MBR's Tube and Pipe Group

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©2013 Metal Bulletin Research www.metalbulletinresearch.com 1 1

METAL-EXPO

MBR Tube and Pipe Group

14 November 2013, Moscow

Roman Filimonov Consultant, MBR London


©2013 Metal Bulletin Research www.metalbulletinresearch.com 2

Disclaimer:

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information has not been independently verified by us. Those prices and price indices that are evaluated or calculated by us represent an

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Introduction of the new Tube & Pipe group at MBR

Market review

Our products


©2013 Metal Bulletin Research www.metalbulletinresearch.com 4 www.metalbulletinresearch.com/tube

http://www.metalbulletinresearch.com/tube



• Introduction

• Latest Developments:

• What fundamentals are shaping US scrap prices?

• US obsolete (shredded) and prime (busheling) grades, are they accurately priced?

• What market dynamics are impacting the US West Coast market?

• How have European scrap price trends developed in comparison?

• Forecasts:

• What will drive US finished steel consumption in 2014/15?

• What will be the consequential impact on scrap consumption and prices?

• Conclusions

• New MBR products:

• MBR Steel Scrap & Metallics Forecaster

• Strategic Outlook to the Global Ferrous Scrap Industry out to 2021




Market review

Our products



Market review

Global tube and pipe market overview

OCTG market

North America

Middle East and North Africa

Large diameter line pipe market



Market review


OCTG market

North America





Global tube and pipe production from 2002 – 2013 (Mt)

0%

2%

4%

6%

8%

10%

12%

0

20

40

60

80

100

120

140

160

180

(LHS) Tube & pipe production Tube & pipe % of total steel

Global steel tube output reached 151 Mt in

2012, from 142kt in the previous year

Steel tube and pipe production has grown at a

faster rate than steel production, with a CAGR

of 7.2% for the last decade combined to a

CAGR of 5.52% for steel

Consequently the share of tube and pipe from

total steel production has grown in the last 2

years by 2%

Global tube and pipe market

Source: WSD, Stahlrohr, MBR



Tube & pipe production (kt): China vs the Rest of the World (Mt)

0

20

40

60

80

100

120

140

160

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Rest of the World China

Tube & Pipe production growth in China has

completely changed the global market in a less

then decade

As of 2012 China’s production reached 76 Mt

accounting for a half of the global total

Production outside of China has not changed

since 2011 after recovering from the decline in

2009 due to the economic crisis

China’s tube & pipe production has grown at a

CAGR of 19% for the last decade and at

nearly 20% in 2012


Source: WSD, Stahlrohr, MBR



Tube and pipe market broken down by key end-use sectors in 2012 (Mt)

OCTG smls 9%

OCTG wld 3%

LDP LSAW 6%

LDP HSAW 5%

LP smls 2%

LP ERW 5% Other industrial

70%

Oil & gas related tubular products accounted

for 30% of the total global tube & pipe

consumption in 2012

This segment also offers one of the

highest margins to producers

At the same time the segment is one of

the most difficult to penetrate as it poses

increasingly difficult technological

challenges

Oil Country Tubular Goods (OCTG) is

the largest oil and gas segment with a

12% share followed by large diameter

line pipe (LDP) at 11% and small &

medium diameter line pipe at 7%


Total = 151 Mt

Source: Stahlrohr, MBR



Market review


OCTG market

North America




©2013 Metal Bulletin Research www.metalbulletinresearch.com 13 Source: Company information, ISSB and MBR

Global OCTG consumption split by key region (Mt)

China

5Mt

CIS

2.4Mt N. America

6.6Mt

MENA

1.8 Mt

OCTG market

Welded OCTG

Seamless OCTG

Total shipments = 18.4Mt

The USA is

unique in that

it is the only

market

worldwide

where welded

ERW is

accepted to

the same level

as seamless


©2013 Metal Bulletin Research www.metalbulletinresearch.com 14 Total shipments ~ 12.7Mt

