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April 2017
FOR IMMEDIATE RELEASE

Press Contact:

Anne Meerboth-Maltz
Tel. (312) 781-5185
Fax (312) 781-5188
E-mail: ameerboth@mdna.com

Messe Düsseldorf North America
150 North Michigan Avenue
Suite 2920
Chicago, IL 60601


Tube 2018 Specialist Article No. 4
Global Steel Pipe Market 2016
Europe’s Steel Pipe Mills increase Output against Global Trend

With the exception of the crisis year 2009 global steel pipe production has only developed in one direction over the past ten years: upwards. This trend seems to have stopped for the time being. After only marginal growth in 2015, last year saw the output go down by 3% to 164 million tons worldwide, according to data by the “Wirtschaftsvereinigung Stahlrohre e. V.” (Steel Pipes Trade Association) in Düsseldorf, Germany. The reason for this dip was the markedly lower steel pipe production in North America, the CIS and China compared to the previous year. European steel pipe producers did significantly better. Across the EU steel pipe producers managed to increase their output by 4% to 14 million tons. In Germany output even rose as much as 5% over the previous year to 2.6 million tons.

The worldwide decrease in production is mainly attributable to the lower quantities of seamless steel pipes and welded large-diameter pipes with an outer diameter exceeding 16”. In contrast to this, steel pipe producers on a global scale manufactured approximately the same amount of welded steel pipes with an outer diameter of up to 16 inches in 2016 as in 2015. Whereas the EU producers succeeded in slightly increasing output in this segment for the third consecutive time, output in the U.S. lagged significantly behind the previous year’s figures.

The Association sees the energy industry’s sustained reticence to invest as the reason for the decrease in output for seamless steel pipes in all regions of the world. The decrease compared to the previous year was particularly pronounced in the U.S. with 20%. Compared to this, output of EU producers was only 5% lower than in 2015. Producers of large-diameter pipes posted an 8% decline worldwide. Particularly affected in this segment were the plants in North America and the CIS, while EU producers succeeded in increasing their production by 6% after a very weak previous year.

China continues Consolidating its Dominant Position
China’s continuously growing dominance on the steel pipe market is hard to overlook. The global record output of 168.8 million tons in 2015 can therefore be attributed exclusively to the 11% production increase posted by Chinese manufacturers. With this, China’s share in global steel pipe production rose to 58%. This increase resulted especially from the marked increase in the production of “small” welded steel pipes with an outer diameter of up to 406 millimeter in China. EU producers were also able to expand their production in this market segment. Global large diameter pipe production also went up in 2015 although not only production increases in China contributed to this growth but also increases in the CIS and the U.S.

2015 proved a particularly bad year for fracking companies in North America, many of which had to discontinue production by association accounts. The reason for this were the falling crude oil prices which even dropped below the values in the crisis year 2008 towards the end of the year. Due to the crude oil oversupply on world markets the energy industry largely stopped investing. The fact that natural gas prices also continued to drop did not help upstream suppliers in this situation – their sales dropped by over 50% in part.

Salzgitter AG, whose pipe operations were renamed “Business Unit Mannesmann” in August 2016, also felt a slightly negative trend in global steel pipe production for the first time in years. By company accounts its customers’ demand is driven by the mega trends “Water”, “Energy” and “Mobility”. On the global steel pipe market producers were therefore faced with multiple challenges during the first nine months of 2016. They mention the sudden drop in demand on the energy industry’s part in past years, although this clientele still represents some 50% of global steel pipe production. On the other hand, sustained surplus capacities especially in the Far East put an additional burden on the industry’s earning power.

Big Demand from the Construction and Automotive Industries
A positive trend in the companies’ view were the raw materials prices which consolidated on a low level on world markets. The prices for crude oil, which fluctuated between US$ 40 and 50 per barrel in the third quarter, caused exploration activities to at least stabilize. The Rig Count (an indicator for the number of new oil and gas wells to be commissioned) in North America continued to go up slightly – but a noticeable counter movement for the massive investment slump in the energy sector is not on the horizon yet. In contrast to this, the classic sectors of industry continued to show robust demand. According to Salzgitter demand was particularly high in the construction and automotive sectors. Even the large-diameter pipe business was better from the German perspective than in the very weak previous years.

The order intake of the Europipe Group, for example, is substantially higher than over the first nine months of the previous year. The reasons for this are mainly orders for new pipeline projects such as the Nord Stream Pipeline 2, TAP Offshore and Zohr Field. In addition to this, delays in completing the pipeline project in the Black Sea (called South Stream formerly) made for better filled order books.

In 2016 Salzgitter’s order intake also improved for HFI-welded pipes against the period under review. Over the first nine months of 2016 this company even posted double the order intake for spiral-seam welded large-diameter pipes compared with the same period in 2015. Here most demand was generated in Germany due to the realization of long planned projects, followed by Poland, the Netherlands and Italy. The high-precision pipe market in turn benefited from the filled order books of export-focused German premium automotive manufacturers whereas the situation in the industrial and energy sector continued to be tight. Weak demand was also posted in the stainless steel sector. By company accounts, the relatively high order volumes of the power plant sector failed to compensate for the weak demand from fields that are directly or indirectly related to oil and gas.

At present forecasts on the development of the economic situation are subject to a particularly high degree of insecurity against the backdrop of the current political and economic environment. This is why the company’s future-related statements are subject to a moderate cyclical recovery on the principal markets – a fact not carved in stone in view of Donald Trump, Brexit and so forth.

Salzgitter forecasts heterogeneous developments for its own companies in the business unit Mannesmann: Positive – also due to the orders received last year – by the large-diameter pipe plants and also by the high-precision plants thanks to automotive manufacturer’s sustained demand. In contrast to this, the rate the order situation on the North American market as weak. The segments of medium-sized pipes, high-precision and stainless steel pipes, in turn should see some at least hesitant recovery.

Improved Perspectives
According to estimates of the Steel Pipes Trade Association the outlook for the steel pipe industry have improved again in the meantime. They say that “the investment activities of the energy sector, which had practically reached a complete standstill after the crude oil price collapse in 2015 are starting to return to normal.” In addition to the resulting backlog demand, the cyclical upswing in raw material and steel prices should benefit the sector just as much as the continued robust economic situation in industrialized countries. Playing an important role here are the relatively favorable energy prices, the expansive fiscal policy and the favorable Euro-Dollar exchange rate. On top of this, the Association expects North America’s expected more expansive economic and energy policy with a stronger focus on fossil energy carriers to produce positive effects for the steel pipe industry.

All kinds of steel pipes as well as plants and machinery for the production and finishing of pipes will be a central theme at Tube, International Tube and Pipe Trade Fair. Tube will return to the fairgrounds in Düsseldorf, Germany from April 16 - 20, 2018. wire - the industry's leading international wire and cable trade fair - will again be held concurrently. For more information visit www.tube-tradefair.com and www.wire-tradefair.com

For Tube 2018 press information, contact:
Anne Meerboth-Maltz
ameerboth@mdna.com
Tel. (312) 781-5185

Messe Dusseldorf North America Located at 150 N. Michigan Avenue, Suite 2920, Chicago, IL. Phone: 312-781-5180. .