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Outlook for The Large OD Linepipe Market
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Energy Portfolio
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Demand in recovery for the large OD linepipe marketProducersoflargeODlinepipeareoptimisticovertheoutlookforlinepipe
demandoverthecomingfiveyearperiod,followinglacklustregrowthinthe
previoustwoyears.Sincethestartoftheglobalrecession,linepipesupply
hasexceededdemandcausingpricestoslipandproducerstocutoutputrates
orshiftproductiontonon-energytransmissionpipe,whichcarriesanarrow
margin.Demandisnowinrecoverybutinthemeantime,therehavebeensome
structuralchangesinthemarketsthataffecttheprevailingsentimentaswellas
ouroutlookfortheindustry.
A change in focus is requiredFirstly,energydemandgrowthisnotthesameasitwaspre-recession.Theslow
economicrecoveryinthematuremarketsofNorthAmericaandEuropecurbed
energydemandgrowthandthelong-termoutlookforenergydemand.Energy
usagepatternshavebeenaltered,possiblypermanently.Environmentalconcerns
haveshiftedenergydemandtowardnaturalgasusageandawayfromoil.Thishas
resultedinachangeinoriginandtransportationofthefuel.Naturalgastends
tobetransportedinlarger-diameterpipe,favouringspiral-weldedlinepipeover
longitudinalweldedlinepipe(LSAW).
Theabundanceofnaturalgasfromimprovedandmore-efficientdrillingpractices,suchasfrackingtechnology
andpaddrilling,hasaffectednaturalgaspricestothedownside.Drillinghasnowshiftedtowardoilawayfrom
theless-profitablenaturalgas.Moreover,theneedforimportednaturalgashasnowbeeneliminated,andnow
naturalgasexportsintheformofliquefiednaturalgas(LNG)areunderreview.Morethan32bcf/dayofLNGexport
capacityisproposedintheUSA.
Eachofthesedevelopmentsaffectthesizeandtypeoflinepiperequired.Ingeneral,linepipedemandisnow
strongestinthesmallerrange,16-24”OD,ratherthaninthelargersizes.Whiletheshifttonaturalgasfromoil
wouldfavourlarger-sizedlinepipe,suchasover24”OD,ithasnotbeenthecase.Theslower-than-expected
economicrecoveryhasaffectedfinancingandlimitedtheamountofcapacityenergyfirmsarewillingtocommitto
transport.Pipelinesarenotapprovedunlessthecapacityofthepipesisutilizedbytheenergycompanies.Lower
committedcapacityresultsinlessneedforhigh-capacitylinepipe.Meanwhile,oilpipelinesrequiresmallersizes
andpaddrillingincreasetheneedformedium-diameterpipelinesconnectingtotrunklines.
The increasing importance of replacement pipeAlso,inthematuremarkets,demandforreplacementpipewillalsodrivelinepipedemandmorethaninthepast.
Linepipeproducersexpectthatreplacementpipeorderswillencompassagrowingshareoftheirsales.Andwith
failuresofoldexistingpipelines,thedemandwillgrowevenfaster.About60%ofoilpipelinefailuresand51%of
naturalgaspipelinefailuresaretheresultofcorrosionormaterial/weldfailures.Morethan60%ofthelinepipein
theUSpipelinesystemisover50yearsold.Thereisabout36,000milesofcastironpipestillinserviceintheUSA,
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mainlytheMid-Atlanticstatesandmorethan100,000milesofplasticpipe.Overtime,allofthismaterialwillbe
earmarkedforreplacement.
Infrastructureinvestmentisalsoneededindevelopingeconomies,especially
ChinaandtheMiddleEast.TheMiddleEastcountrieshavebeenmainlyexport
orientedsofarintheirenergyinfrastructure,butgrowingdomesticenergy
demandisrequiringfurtherpipelinedevelopment.Finally,explorationand
developmentismovingtomoreremotelocationsandalongerdistancefrom
consumingmarkets.
