Steel Market Update
Our latest monthly update is much the same as the previous months’. Spot availability is non-existent, contract tons are being pushed out 10-12 weeks, and prices are up.
The supply chain disruption is providing little indication of when it will finally settle down, but we still think prices will start backing off at the tail end of Q2 and into Q3. Domestic mills’ utilization rates have stalled out in the high seventieth percentile, and it is unclear on when they will notch higher. In a potential sign of relief, we have seen some pull back in international scrap markets.
Following the plunge in the Turkish lira, after President Erdogan canned the country’s top banker, Turkish buyers dried up for available cargoes freeing them up for other importing countries. In conjunction, supply chain issues around bulk seaborne shipping has led to a surplus of supply at key export points, forcing sellers to lower prices. It could be seen as one of the first steps in the process for a retreat in semi-finished steel pricing.
OCTG & Line Pipe Market Update
The OCTG and Line Pipe markets have started to tighten up but have not seen near the explosion in prices as steel markets. Although drilling activity has continued to tick upwards, demand is still significantly under traditional levels.
February 2021 demand was ~200,000 tons, while February of 2020 was ~387,000. Market pricing changes over the past few months are directly attributed to dwindling on the ground inventory and high replacement costs. Imports have started to pick up and will help to fill inventory holes, however domestic ERW mills are not overly active participants.
With high coil prices, and tepid demand, ERW mills are having more success raising prices in other markets like structural rounds and shapes compared to the API market. At these elevated pricing levels, there will be very little speculative buying, so we expect certain niche areas of the market to continue to run hot. This will continue to be an import or domestic seamless market until there is a significant change in market dynamics.
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Tex-Isle ERW Pipe Mill - Progress Update
Tex-Isle’s mill expansion is closing in on completion of the site development. Our next steps will be to install our foundation slab along with embedded mechanical, electric, and plumbing requirements. The 60,000 square foot facility will house a new ERW facility which will produce 2.375” – 8.625” OD steel pipe for API and structural use. We expect to commission this facility in Q4 2021