Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

The oil country tubular goods (OCTG) market is expected to continue struggling in 2020 due to stagnant rig counts which are influencing limited steel pipe demand. 


As Tenaris informed Davis Index through email recently, drilling activity in the oil and gas markets has been steadily declining along with unfairly traded OCTG imports, which in turn, directly impact tubulars and are decreasing mill production plans and ferrous scrap demand. Recent forecasts and announcements by entities that service the energy industry in Texas, Arkansas, and the Ohio Valley project the OCTG market to remain challenging in 2020. 


According to the Energy Information Administration (EIA), WTI crude prices are expected to be 3pc lower in 2020 compared to the year-to-date November-ended average of $56.74/b (barrel). 


This is resulting in tightly managed capital investments in the industry that are limiting exploration projects and therefore impacting the tubulars business. A rebalance in supply may somewhat strengthen pipe prices but a drastic increase is presently not expected. Imports are expected to increase in Q1 2020 as quotas, especially, from South Korea are reset while demand ticks up on early year projects. 


Prices for P110 domestic welded casing in December 2018 were at $1, 550-1,600/st ($1,708-1,763/mt) but declined to $1,300-1, 350/st ($1,433-1,488/mt) in May 2019 then further to $1,175-1,200/st ($1,295-1,322/mt) by June with stagnant pricing remaining into September 2019. By November, prices plunged further to $1,050-1,100/st ($1,157-1,212/mt). 


US energy prices reportedly continue remaining stuck in the weak market, but US mills launched energy tube price hikes in early December with narrow effects. J55 ERW OCTG pipe was $1280-1380/st ($1,411-1,521/mt) in August 2018, by January 2019 it declined to $1,200-1,250/st ($1,322-1,378/mt), and now in mid-December the pipe is at $1,000-1,100/st ($1,102-1,212/mt). Prices declined 12-17pc since earlier this year. 


According to the latest Baker Hughes rig count data, oil rig count in the US decreased by eight week-on-week and 208 compared to the same week a year ago at 677 rigs. Oil rig counts in Canada decreased by 36 week-on-week to 52 rigs but increased by 37 compared to the same period a year ago. 

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