MBRforecaststhatthestrongestgrowthingloballargeODlinepipeoutputis
expectedtobeinthe2014-2015periodwithmoderatinggrowththroughout
therestofthenextfiveyears.Thegrowthwillbeledbyproductionofspiral
linepipe,withERWandLSAWtrailing.Theregionswiththestrongestgrowth
willbeEurope,India,NAFTAandChina.ProductioninChinaisexpectedto
declinein2016-17andthenrecoveragainby2018withsimilarresultsinIndia
andEurope.NorthAmericanlarge-diameterlinepipeoutputisexpectedto
postincreasingoutputgainsthrough2018althoughthestrongestgrowthwillbeinthe2013-15period.Still,much
ofthegainsinoutputwillbeinspirallinepiperatherthanLSAW,withtherestofthegainscomingfromERWmills.
Ashasbeenthecaseoverthepast3-4years,supplywillbesufficientfordemandandpricesareunlikelyto
riseappreciablyduringtheforecastperiod.
Inthenearterm,substratecostsarenot
expectedtoprovideaboosteither.HRcoil
suppliesareampleandplateproducershave
beenexperiencingtroubleinraisingpricesas
well.Aslinepipeoutputrises,excesscapacity
andfallingcostpressureswillcontinueto
weighonprices.
Source: Metal Bulletin Research
US imports of seamless casing and tubing (‘000 tonnes)Import tonnage tappered off at the end of 2012 as prices slipped
0
20
40
60
80
100
120
140
160
180
200
Apr09
Aug09
Dec09
Apr10
Aug10
Dec10
Apr11
Aug11
Dec11
Apr12
Aug12
Dec12
AsiaTotal EULatin AmericaEastern Europe/CISOther
Source: Bloomberg, Metal Bulletin Research
Crude Oil Spot pricesBrent crude oil prices fell to a three-month low in March
-20.00
0.00
20.00
40.00
60.00
80.00
100.00
120.00
140.00
160.00
Aug08
Jan09
Jun09
Nov09
Apr10
Sep10
Feb11
Jul11
Dec11
May12
Oct12
Mar13
Brent-WTI spread, $/bbl
Brent Crude, $/bbl
WTI, $/bbl
Source: Metal Bulletin Research
Welded substrate month-on-month performance, Oversupply has caused finished steel prices
to languish in the second quarter
-2.1%
0.0%
-1.8%
-4.3%
-6.0%
-4.5%
-3.3%
-7% -6% -5% -4% -3% -2% -1% 0%
MBR Raw Materials Index
Asia CR 304
EU CR 304
USA CR 304
China HR
EU HR
USA HR
Source: Metal Bulletin Research
Welded demand indicators month-on-month* performance, Stronger natural gas prices may
support a recovery in gas drilling rates
-9.4%
7.1%
-5.2%
-9.3%
-2.4%
2.6%
-23.9%
-30% -25% -20% -15% -10% -5% 0% 5% 10%
WTI
Henry Hub natural gas
Global rig count
US natural gas rig count
EU IP (y/y % ch)
US non-res. cons. Exp. (y/y %ch)
China FDI:ytd construction (y/y %ch)
*Unless otherwise noted
AselectionofMBR’sanalysisdata
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Metal Bulletin Research’s Energy SolutionPervasiveeconomic,financialandpoliticalinstabilityhavecreatedanextremelychallenginginvestment
climate.Businessdevelopment,marketingexecutivesandinvestorsneedexpertguidanceabouttrendsin
theglobaleconomyandpolicy,andtheimplicationsforyourstrategy.
Energyandpetroleumproductpricesremainhighrelativetoeconomicgrowthanddemandexpectations.
Theoutlookforconsistentsupplieshasbeenmarredbypoliticalconcernsandregionalsupplyand
infrastructureshortcomings.Theseinconsistenciespointtoagreaterneedforinfrastructureimprovements
anddevelopment,includingnewandexpandedpipelinecapacityandLNGfacilities.
Theenergyindustryisundergoingsignificantchangewhichwillhaveimportantimplicationsgoingforward.
MBR boasts the largest network of tube and pipe intelligence worldwide with analysts situated in the US, Middle East, Eastern Europe, UK and Asia. This has earned us the unique status as the world’s foremost specialist in the global metal analysis for the energy industry.
Market TrackersMBR’sTube&PipeMarketTrackersaredetailedforecastingreportsthatmonitorthedirectionofthemarket.Bothofourtubeandpipeproductsarepublishedmonthly,withadditionalExcelfilesandgiveyouregularaccesstotheeditorsforconsultations.
