkey Net import 113 178 205 20 22 18 17 15 27 15 217 6%

Ukraine production 510 782 876 79 74 83 82 80 61 48 887 1%Net import -396 -602 -659 -43 -37 -70 -68 -49 -57 -32 -643 -2%Apparent cons 114 180 217 35 37 13 14 31 4 16 244 12%

UK production 6 - - - - - - - - - - -Net import 83 89 148 18 13 11 9 18 6 6 155 5%Apparent cons 50 - - - - - - - - - - -

Source: Customs Statistics, Metal Expert, Various sources, Metal Bulletin Research * Some European figures are MBR estimates



Rig counts in Europe and the Middle East decline in March 2013, while African counts inch upAccording to Baker Hughes, international rig counts in March 2013 retreated on a month-on-month basis with declines totalling 7 rigs. In March 2013, the international rig count was primarily supported with growth in Latin America, which helped offset declines seen in Europe, Asia Pacific, and the Middle East. A comparison of total rig counts in Q1 2013 becomes difficult, as the civil unrest in Syria has led Baker Hughes to emit rig counts from the country beginning in February 2013. Similar exclusions were seen in the total rig count for the Middle East over the first quarter of 2012, which emitted data from Iraq, skewing year-on-year comparisons. Despite the exclusion of this data, international rig counts on a month-on-month basis across Europe, the Middle East, and Africa are down by a total of 14 rigs in March 2013.

The deceleration in global rig counts was most visible across the Middle East, as Quatar, Oman, Kuwait, and Yemen recorded month-on-month declines between February and March 2013. Oil production across the Arabian Peninsula showed a similar trend in Q4 2012, as production retreated. Rig counts in Egypt also decline and in March 2013, oil rig counts were down by 17 units with a similar trend seen in Iraq. Saudi Arabia on the other hand, exhibited an opposite trend, as total oil rig counts in the country slowly gained strength over 2012. Slight contractions in rig counts in Iraq and Egypt, along with weakening global economic growth prospects, leads MBR to believe that the MENA region may see a slight slowdown in drilling activity, taking some support away from premium seamless OCTG tube and pipe demand. Activity in these regions and other countries in the Middle East and North Africa will largely be dictated by political uncertainty and initially high investment and start-up costs. Premium OCTG seamless production and consumption will gain support from robust oil and gas exploration activities in sub-Saharan and eastern Africa over the year.

An economic contraction will likely reduce seamless demand in EuropeIn the IMF’s recently revised World Economic Outlook report, World Output figures were revised, exposing a bleaker assessment of the global economy than anticipated in their earlier report in January 2013. Of the downward revisions for expected growth rates in 2013, France, Italy, and the CIS regions fell -0.4%, while Central Europe and Eastern Europe fell -0.3%. The Middle East, North Africa, and Sub-Saharan Africa were not immune to the downgrades, as the MENA region’s growth rate dipped -0.3%, with the output in sub-Saharan Africa falling -0.2%.

Economic uncertainty weighed on substrate costs for seamless tube and pipe prices in the first quarter of the year. Deterioration in raw material prices, including declines in ferrous scrap and iron ore, along with weakening demand prospects in the euro-zone and periphery countries over the medium term, will most likely leave seamless producer vulnerable to volatile production costs over the next few months. Overall, we believe that seamless market developments in Europe seem unlikely in Q2 2013, as core economic indicators point toward a further contraction.

Source: METI et al

German motor vehicle production (units) Indicators still point to a downtrend in activity through the first

quarter


Dollar to euro exchange rate The recent strengthening in the euro will have further consequences for

internationbal trade

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Market Outlook

Asia Market Analysis

l Mixed price results for Chinese mills… l …as excess capacity continues to weigh on sentimentl Demand slow in Asian export markets

There is some confidence that the Chinese government will maintain its balancing act and control inflation while keeping the economy on track for 7.5% GDP growth, regarded as near the minimum to maintain social and political cohesion. Unfortunately the steel industry, including tube and pipe mills, has still to adjust to the implications this has for steel demand. Stocks are still too high because output has not been held down to clear them; tube and pipe

prices will remain fragile until the market is rebalanced. Producers are likely to continue to depend on increasing exports, but these will face rising obstacles in markets with indigenous seamless tube capacity, particularly in North America and the EU. The slower growth forecast for Japan and Korea is likely to result in oversupply in these two markets as well and similar attempts to clear surpluses abroad.

