Tubular makers in the US, including pipemaker Tenaris, France's Vallourec, US Steel, and pipe distributors expect some uplift in demand in the fourth quarter after enduring a long slowdown throughout 2023.
Integrated steelmaker US Steel, which operates an electric arc furnace (EAF) seamless pipe mill in Fairfield, Alabama, expects lower volumes in the third quarter as chief financial officer Jess Graziano said on a 28 July earnings call that high inventories of around seven months will keep demand tamped down.
"In the very near term, let's call it [third quarter] volumes, [we expect] probably weaker [volumes] sequentially, but we do expect as the restocking happens out to the end of the year we'll get back to 120,000-130,000 short tons (of pipe shipments) per quarter as we see that inventory rebalance," she said.
French tubular maker Vallourec expects its US volumes to fall in the third quarter before rising in the final quarter of 2023. Prices are expected to stabilize in the second half of the year, according to a 28 July earnings release.
The Argus line pipe index has dropped by 27pc to $2,743/st (42,449/metric tonne) in July from its peak of $3,783/st in May 2022.
Distributors have blamed falling prices on high inventories as they fight for business in a supply saturated market.
The Argus oil country tubular goods (OCTG) all items average index has fallen to $2,735/short ton (st), a 29pc drop since hitting its peak of $3,867/st in October 2022. Seamless OCTG average prices were at a $352/st premium to welded OCTG.
Drawn by the high prices of late last year, US OCTG imports are up by 33pc and line pipe volumes up 21pc in the first six months of 2023 compared to the same period last year, according to data from the US Department of Commerce.
The OCTG trend showed some signs of abating as year-over-year import data for May and June was off by 14pc and 17pc, respectively, while line pipe imports slipped by 2.7pc and 1.7pc, respectively, in April and May, before jumping by double digits in June.
Global pipemaker Tenaris expects US oil and gas drilling may bottom out by the end of 2023 after slowdowns related to upticks in imports and OCTG inventories. Still, chief executive Paola Rocca expects third quarter volumes to fall as improved OCTG production at Tenaris' own mills allowed it to pull forward volumes into the second quarter.
Tubular distributor DistributionNOW (DNOW) expects rig counts to flatten out in the second half of 2023 after declining since the fourth quarter. Active drilling rig counts peaked at 784 for the week ending 2 December, 2022 and have since declined by 120 rigs, or 16pc, since then to 659 rigs for the week ending 4 August, according to data from oilfield service company Baker Hughes.
"In the US, we expect [third quarter] revenue to be flat [because of] US rig count headwinds and project mix," chief executive Dave Cherechinsky said on an earnings call on 2 August.
Rob Saltiel, chief executive of MRC Global, said large inventories have been built at multiple customers that will flatten the revenue from the company's gas utilities division through the rest of 2023.