Seamless Steel Tube & Pipe Market Trackerz Shortandlongtermforecastsofregionalpricemovements
z SupplyanddemandanalysisonkeymarketsinAsia,EuropeandNorthAmerica
z AnalysisofkeydevelopmentsinOCTG,linepipe,boilerpipeandmechanicaltubingmarkets
z Detailedcapacityupdatesandcoverageofcapacityutilizationforthemajorproducingcountries
z Dataontradeflowsandkeyend-userdataformajorconsumersincludingtheoilandgasandautomotivesectors
z Strategicanalysisandinsightsintoleadingindustrycompanies,includingsuppliersanddistributors
Downloadable data
z US,W.Europe,E.Europe,China,JapanseamlesspipepricesbyproductbacktoJan2004,plusselectedsix-monthpriceforecasts
z CurrentandhistoricalEuropeanseamlessproductiondatabymajorcountry
z ComprehensivedatabaseofUSseamlessproduction
z Asianseamlessproductionbymajorcountry
z Energypriceswithextensivehistoricaldata
z TradeflowsfordevelopingeconomiesinAfrica,MiddleEast,andEasternEurope
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Welded Steel Tube & Pipe Market Trackerz AnalysisofkeydevelopmentsinOCTG,linepipe,hollowsectionsandmechanicaltubingmarkets
z Dataontradeflowsandkeyend-userdataformajorconsumersincludingtheoilandgas,manufacturingandconstructionsectors
z Intelligenceonactivitybydistributorsandsuppliers
z Strategicanalysisandinsightsintoleadingindustrycompaniesfromourinternationalteamoftubeandpipespecialists
Downloadable data
z Weldedtubeandpipepriceswithfive-yearhistoryandone-yearforecast
z NorthAmericanshipmentsofweldedpipebyproductwithextensivehistoricaldata
z NorthAmericanapparentconsumptionofweldedpipewithfive-yearhistory
z ComprehensivearchiveofAsianweldedtubeproductiondatabymajorcountry
z Europeanweldedtubeproductionandapparentconsumptiondatabymajorcountry
z TradeflowsfordevelopingeconomiesinAfrica,MiddleEast,andEasternEurope
Strategic Reports MetalBulletinResearchpublishesarangeofin-depthstrategicforecaststudiesavailableforone-off
purchaseofferinglong-termforecastsandjustifiedrecommendationstoassistinyourstrategicdecision
making.
The Five Year Outlook for the Global OCTG MarketThisstudyprovidesindependentbycountryandregionalanalysisofOCTGmarkettrends,
andamedium-termforecastforsupply,demandandpricingincludingthefollowing:
z DemandforOCTGby-country,regionandproductgroup
z Medium-termforecastforpriceoutto2020
z SeamlessandweldedOCTGmaterialglobal,regionalandby-countrysupplyanddemandbalance
z InsightsondriversbehindOCTGdemanddynamicsby-country
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A Strategic Outlook for the OCTG Heat Treatment, Threading, Coupling and Premium Connection Sectors out to 2020ThiscomprehensivestudyexaminesthestrategicgrowthopportunitiesfortheOCTGindustryanddetails
currentandfutureprospectsfordownstreaminvestmentsoutto2020.
ItlooksindepthatwhatthemajorinfluencesthatwillshapetheOCTGindustrywillbe
overthenextdecade.Thestudyalsoprovidesdetailsontheavailablethreadingcapacity
by-countryandnewdownstreamproductioncapacitiesbeingbuiltby-majorcountryandcompany.
‘This timely and ground-breaking report harnesses MBR’s unique status as the world’s foremost specialist in
global analysis of the steel tube and pipe markets.’
Murat Balapanov, General Director, Caspian Pipe Industries
The Five Year Strategic Outlook for the Global Large-diameter Linepipe MarketThisstudyanalysesthefactorsthataredrivingtherecoveryinover16”(406mm)
linepipedemand,supplyandpricingandtowhatextentprevailingpriceswill
increasegoingforwardinthisenvironmentofrisingcosts.
“A trusted and reliable business intelligence provider in determining my global tube and pipe business
strategy”.
John Bloomberg, Director, Tube and Pipe Division, Duferco SA, Switzerland
Prices for MBR’s Energy Solution
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TheFiveYearOutlookfortheGlobalOCTGMarket £8,995/€10,490/$14,750
AStrategicOutlookfortheOCTGHeatTreatment,Threading,CouplingandPremiumConnection £8,995/€10,490/$14,750
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