SBB Pipe & Tube Report

© Steel Business Briefing 2011 1

SBB’s Tubulars Market Report

AllsteelmakerssinceAndrewCarnegiehave dreamed of vertical integration. Usually, that comes down to havingcaptive raw material sources like scrap,coke and ore. In the US, however, there’sbeencomparativelylittleintegrationintheother direction. Most domestic mills arehappy to sell their steel as‐is todistributors,processorsorfabricatorswithpreciousfewexceptions. Thatlookstobechangingintheworldofhigh‐endoil ieldpipe.Atleasttwolargetubemakers have announced in the pastweek or so that they’re bringing theirthreadingandend‐ inishingoperations in‐house or expanding their existingoperations. Downstream integration used to be

relatively common for tubular producers.Mills commonly became involved in drillstring design for their dedicated clients.And one notable US steel company evenbrie lydabbledintheactualproductionofhydrocarbons and the associated luids,bitsandpiecesneededtoextractthem. The material needs of the oil and gasindustry are likely to become even morecomplex over time, requiring mills andtheircustomerstodovetailonanumberoflevels.At somepoint, itmaybecomehardto tellwhere the steel company ends andtheenergycompanybegins.DanHilliard,[email protected]

Down‐hole downstream could be new standard

Top News

Late Breaking News ■ OCTG end‐ inishing capacity set to

skyrocketin2011,early2012■ Global oil and gas activity still

increasing■ Hebei irmtocommissionnewplant

SBB Pipe & Tube Trackers

October 5, 2010

February 9, 2011

Quote of the Week

March 9, 2011 © Steel Business Briefing 2011

Source: SBB Price Trackers

2 3 4 5 7 9

Northwest Pipe has petitioned a USfederal court in Tacoma, Washington, todismiss a shareholder lawsuit stemmingfrom concurrent US Securities andExchange Commission and internalinvestigations of its accounting practices. Attorneys representing Northwestclaim that a lawsuit brought byshareholders in late 2009 should bedismissed because it fails to identify anywrongdoing on the part of Northwest tomanipulateitsstockprice. Furthermore, the attorneys note thatshareholders cannot claim an economiclossbasedonlyontheannouncementofan

investigation. “The applicable law is plain…losscausation requires a disclosure of thealleged wrongdoing, and not merely of arisk thatwrongdoingmay laterbe found,”theattorneyswriteinaFebruary25 iling. Northwest’s investigation into itsaccounting practices began in November2009. It concluded with a restatement of itsearningssince2005. The company had previously beenrecordingsteelcostsatthetimetheywereincurred rather than when the steelenteredthemillingprocess.

“Virtually all the bills are landowner‐oriented or oriented toward the local municipality...That’s the goal."

Pennsylvania state senator Gene Yaw on several bills introduced to the Senate in the past week dealing with on‐going water quality issues in the Marcellus shale forma on.

Top News SBB Pipe & Tube Trackers

October 5, 2010

For subscription details see back page, or contact:

Pittsburgh +1 412 431 4370 London +44 207 626 0600 Shanghai +86 21 5110 5488

[email protected] www.sbb.com

Webco names new CEO S&P wary on pipelines

Standard & Poor’s thinks trouble maybe on the way for natural gas pipelinebondholders. While S&P continues to view theindustry favorably, recent high‐pro ileaccidents are likely to bring increasedregulatoryscrutinyandassociatedcosts. In addition, large new shale plays –particularly the northeastern USA’sMarcellus shale formation ‐ are locatedrelatively close to large end markets likeNewYorkandWashingtonDC,decreasingthe importance of long‐range natural gaspipelines to transport gas to once‐keyre ineriesintheGulf.

