Data indicates improvement in the tube and pipe industry

According to the U.S. Federal Reserve, the durable goods manufacturing index in June increased by 11.6% after growing by 5.8% in April. Motor vehicles and parts manufacturing improved substantially in June—105.0%—but despite the growth in the last few months, output remained more than 25% below its February level (before the pandemic set in). Consumer durables, business equipment, and durable materials posted increases of 36.6%, 11.8%, and 7.4%, respectively. Year over year, the June 2020 durable goods manufacturing index was 14.3% below the June 2019 reading.

The June Manufacturing Report On Business, as published by the Institute for Supply Management, quantified the Purchasing Managers’ Index at 52.6%, up 9.5 percentage points from the May reading of 43.1%. The New Orders Index improved to 56.4%, which is up 24.6 percentage points from the May reading of 31.8%. The Production Index registered 57.3%, up 24.1 percentage points compared to the May reading of 33.2%. Keep in mind that readings above 50% indicate growth in manufacturing. For more information, visit the site at www.ismrob.org.

Domestic pipe, tube, and steel mill news

Several sunset reviews were concluded recently including antidumping duty orders on light-walled rectangular pipe and tube from China, Korea, Mexico, and Turkey; antidumping duty orders on certain oil country tubular goods (OCTG) from the People’s Republic of China; countervailing duty orders on OCTG from India and Turkey; and antidumping duty orders on OCTG from India, Korea, Turkey, Ukraine, and Vietnam. In all cases the U.S. International Trade Commission determined that a revocation of the orders would be likely to lead to continuation or recurrence of material injury to an industry in the U.S. within a reasonably foreseeable time.

The ArcelorMittal USA mill in Burns Harbor, Ind., suffered an explosion at the D blast furnace on July 16. ArcelorMittal said that despite the accident, the company would be able to meet demand.

On July 21 U.S. Steel and AK Steel announced a price increase of $40/ton on spot market base prices for all carbon flat-rolled steel, effective immediately. This includes hot-rolled steel, cold-rolled steel, and coated products. Meanwhile, because automobile manufacturing has increased, U.S. Steel has restarted its No. 6 and No. 8 blast furnaces at its plant in Gary, Ind.

Shipping & Imports

Overall pipe and tube shipments for the sectors of the market that we cover increased in May from April by about 4.8% because of much stronger import levels. Shipments were still about 26.8% below May 2019 volumes. Imports increased in May 2020 from April 2020 by 38.9% but were about 25.5% below year-earlier levels. Domestic shipments fell by about 6.5% from April 2020 and by about 27.4% from May 2019.

In mechanical tubing products, May shipments decreased by about 8.5% from April and by about 23.5% from May 2019. Imports increased by 13.6% from April 2020 but were 11.4% below May 2019 volumes. Domestic shipments dropped by 13.1% and 26.2% for the same periods. Year-to-date mechanical tubing shipments are down just 4.2% overall while seamless mechanical products—used in oilfield couplings and equipment—are down by about 31%.

Outlook

The gross domestic product (GDP) in the U.S. declined in the second quarter by 9.5%. Fitch Ratings and others expect the U.S. economy to shrink in 2020 by about 5% overall. This assumes that the current wave of COVID-19 cases doesn’t result in the severe business restrictions that many states had during late March and April.

Unemployment, which improved some, is now moving sideways while Congress continues to negotiate another round of COVID-19 relief, specifically the federal unemployment boost of $600 per week. Although many economists credit this effort for preventing even worse Q2 GDP performance, it expired on July 31. It is expected that Congress will come to terms with an agreement, but as of press time (August 12) new legislation was not yet in place.

From a pipe and tube perspective, order patterns for import shipments, based on licenses for July, reflect COVID-19 primarily in oilfield products. Construction market pipe and tube products are likely to weaken later in the year. Import shipments have been more volatile in the last several months in terms of percent of variability.

Hot-rolled Steel

According to data from the SteelBenchmarker, the index for base hot-rolled band (HRB) prices improved to 68 in May from 66 in April. Demand has improved, but idled capacity has returned; HRB prices in June and July continued to fluctuate but were predominantly lower.

Paul Vivian can be reached at pvivian@prestonpipe.com; Rick Preckel can be reached at rpreckel@prestonpipe.com.