End of price rally in ChinaFor the Chinese steel market, the spring recovery began late and seems to have ended early. Steel market prices have weakened generally and the prices of a number of categories of seamless tube and pipe have been marked down. A106B has lost more than last month’s modest gain, and is trading in the spot market at Rmb4,350/tonne ($702/tonne), back to the January level. The export price for low carbon A106B has fallen too, now $50/tonne lower than in March, but most other export prices are reported to be stable.

The weakness may be explained by a cooling off of demand for construction supplies, the result of the government’s selective restraints on credit for the property sector – a move to nip in the bud what it saw as the beginning of a new wave of property speculation. This has slowed sales for lower priced structural grades but had less impact on boiler grades; these have been buoyed by signs of more steady demand from manufacturing.

Seasonal strength among carmakersDemand for higher value structural grades for the car industry gained from a sharp increase in vehicle production in the first quarter. There was the usual big increase in March after the Lunar New Year holiday, but the rise was particularly large this year – 54.8% - which helped to raise first quarter output 12.8% above the level in the first quarter of 2012. Vehicle output continues to fluctuate widely, however. A 12-month moving average has moved little over the past year and has not been far above the more or less static level of 2011.

Source: METI et al

Japanese tube nad pipe trade (‘000 tonnes), Weaker yen helps net exports recover

Source: CAAM

Chinese vehicle production Out continues to swing wildly from month to month

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Units 12-month Trend



This is a worry for seamless tube mills. They have depended for sales growth on gaining share from imports but there is little scope for more gains; producers need a sustained growth in domestic car output for further gains. There are condiment forecasts of rising car output – POSCO has just established a new car body sheet joint venture on this assumption – but the record of the past two years is not encouraging.

Oil and gas industry demand remains strong; seamless mills have been encouraged by trading in casing grades, where they have seen the spread narrow due to some recovery at the lower end of the price range. The prices of smaller diameter pipe had drifted down in February-March but most have advanced in recent deals. Prices of larger diameter casing pipe have held steady. In stainless steel pipe markets there are still wide local price variations, but deals have mostly been in the same range as last month, seemingly unaffected by the downward drift of nickel prices.

Limits to exports…China’s excess capacity remains the producers’ chronic problem. For a combination of reasons it cannot be solved simply by maximising exports. In markets with large seamless pipe capacity Chinese exporters face threatened or actual anti-dumping measures. As reported last month, the EC will report later this year as to whether there is a case for extending current restraints on imports of small diameter stainless pipes from China to pipes of larger diameter.

The demand for the EC inquiry owes much to the parlous state of general industrial demand in the EU but such restrictions are rarely eased when local markets grow. In North America, where specialist demand is enjoying something of a boom because of investments in shale gas fracking projects, investors are expanding capacity and building new mills. Once commissioned – or even before commissioning - they can be expected to oppose any moves to ease the entrance of Chinese tube and pipe.

…especially in nearby marketsThe markets in China’s neighbours that are long-term net importers of seamless tube, Taiwan and South Korea, have slowed – GDP in Taiwan has been drifting and the Korean government has introduced a won17.3tn ($15.4bn) supplementary budget to boost the flagging economy. Chinese mills enjoy a growing share of the market in distant Turkey. The country lacks seamless capacity and continues to welcome imports. At the beginning of April the international specialist group Interpipe signed a new distribution agreement with a leading Turkish trading group to step up shipments. Nearer home, the ASEAN countries (with almost no seamless capacity) and the Persian Gulf remain large net importers, but in both regions Chinese exporters have to contend with newly competitive Japanese mills, whose currency has fallen by 20% against the US dollar since the final quarter of 2012 while the Rmb has been rising – albeit by only a little over 1% so far.