Effective immediately, former WebcoIndustriesCEOF.WilliamWeberhascededthepositiontoDanaWeber,thecompany’sCOOandpresident. Weber will retain his position aschairman of the US carbon and specialtytubemaker. David Boyerwillmove up toCOO. “Both of these promotions re lect thetirelesseffortsandundyingcommitmentoftheseindividualstoWebco’ssuccess,”saidWeber.“WhileIhaverelinquishedtheroleofCEOtoDana, Iwillcontinuetoserveasthechairmanoftheboardofdirectorsandbeinvolvedonadailybasis.”

Northwest asks for shareholder suit dismissal

Contents

Regional Reports…………………………. US Trade……………....…..…..…………... Canada Trade………..…………….…..…. NAFTA Industrial…...………….....….... End Use ‐ Oil & Gas……………………... Profile ‐ Associated Pipe Line ...…..

Singapore +65 6227 7811 São Paulo +55 11 3371 5755 Bursa +90 224 234 1523

March 10, 2011

Editor’s Comment

Source: SBB Price Trackers

2 3 5 7 8 10

80

100

120

140N. America

134w-o-w: 0

World132

w-o-w: 0

mailto:[email protected]�

© Steel Business Briefing 2011


North America ■ Midstreamnaturalgas irmSouthcrossEnergyofDallasexpectstolayover25miles

of linepipe – representing almost5,200 short tonsof steel – into theEagleFordshaleformationbymid‐2011.The20‐inchODlinewilllinkgaslandbeingworkedbySwiftEnergyCoinMcMullenCounty,TexaswithaSouthcrossprocessingfacilityinGregory,Texas.

■ UScarbonandspecialty tubemakerWebco IndustriesofSandSprings,Oklahoma

credits improved volumes and pricing for its year‐on‐year improvement. For theiscal2011secondquarterendedJanuary31,Webcopostednetpro itof$5.23m.IniscalQ22010,Webcopro itedjust$124,000.FiscalQ22011salestopped$112m,up73.6%fromayearago.

■ TMKIpscoplans toadda threading lineandotherend‐ inishingequipment to its

Wilder, Kentucky mill later this year. TMK’s 570,000‐short ton/year Wilder millcurrentlysendsthe4.5‐16‐inchweldedpipeitproducestoaseparateTMKfacilityfor threading.Thenew threading lineatWilderwill “result in signi icant savings,improve ef iciency and modernize our facility,” according to a companyspokeswoman. The company also recently began commissioning of a secondthreadinglineatitsBrook ield,Ohio,facility.

■ Stainless pipe makers Marcegaglia USA and Outokumpu raised their transaction

priceseffectiveMarch1.Marcegagliaachievedtheincreasewithabasepricehikeofunspeci iedamount,whileOutokumpuconcurrentlylowereditsbasepricesanditsfunctionaldiscountpercentage,againbyunspeci iedamounts.

Asia■ SupportedbysteadydemandChina’soutputofseamlesspipescouldrisebyabout

8% this year to reach 27‐28m tonnes. Prices are likely to remain high due tosoaringrawmaterialcosts.ArecentreportfromChinaMetallurgicalNews(CMN),apublicationoftheChinaIron&SteelAssociation(CISA),quotesindustryinsidersassayingdemandforseamlesswillrisethisyearboostedbyenergysectorsincludingrising oil/gas drilling activities and large investments in clean energy (includinghydroelectricandnuclearpower).

■ China’s privately‐owned Huludao City Steel Pipe Industrial (Huludao), which

specializesinproducingelectricresistancewelded(ERW)pipes,willcommissionasecondERWpipemillatitsPhilippinesoperationinJune.Thenewmill,locatedinthe Philippines' Clark Special Economic Zone, will produce oil tubular countrygoods forexport to theNorthAmericanmarket.Thenewmillwill beable to rollERWin6~14inches(168‐355mm)diameterandinthicknessesof2~11mm.

Europe ■ Marek Mazurek has been appointed the new chief executive of Polish steel pipe

insulator and distributor Izostal. He replacesWladyslawMrzyglod who resignedfrom the company last week without giving a reason for his departure. MarekMazurek had been Izostal’s inancial director since 2005 and also later becamecompanyvice‐president.