Estimated apparent consumption of seamless OCTG by region in 2012 (Mt)

3

1.6

MENA

China

CIS

N. America

OCTG market

Source: Company information, ISSB and MBR

2

4.9



Market review


OCTG market

North America





52%

60%

69% 52% 49% 47%

0

1000

2000

3000

4000

5000

6000

7000

8000

2007 2008 2009 2010 2011 2012

Seamless Welded

Total US OCTG shipments 2007-2012 (kt)

The US OCTG market has shown a strong

recovery since 2009 mostly driven by the shale

revolution

The market is a heavy user of ERW which

accounted for 53% of the total OCTG

consumption in 2012

Annual US Natural Gas Production and Projected Production

by Gas Type

OCTG market - USA

Source: EIA, ISSB and MBR


©2013 Metal Bulletin Research www.metalbulletinresearch.com 17 Source: Preston Pipe, ISSB and MBR

US Seamless OCTG consumption by origin 2007-2012 (kt)

48% 33%

36%

50% 50% 46%

0

500

1000

1500

2000

2500

3000

3500

4000

4500

2007 2008 2009 2010 2011 2012

Local production Austria Canada Japan Mexico Germany India Argentina China Other

Mexico, Argentina, Japan, Canada and

India have all seen exports to the USA

increase by more than 100ktpy in 2012

vs 2007

500

1000

1500

2000

0 to 4" 4 to 8" 8 to 12" 12 - 16" 16" +

US seamless OCTG apparent consumption by

diameter in 2012 (kt)

The US seamless OCTG market has been

consistently dominated by imports

China exited the market in 2009 but several

other countries have increased both ERW and

seamless OCTG exports

In terms of diameter there is a shift towards

the smaller OCTG diameters vs most other

hydrocarbons producing regions

OCTG market - USA



OCTG market - USA

For detailed forecast information please contact our team at MBR

(see slide 33)



Market review


OCTG market

North America





MENA OCTG demand from 2004 – 2012 (kt)

Source: Interviews, ISSB and MBR

200

400

600

800

1000

1200

1400

1600

1800

2004 2005 2006 2007 2008 2009 2010 2011 2012

Seamless Welded

OCTG market - MENA

Total OCTG demand in the

MENA market in 2012 was

1.61Mt, the highest it has ever

been with ERW OCTG

accounting for 6%



200

400

600

800

1000

1200

1400

1600

1800

2004 2005 2006 2007 2008 2009 2010 2011 2012

Saudi Arabia UAE Oman Kuwait

Qatar Bahrain Iran Iraq

Egypt Algeria Others

MENA Seamless OCTG demand by end-use market (kt)

Source: ISSB, various and MBR

Others = Syria, Yemen, Tunisia, Morocco etc.

MENA ERW OCTG demand by end-use market (kt)

0

20

40

60

80

100

120

140

160

180

200

2004 2005 2006 2007 2008 2009 2010 2011 2012

Saudi Arabia UAE Oman Kuwait

Qatar Iran Iraq Egypt

Algeria Others

OCTG market - MENA

Seamless OCTG demand

reached a new high in 2012 as

demand noticeably picked up in

Iran, Egypt and Oman

ERW OCTG did not follow the

same trend with demand falling

in 2012 in MENA



Saudi

Arabia

Algeria

Iran

Source: MBR

There is only one established seamless OCTG pipe mill in the MENA region, JESCO –

ArcelorMittal will join in Q1 2014

Existing mills

Mills under construction

OCTG market - MENA

Esfarayen Seamless Pipe 250kt capacity (prod signf lower – not sigf

OCTG)

1.9-16” OD

JESCO

400kt capacity

5 ½ - 16” OD

ArcerlorMittal

4 ½ - 16” OD 650kt capacity - exp Q1 2014



OCTG market - MENA


(see slide 33)



Market review


OCTG market

North America




©2013 Metal Bulletin Research www.metalbulletinresearch.com 25 Source: Company data, ISSB and MBR