JISF figures for all forms of pipe and tube (seamless and welded) show that Japanese exports have been rising from their nadir at the beginning of last year. Shipments have actually slipped since the yen began its fall, but it takes time for exchange rate movements to be reflected in trade. The fall of the yen can only reinforce the recovery.

Asian seamless production and trade data ('000 tonne)

2009 2010 2011 Jul 12 Aug 12 Sep 12 Oct 12 Nov 12 Dec 12 year-to-date y-o-y % chg

China production 21,548 25,159 26,486 2,336 2,340 2,324 2,480 2,572 2,500 28,070 6%Net import -2,822 -3,555 -4,612 -455 -420 -475 -374 -456 -394 -4,951 7%Apparent cons 18,727 21,604 21,874 1,881 1,920 1,849 2,106 2,116 2,106 23,119 6%

India Net import 263 322 339 5 14 28 36 23 19 207 -39%

IndonesiaNet import 219 250 312 54 34 32 27 26 -9 386 24%

Japan production 1,658 2,069 2,243 179 179 181 170 164 157 2,182 -3%Ordinary seamless 485 558 617 46 52 42 44 44 46 565 -8%Special seamless 857 1,157 1,226 97 96 102 92 85 80 1,200 -2%Stainless* 317 353 400 35 32 37 34 35 32 417 4%Net import, excl stainless -1,025 -1,216 -1,285 -105 -98 -101 -115 -98 -96 -1,268 -1%Apparent cons, excl stainless 636 1,350 557 38 50 43 20 32 29 497 -11%

MalaysiaNet import 84 120 198 20 18 16 20 20 21 216 9%

S. Korea production 16 16 17 1.5 1.8 1.8 1.8 1.7 0.5 18 10%Net import 320 394 513 46 25 38 38 42 37 456 -11%Apparent cons 336 410 529 47 27 40 40 44 38 475 -10%

Source: Customs Statistics, METI, KOSA, Various sources, Metal Bulletin Research



Energy Market Analysis

l Brent crude oil prices plummet as IMF lowers economic growth outlookl IEA predicts weak oil demand growth in 2013l Cold spring helps boost Henry Hub gas prices

Economic uncertainty takes a toll on Brent crude oil pricesBrent crude oil prices had fallen in 10 of its last 12 sessions prior to April 17. As a result, prices not only fell below $100/barrel for the first time since July, but they fell nearly 12% in what has been their biggest 12-day loss since June 2012. The biggest drop came on Tuesday when the International Monetary Fund lowered its outlook for global economic growth to 3.3% from its January forecast of 3.5 percent. This was not just on Europe, which has not seen this weak oil demand since 1985, but slower than expected economic growth in China and increasing US production.

About a week prior to the IMF announcement, the International Energy Agency said in its April Oil Market Report that 2013 would be the third consecutive year of weak global oil demand growth, rising a mere 795,000 barrels/day. This, it says, is despite relatively strong demand growth (1.28 million barrels/day) in non-OECD countries, with OECD consumption contracting by 480,000 barrels/day including a 340,000 barrel/day decline in Europe. The IEA estimates that non-OPEC oil supply would grow by 1.1 million barrels/day this year while OPEC supply falls 140,000 barrels/day.

Henry Hub natural gas prices continue to riseColder than normal temperatures throughout most of the United States and forecasts that U.S. natural gas output by 0.4% this year pushed Henry Hub natural gas prices above the $4.16/MMBtu support levels with the potential to test the upper resistance level of about $4.40/MMBtu. There had been record net storage withdrawals – an average of 99 billion cubic feet worth, during the four full weeks of March – the highest average weekly net withdrawal for that four week period since 2002.