■ Russian steelmaking group Severstal says it envisages a strong 2011,with better

market conditions and increased production and sales volumes, at high prices,which should be supported by strong raw materials prices and restocking.The group increased its revenue by 42% to $13.6bn last year, making $1.43bnpro itfromcontinuingactivities,althoughitmadeanetlossof$577m.

Vanguard Natural Resources LLC'sproved reserves jumped 191% in2010, the Houston‐based E&P companyreports.El PasoPipelinePartners LPhas agreedtopay$587mtoacquireanadditional22% interest in Southern Natural GasCofromElPasoCorp.

Latest SBB Spot Prices

Global Industry News

Pg. 2

Numbers of the week


US Imports by Product (metric tonnes)

US Imports—Feb 2011 (top 15 trading partners m‐o‐m change, metric tonnes)

Trade Watch US

-100% 100%

m-o-m change

Imports plunge Importlicensedatashowimportsfell23.7% in February, signaling a broaddecline that affected all productcategoriesexceptpiling. OCTGleaddeclines,fallingbyathirdfor the month. Double‐digit declineswere also seen for line, standard,mechanical,structural,andnonclassi ied. AlthoughFebruarylicensedatashowpressure tubing imports down 20% inFebruary, pressure tubing imports inNov 2010—Jan 2011 were 50% abovethecategory’shistoricalaverage.

Dec

09

Jan

10

Feb

10M

ar 1

0

Apr

10

May

10

Jun

10Ju

l 10

Aug

10

Sep

10

Oct

10

Nov

10

Dec

10

Jan

11

Feb

11M

ar 1

1

Pg. 3

Source: Steel Import Monitoring and Analysis System


0K 10K 20K

Stru

ctur

al

Total

Canada

Mexico

South Korea

China

Japan

Stai

nles

s

Total

China

Taiwan

South Korea

Canada

Japan

Pres

sure

Total

Germany

China

Russia

Ukraine

France

Pilin

g

Total

Canada

China

19,508

9,763

6,176

1,104

489

376

8,639

1,360

1,110

1,093

1,016

881

7,714

1,983

840

741

577

570

514

514

0

Feb 2010

0K 50K 100K 150K

OC

TG

Total

South Korea

Canada

Austria

Japan

Mexico

Line

Total

South Korea

Mexico

Greece

Japan

Canada

Stan

dard

Total

Canada

Mexico

Thailand

Vietnam

India

Mec

hani

cal

Total

Germany

Canada

Mexico

China

Japan

153,845

41,058

27,473

18,112

10,746

10,135

104,058

23,442

12,653

10,367

10,067

9,015

55,791

11,908

8,396

7,354

3,720

3,477

31,803

5,945

5,587

4,086

2,403

2,056

Feb 2010

-29%-63,833

-30%-17,732

+16%+3,856

+25%+3,642

+1%+107

-34%-5,337

-19%-24,430

-54%-27,725

+2%+256

+10,367

-13%-1,449

+25%+1,817

-21%-14,636

-31%-5,434

-20%-2,146

+2531%+7,074

+61%+1,405

-48%-3,239

-17%-6,633

+19%+947

-14%-944

-25%-1,326

-20%-589

+57%+748

m-o-m change

-28%-7,450

-15%-1,765

-26%-2,217

-67%-2,217

-63%-837

-15%-64

-4%-353

+23%+254

-35%-609

-17%-217

-31%-452

+57%+320

-20%-1,949

+2%+35

-34%-432

-43%-555

-47%-502

+75%+244

+167%+322

+359%+402

-100%-80

m-o-m change

US Imports by Product and Country—Feb 2011 (top 5 displayed, m‐o‐m change, metric tonnes)

Trade Watch US

CONFERENCEMay 23-24Pittsburgh

Shale Play Tubulars

sbb.com/steelevents/shale-tubulars11/

Highlights LineimportsfromGreecesoaredto10,367 tonnes, although Greek lineimportshavebeennonexistent sinceMay2010. Greek line imports accounted forvirtually all of Greece’s imports inFebruarylicensedata. South Korean imports slumped the

most of any major trading partner.Contraction in SouthKorea’s line importsaccountedforallofthem‐o‐mlossfortheproductcategory. Turkey is typically a major source ofOCTG, but license data show no TurkishOCTGimportsrecordedforFebruary.

