US Steel to restart Texas pipe mill

US Steel will restart an idled pipe mill at its tubular operations in east Texas in response to strong demand from US oil and natural gas drillers.

The Pittsburgh-based steelmaker expects to complete the restart of the Lone Star, Texas, facility's No. 1 electric-weld pipe mill by the third quarter. The mill produces full-body normalized electric-welded pipe in size ranges from 7-16in in outside diameter and is expected to supply drillers in the Permian Basin, a major West Texas oil field, among others.

Sources estimate the mill's 400,000 st/yr capacity represents around 7pc of apparent domestic consumption of oil country tubular goods (OCTG) of around 6mn st. The facility's smaller No. 2 welded pipe mill was restarted in 2017.

The No. 1 mill is expected to be fed with feedstock substrate from US Steel's own mills, boosting pull-through demand.

The announcement follows a strong recovery in US drilling activity, while the US 25pc tariff on imported steel mutes the penetration of imported material.

The total US drilling rig count has held above 1,000 since April 2018, more than double the lows seen in 2016, when US Steel idled the No. 1 mill at Lone Star amid fluctuating oil prices and as high levels of imports muted demand from domestic producers, the company said.

"We are encouraged by an improvement in market conditions and increased customer demand for tubular products that are mined, melted and made in America," US Steel chief executive David Burritt said.

Still, active drilling rigs in the US opened February lower at 1,045 after averaging 1,073 in the fourth quarter of 2018, according to data from oil field services company Baker Hughes. The slowdown comes as West Texas Intermediate crude oil tumbled from as high as $75/bl on a spot basis in October 2018 to around $45/bl in late December. Prices have recovered in early 2019 to the low/mid-$50s/bl.

US imports of oil country tubular goods fell by 11pc to 2.1mn t through September 2018 from a year earlier, in line with a 12pc decline in overall carbon imports as a result of the tariff.

US Steel acquired the formerly publicly-traded mill for $2.1bn in 2007.