Page 8 - ITAtube Journal 1 2019

Market information
Dr. Gunther Voswinckel, VOSCO GmbH
World Pipe & Tube Market:
current factors influencing outlook Dr. Gunther Voswinckel – Update as per February 2019
Welcome to our regular presentation of the main worldwide economic factors influencing the pipe and tube industry.
The largest tube and pipe consuming market segment, accounting for about 51% of total consumption, is the oil and gas industry.
In October 2018, oil prices climbed yet again to a 4 year high of US$85/ barrel. Now, as of February 2019, prices have fallen again, to US$62/barrel. The trade sanctions against Iran and Venezuela initiated by the US government are impacting the oil price - despite the fact that we would be faced with an oversupply of oil were the sanctions not be in place.
Analysts will have once again realized that forecasts on oil price levels may be completely overthrown by political intervention on the part of stakeholders. The figures show that US tube and pipe producers in particular were greatly advantaged by the resulting business trends on the oil and gas market. Increased pumping and exploration activities in the US are cur- rently primary driving forces. If we believe the US experts, this will remain a constant right through 2019. Russian and European tube and pipe producers were also able to profit, to a lesser degree, from this positive trend.
Several other economic factors affecting the tube and pipe industry are discussed here. Other tube and pipe markets such as the automotive (15%), mechanical engineering (9%) and building and con- struction industries (5%) are also attractive market segments for our sector.
Despite current turbulences, the world automotive market is characterized by steady growth of about 2% p.a. At the same time, the proportion of tubes used in auto design is steadily on the rise, meaning this market segment is becoming increasingly attrac- tive.
The building and construction industry market is doing even better, growing by about 4% p.a. Here we see increasing competition between steel and tube structures and concrete elements. Lobbying
activities may help to further enlarge the steel/pipe penetration for skyscrapers and bridges.
World production of steel tubes extrapolated from Q3 2018 evidenced a slight increase of 2% as markets further stabilized.
In detail, growth of 13% is reported for the US, sup- ported by political trade barriers for tubular products and the strong growth of the shale gas exploration industry.
For welded tubes below 406 mm diameter, figures showed a Q3 production increase of 5%; the US reported growth of 12% after exceptional gains in 2017 (+30 %). For welded tubes of 406 mm or larger, Q3 2018 production experienced an overall drop of 5%. But both the US (+13%) and the CIS (+9%) showed significant production growth.
In seamless tubes, Q3 2018 saw production grow overall by 4%. The US – following a boom year 2017 (+69%) – reported continued growth at the lesser rate of 17%. Even India, with its smaller produc- tion capacity, was able to report notable production gains of 32%.
This is a remarkable trend change, with US tube production experiencing impressive growth for the second time in several years. It would appear that the US trade barriers policy is having an impact. However, it should be noted experts are cautioning that this effect may not be sustainable, since some of the tube production plants taken back online to serve the increased demand are all but obsolete.
Pipe prices meanwhile continue to climb, as reflected in the pipe price index which showed an increase of 25% in 2018. Competition in saturated markets is prompting minor investment in those tube markets that display growth. Producers are streamlining their processes and targeting more demanding high- tech products rather than commodity-grade tubes. Limiting factors are sometimes the available steel quality for strip, plate and billets, as well as tube plant infrastructure in terms of both machines and the applied quality standards.
ITAtube Journal No1/February 2019
8