Source: Steel Import Monitoring and Analysis System

Pg. 4


Trade Watch Canada

Canada Imports by Product (metric tonnes)

Pg. 5

Source: Statistics Canada

Canada Feb 2011 Imports (metric tonnes, m‐o‐m changes)

-100% 100%

m-o-m change

Imports flat Canadian steel pipe & tube importswere latinFebruaryasdeclinesinOCTGimportsoffsetlargeincreasesinlinepipeimports. Imports from Italy surged fromnearlyzeroinJanuaryto5,144tonnesinFebruary, primarily due to higherimportsofsmalllinepipe. Taiwan likewise posted a largemonth‐on‐month gain,with increases inTaiwanese imports of standard, OCTG,andlinepipe.


Mar

10

Apr

10

May

10

Jun

10

Jul 1

0

Aug

10

Sep

10

Oct

10

Nov

10

Dec

10

Jan

11

Feb

11

Mar

11

OCTG - seamless

Standard & Other Pipe

Line >16"

OCTG - welded

Structural

Line <16"

Total

0K

40K

0K

40K

0K

40K

0K

20K

0K

20K

0K

20K

0K

15..

22,22412m avg = 28,056

31,12912m avg = 25,241

18,96512m avg = 17,371

16,47012m avg = 12,985

13,52712m avg = 12,153

15,54312m avg = 10,176

117,85812m avg = 105,983

1 year

+0.3%

+11.1%

-4.5%

-17.8%

+226.4%

-5.7%

-27.2%

+648

+3,096

-1,276

-7,128

+26,308

-3,778

-16,574

Jan-Feb


Trade Watch Canada Canada Feb 2011 Imports by Product and Country (metric tonnes)

Canada Imports by Country and Product Group (metric tonnes, m‐o‐m change)

-100% 100%

m-o-m change

0K 10K 20K

OC

TG

- w

elde

d

TOTAL

United States

Turkey

China

Taiwan

South Korea

Line

<16

"

TOTAL

Italy

China

United States

Argentina

Japan

Stru

ctur

al

TOTAL

United States

Japan

Taiwan

China

United Kingdom

16,470

7,229

2,742

2,654

1,887

1,100

15,543

4,910

2,578

2,547

1,952

1,369

13,527

13,404

64

30

26

2

0K 10K 20K 30K 40K

Stan

dard

& O

ther

Pip

e TOTAL

United States

China

South Korea

Taiwan

Thailand

OC

TG

- s

eam

less

TOTAL

United States

China

India

Brazil

South Korea

Line

>16

"

TOTAL

Japan

Hong Kong

China

United States

South Korea

31,129

14,547

6,292

4,378

1,498

1,070

22,224

8,179

7,917

1,860

938

897

18,965

15,390

1,212

938

664

461


Pg. 6



End Use NAFTA Industrial

NAFTA Quarterly GDP Growth (millions USD, seasonally adjusted)

New orders for durable goods rise New orders for US durable goodsrose 3.2% in January after declining forthreeconsecutivemonths,accordingtoaMarch 3 release from theUS CommerceDepartment. Transportation equipment showedthe largest rise, a $10.8B or 27.3% rise,primarily due to a surge in orders forcommercialaircraft. Orders of nondefense capital goodsexcluding aircraft, a barometer ofbusinessinvestment,fell6.2%inJanuaryfor the largest fall since Jan 2009. Thedecline followed two months ofincreases.

Pg. 7

Chryslerisinvesting$550milliontoupgradeitsTolucaplanttomanufacturetheFiat500subcompactcarfortheUSmarket.