Market OutlookFor the first time since July, Brent crude oil prices fall below $100/barrel after six consecutive days of declines. The biggest downward push came April 16 when the International Monetary Fund lowered its outlook for world economic growth on the back the sluggish economic recovery, increasing energy production in the USA

and slower than anticipated growth in China. The International Energy Agency is also predicting weak growth in oil demand in 2013. Meanwhile Henry Hub natural gas prices continue to firm, rising above $4.16/MMBtu, pushed up by unseasonable cold weather in much of the USA.

Source: Bloomberg, Metal Bulletin Research

Crude Oil Spot pricesThe Brent-WTI spread continued to narrow in April

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Brent Crude, $/bbl

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Source: Bloomberg, Metal Bulletin Research

Long-term natural gas pricesMBR notes sustained natural gas prices above $4/mmBtu

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100-day moving av.

200-day moving av.

Seamless Steel Tube an

d Pipe Mon

thly / Issue 117 / 18 Jan

uary 2008

12 Seamless Steel Tube and Pipe Monthly March 2012 Seamless Steel Tube an

d Pipe Market Tracker / Issue 91 / 22 April 2013

Published monthly by Metal Bulletin LtdISSN 1749-3757Produced by: Laima Alavociute Kimberly Leppold Brad MacAulay

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Other MBR reports available include:

l Welded Steel Tube and Pipe Market Trackerl Steel Raw Materials Weekly Market Trackerl Steel Weekly Market Trackerl Coated Steels Market Trackerl Stainless Steels Market Trackerl Ferro-alloys Market Tracker

To receive a free sample of any one of the above reports, email your details to: [email protected]

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Seamless capacity developments and news

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Schulz to open pipe finishing facility in Mississippi The Schultz Xtruded Products LP unit of Germany’s Wilh. Schultz GmbH has announced plans to build a $30-50m pipe finishing facility in Hernando, MS, to further take advantage of growing demand for seamless stainless steel, alloy steel and pipes and extruded shapes and profiles for the oil and natural gas industry. The company says it believes that this facility, which will employ 70 people, is a good opportunity for them to complement its $300m seamless pipe mill in Tunica, MS, which commenced production in late 2011.

Borusan Mannesmann breaks ground on Texas mill Istanbul-based Borusan Mannesmann, the first Turkish company to build a pipe mill in the United States, broke ground for its $150m, 300,000 ton per year seamless energy tubulars mill in Baytown, TX, on 2nd April 2013. Once up and running, the facility is to employ 250 workers.

Borusan’s chairman, A. Ahmet Kocobiyik, says this investment will not only give Borusan a foothold in the US market, but could be a beginning of a new era of economic relations between the USA and Turkey and its steel sectors. Borusan received a $1.6m grant from the Texas Enterprise Fund as incentive to build the pipe mill in Texas. In Texas, the mill will be well-placed to receive substrate from overseas or from domestic producers located in the southern USA. Moreover, MBR understands, that the mill will not initially have finishing or heat-treatment capacity on site for OCTG, but the Texas location is also close to distributors and finishing capacity.

New Tenaris mill to start up in 2016 Tenaris’ new 600,000 tons per year seamless oil country tubular goods mill, which is also being built in Baytown, TX, is expected to start up in 2016, German Cura, president of Tenaris North America, recently told attendees at a recent town hall meeting there. He says that this and other Tenaris US investments have been at least partially motivated by the recent shale gas boom.

He says the company has already filed for environmental permits for the plant with the Texas Commission on Environmental Quality and will start construction as soon as the proper authorizations are in place. The plant will include heat treating and premium threading capabilities but will not have a melt shop.

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Seamless Steel Tube and Pipe Market Tracker · April 2013 Seamless Steel Tube and Pipe Market Tracker 3 Metal Bulletin Research Seamless prices approach near-term trough Seamless