Page 9 - ITAtube Journal 2/2019

The main and dominant market segment for steel tube and pipe suppliers is the OCTG industry with a 51% market share. Besides this, the automotive (15%), mechanical engineering (9%) and construction industries (5%) are also strong market segments for the sector. (Fig.1)
Let’s take a look rst of all at the OCTG, oil and gas, as the largest target market of steel tube and pipe suppliers. This market is subdivided into pipes used for oil and gas rigs, such as drill pipes, joints, tubing and casings and, further downstream, line pipes to transport oil and gas.
The number of oil and gas rigs is heavily dependent on the price of oil. There is a strong correla- tion between the oil price and the number of oil and gas rigs in operation (see also ITA Tube Journal 2019/1). And of course, OCTG tube and pipe consumption depends on the number of rigs, as well as the depth of drilling and the capacity of the rigs.
After an extended period of stead- ily climbing oil prices – from early 2016 (US$30 /barrel) to October 2018 (US$85 /barrel) – the oil price fell back to US$52 /barrel in only 2 months, only to recover to about US$62 /barrel by April 2019. (Fig.2) This price volatil- ity is quite striking and a conse- quence of nervous reactions to the political measures taken. Without the current political interven- tions, the world would be facing an oversupply of oil and gas, a situation which in early 2018 caused some US experts to warn that prices could plummet, much as they did in 2014 following the rst shale gas boom.
The International Energy Agency (IEA) sounded a warning note
Figure 1: Markets for Steel Tube and Pipes
Source: ITATube Journal/Wirtschaftsvereinigung Stahlrohr
Market information
Figure 2: Oil Price Development 2014 to 2019 Source: Nasdaq
and backed up its warnings with gures. The organization expected growth in oil consump- tion in 2018 of about 1.4 million barrels/day. At the same time non-OPEC countries, particularly the US, were expected to raise their pumping levels by about 1.7 million barrels/day.
Citigroup analysts went even further and predicted a hike in output by non-OPEC producers of about 2.2 million barrels/day.
If the IEA and Citigroup predic- tions had been proven correct,
the world would have been faced with an oversupply situation. As it is, political intervention by the US government, i.e. the sanctions imposed on Iran and Venezuela’s oil exports, created an arti cial mood of supply shortages, which in turn prompted the oil price rally through 2018.
In 2019, following a sharp dip in outgoing 2018 back to US$52/ barrel, oil prices recovered again, possibly due to potential political con ict in Iraq. (Fig.3)
With oil prices currently so heavily
ITAtube Journal No2/May 2019
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