"Mexicoisinanidealpositionforproductionofthiscarbecauseoffreetradeagreementswithneighborstoboththe

northandthesouth,"saidSergioMarchionne,CEOofChryslerandFiat.

Theplantupgradewillcreate600directjobsandmarksthe irstFiatcartobemanufacturedentirelyinMexico.Chrysler‐Fiatcurrentlyemploys7,000workersatitssixMexicanplants.

Chrysler plans to build Fiat 500 in Mexico

2006 2007 2008 2009 2010

Can

ada

Uni

ted

Stat

es

0%

0%

+0.

8%+

0.7%

Source: Federal Reserve Bank of St. Louis

Source: US Census Bureau

US Manufacturers New Orders (millions USD, seasonally adjusted)

Canada’s GDP beats expecta ons Canada's GDP rose faster thanexpected in Q4 2010 on the strength ofrising exports and durable goodspurchases. GDPgrewata3.3%annualrateinQ42010,exceedingthe3.0%growthforeastbyaBloombergsurveyofeconomists.Ona non‐annualized basis, the risetranslatesto0.8%quarterlygrowth. Exports increased 4% during thequarter. Energy exports by volumesurged 17%, as crude oil rose 30% to arecordhigh. Business spending on plants andequipment rose 2.5%, mainly due to a4.9% growth in investment innonresidentialstructures. Domesticpurchasesofdurablegoodsrose 2.9% in Q4 2010 after rising just0.6%inQ32010. Canadian growth outpaced USoutput,whichgrewata2.9%annualrateinQ42010,boggeddownbyhousingandweakconsumerspending.



TheNorthAmericanrigcountappearsto have rebounded slightly in the latestcount by petroleum industry consultingirmBakerHughes. TheUSpickedupeightrigs fora totalof1,707,or311rigsabovetheequivalent2010count. During the week ended March 4, theUS gained 18 rigs geared for oil but lostseven geared for natural gas and three

classi ied as miscellaneous, yielding thenetgainofeight. By state, Pennsylvania posted thelargest individual loss of 11 net rigs,followed by Texas with ive. Oklahoma posted the largest net gainwith ive rigs, followed by North Dakotawithfour.Canada’srigcountincreasedbytwo net rigs for a total of 625, or 82 rigsabovetheequivalent2010count.

Rig Count by US State (w‐o‐w change, updated March 4, 2011)

2009 2010 2011

US

Can

ada

500

1000

0

200

400

260

801

970899

184

447

210

177

2 years

+2.3%

-0.8%

+18

-7

+4.9%

-9.7%

+21

-19

w-o-w change

Gas

Oil

Gas

Oil

8

8

1

4

3/4

Rig Count by Country: Oil / Gas split (Updated March 4, 2011)

Source: Baker-Hughes

PA bill targets pooling, abandoned mineral rights CourtesyGasBusinessBrie ing Twomore Pennsylvania Senate billsintroduced by Senator Gene Yaw targetforced pooling and the abandonment ofmineral rights in the Marcellus Shaleplay. The forced pooling bill, SB 447,focuses on the pooling of "holdout"companies, not landowners, who holdacreage in land units held by othercompanies, Yaw tells Gas BusinessBrie ing. "I've been told that 90% of thepooling issuesare inter‐company issues,rather than between landowners andcompanies," Yaw says. "This statuteaddressesthat." Yaw says company‐to‐companypooling also will reduce theenvironmentalimpactofdrillingbecauseitwillminimizetheamountofwellsites. SB 445 dealswith the abandonmentofmineralrights.Iftheownerofmineralrights hasn't exercised within 21 yearshis or her rights, or iled papers tocontinuetheirclaim,therightswouldgotothesurfaceowner. "We're not looking to take anythingawayfromanyone,"Yawsays. "We're inding a fair number ofsituations where someone transferredproperty rights 100 years ago butretainedmineral rights," Yaw tells GBB."It'sburied in themiddleof adeedand,100 years later, the owners don't knowwhethertheyhaveaninterest."

