MRC Global InSight

Line Pipe

In the U.S., carbon steel pipe supply remains volatile as government actions continue to put pressure on traditional supply and demand dynamics. No other product category has been as significantly impacted as line pipe. General consumption remains at multi-year highs, and we expect demand to stay healthy for the balance of the year, notwithstanding any seasonal changes.

The robust midstream sector is leading the way. Infrastructure build out in the Permian Basin and the Marcellus shale plays remains strong. While the Marcellus is concluding several large diameter transmission projects and moving on to gathering and smaller diameter lateral lines, the Permian Basin is just getting started with expansion. No fewer than ten major projects are proposed or are currently moving forward. We anticipate that the SAW large diameter mills and the 16” to 24” HFW mills will benefit from this new activity, resulting in supply challenges and extended lead times.

We describe the effect of Section 232 in detail in our additional section for this edition of InSight. This includes details about the new preliminary anti-dumping and countervailing duties, which were applied to six importing countries (South Korea, Greece, Turkey, China, India and Canada) for welded pipe with diameters greater than 16”. These new filings will immediately affect prices and lead times for the above mentioned projects and any other midstream projects as these countries represent approximately 80% of current imported supply.

While the anti-dumping/countervailing duty suit does not impact 16” and below welded pipe, demand remains strong for U.S. domestic welded mills. Section 232 quotas have impacted imported supply, and the domestic mills have benefited with increased demand. While not as tight as the larger diameter mills, lead times remain extended and pricing remains at high levels.

Section 232 quotas and tariffs have directly impacted the market since their introduction. Approved import seamless pipe has seen significant increases in pricing and restriction in supply. Domestic mills have increased production and also increased pricing levels. It is our expectation that these dynamics will continue through the balance of the year and into 2019.

MRC Global continues to invest in inventory as we remain bullish on the market in general. We have increased our on-hand tonnage over the first half of 2018 and have placed significant orders with both U.S. and international players to arrive monthly. We are well-positioned to meet the needs of our customers during this unpredictable time.

The conditions outside of the U.S. are far more stable in both price and demand. As the dynamic continues to change in the U.S., we expect to see changes in other countries as traditional importers to the U.S. will need to seek new markets for their volume. This could result in deflation in other markets as “dumping” could occur. To date, this is not yet apparent.