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

North America

South America

EU Middle East

CIS China Other Asia

HSAW LSAW

Market split between LSAW and HSAW in each region in 2012 (%)

More than 95% of all large-diameter pipe

consumed in the CIS in 2011 was LSAW

Nearly 70% of large-diameter pipe

consumed in North America being SSAW

LDP market



0

2000

4000

6000

8000

10000

12000

2008 2009 2010 2011 2012

North America South America Middle East

Africa CIS Europe

Asia ex China China

Global LSAW production by region 2008 – 2012 (kt)

5000

10000

15000

20000

25000

30000

2008 2009 2010 2011 2012

North America South America MENA

CIS Europe Other Asia

China

Global LSAW capacity by region 2008 – 2012 (kt)

CAGR = 6.9%

Source: Company interviews and MBR estimates

LDP market

2011 global LSAW production hit 11Mt but dropped by 20% to 8.7 Mt in 2012. Capacity for LSAW pipe making has

exceeded 24Mt – over the last five years capacity has outpaced production in its growth



2000

4000

6000

8000

10000

12000

14000

16000

18000

2008 2009 2010 2011 2012

China Other Asia CIS

EU MENA North America

South America

13M

Global HSAW capacity by region (kt)

The HSAW market has also dropped in 2012 by more than 10% while capacity has risen moderately.

North America and China are leading HSAW capacity growth

Source: Company interviews and MBR estimates

1000

2000

3000

4000

5000

6000

7000

8000

9000

2008 2009 2010 2011 2012

North America South America Middle East

Africa CIS EU

Other Asia China

Global HSAW production by region (kt)

CAGR =9.3%

LDP market



change y-o-y, %

2010/2011 2011/2012

North America -0.4 0.6

ME & Aafrica -0.2 0.5

South America 0.6 -0.1

Other Asia -0.4 -0.1

China 0.4 -0.3

CIS 0.1 -0.4

EU -0.1 -0.6

0

500

1000

1500

2000

2500

3000

3500

4000

2010

2011

2012

Source: MBR, ISSB

Global LSAW consumption 2010 – 2012 (kt)

Companies directing their marketing efforts globally

have more chances to mitigate a negative impact of

such a decline at a single (domestic) market

LDP market

The CIS market along with

the EU and Chinese market

saw a severe drop in LSAW

line pipe consumption in 2012

vs 2011 – at the same time

Middle East and North

American consumption have

increased



OCTG market - MENA


(see slide 33)




Market review

Our products



Metal Bulletin Research (MBR) has published a

timely study, A Strategic Prospects for the Global

Transmission Linepipe Market by type, syze and

grade.

The study is the first of this kind and offering expert

analyses and forecasting including:

How will linepipe develop by grade, size and

application?

What is pipeline growth by region for new

build and replacement?

How will linepipe prices evolve as a result?

NEW REPORT COMING IN EARLY 2014



Available off the shelf reports:

The Five Year Outlook for the Global OCTG Industry

Strategic Prospects for the Global Tramsmission Linepipe

Market by type, size, range and grade

The Five Year Strategic Outlook for the Global Large-

diameter Linepipe Market

The Five Year Strategic Outlook for the Small-diameter

Linepipe Market (under 16" OD)

A Strategic Outlook for the OCTG Heat Treatment,

Threading, Coupling and Premium Connection Sectors out

to 2020

Monthly publications:

Welded Tube and Pipe monthly market tracker

Seamless Tube and Pipe monthly market tracker



Contact details for further information:

Metal Bulletin Research

Nestor House, Playhouse Yard, London EC4V 5EX

+44 (0)20 7779 7999

Europe/

MENA/

Asia

James Ley

+44 207 779 8521

[email protected]

Kim Leppold Roman Filimonov

Americas CIS

Roman.filimnonov@metalbulletinresearc

h.com

[email protected]

+1 610 404 0801 +44 207 827 6443

Business

MBR's Tube and Pipe Group