End Use Oil & Gas

Pg. 8

North American rigs bounce up once again

-10% 10%

w-o-w % change

Source: Baker Hughes

http://www.gasbb.com/�


NYMEX WTI Crude Oil 1‐month contract

NYMEX Henry Hub Natural Gas 1‐month contract

Source: Energy Information Administration

Quebec recommends shale moratorium The Quebec minister of sustainabledevelopment,environmentandparkswillappoint a commission to study shale gasexplorationandproductionintheCanadi‐an province as he considers recommen‐dations to haltmuchof the local activityintheindustrytowaitformoreanalysis. Inareportmadepublic lateTuesday,a Quebec government bureau recom‐mendedtheformationofthecommissionandalsostoppingallhydrofracturingnotrelatedtoascienti icstudy. Shale gas exploration that did notinvolve hydrofracturing could continueshould Minister Pierre Arcand ban thepracticependingfurtherstudy,undertherecommendations. Arcand said, that he would appointsuch a commission andweigh other ele‐mentsinthereport,whichhereceivedinFebruary.

End Use Oil & Gas cont. Canada Rig Count by Province (m‐o‐m change, updated March 4, 2011)

Map data © OpenStreetMap (and) contributors, CC-BY-SA.

Alberta468 (+8)

Saskatchewan79 (+1)

Manitoba20 (+0)

British Columbia55 (-7)

Source: Baker Hughes

Pg. 9

-10% 10%

w-o-w % change

Feb

10

Mar

10

Apr

10

May

10

Jun

10

Jul 1

0

Aug

10

Sep

10

Oct

10

Nov

10

Dec

10

Jan

11

Feb

11

Mar

11

$4.00

$5.00

12m avg = $4.18

March 9, 2011$3.93



Associated Pipe Line Contractors Whatisit?APLC is a Houston, Texas, based firm specializing in pipeline construction and service. Itcurrentlyoperatesmorethan25,000milesofpipelinein43statesand27countries.Whatdoesthecompanydo?Thecompanyisdividedintoseveralmainoperatingdivisions:thelanddivision,whichhandlessite surveys, construction cost estimatingandactual installationof land‐basedpipelines; themarinedivision,whichhandlestheinstallationofshallow‐waterunderwaterpipelines;theArcticdivision,whichhandledmuchoftheendconstructionstagesofthetrans‐Alaskapipelinesysteminthelate1970s;therehabilitationandspecialservicedivision,whichhandlespipelinepigging,rehabilitationandotherservices;andaconstructionsupportdivision,whichbuildsassociatedairstrips,campsandothersupportstructures.Whoaresomeofthecompany’smajorclients?APLC’sclient list includesmajorenergyplayers likeElPasoNaturalGas,ChevronPipeLineCompanyandShellPipeLineCorporation,aswellasdiversifiedcompanieslikeDowChemicalCompanyandAircoCryoplantsInc.Whyisitinteresting?■ APLChascompletedpipelinesrangingfrom4‐48inchesindiameter.■ Thecompanyisresponsibleforover12,000milesofland‐basedpipelinesalone.■ The firm is currently involved in fourmajorpipelineprojects in fourUS states, totalling

almost400milesofpipeline.

For more informa on, visit:

h p://www.associatedpipeline.com/

A brief history of Associated Pipe Line

Contractors

Has currently completed more than 25,000 miles of pipeline

PurchasesTulsa‐Houston,Inc

ChangesnametoAssociatedPipeLineContractors,Inc,acquiredbyJRayMcDermott

ReorganizedasSharman,Allen,Gay&Taylor,Inc.

FoundedinTexasasAssociatedContractorsandEngineers,Inc

1946

1956

APLCworkersloweringasectionoflinepipeintoplace

1958

1989

2011

Industry Profile

Pg. 10

http://www.associatedpipeline.com/�

Documents

SBB Pipe & Tube Report