Data indicates manufacturing growth, but an additional boost from Congress is needed

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The durable goods manufacturing index in August increased by 0.7% but remains 8.0% below year-ago levels, according to the U.S. Federal Reserve. Motor vehicles and parts manufacturing, having fully recovered to prepandemic levels, declined modestly in August, but gains in other sectors more than offset that sector. Growth was strongest in August in primary metals (+2.1%) and aerospace and miscellaneous transportation equipment (+4.2%). These industry segments remain 21.6% and 18.3% below year-ago levels, respectively.

The August Manufacturing Report On Business, as published by the Institute for Supply Management (ISM), indicated that the Purchasing Managers’ Index (PMI) was 56.0%, up 1.6 percentage points from the July reading of 54.2%. The New Orders Index improved to 67.6%, which is up 6.1 percentage points from the July tally of 61.5%. The Production Index registered 63.3%, up 1.2 percentage points compared to the July posting of 62.1%. These indices turned positive (greater than 50%) in June after steep gains in May, and they continue to improve. For more information, visit www.ismrob.org.

Domestic pipe, tube and steel mill news

Global pipe producer Tenaris announced an $11 million investment in its recently acquired Koppel melt shop to expand the plant's billet size range to match its North American seamless pipe mills' size ranges. Tenaris has seamless mills in Ambridge, Pa.; Bay City, Texas; and Sault Ste. Marie, Ont. The funds also will be used to upgrade safety, information technology, and automation systems at the plant.

Zekelman Industries has launched a national advertising campaign called "Life Reinforced" advocating more manufacturing in the U.S. The domestic manufacturing sector suffered a steep decrease, about 28% from 2000 to 2018, making it the hardest-hit employment sector. Many economic experts have come to share Zekelman Industries' perspective that America is losing manufacturing jobs because of poor trade deals and unfair trading practices rather than advancements in technology.

U. S. Steel and Nucor announced steel sheet price increases in the last week of August of a minimum of $40/ton. The price increases were effective immediately. EXLTUBE, a Kansas City, Mo., producer of construction and manufacturing-related pipe and tube products, announced a price increase of $50/ton for all products during the same week. On Sept. 14, U. S. Steel announced another price increase on sheet products of $60/ton and EXLTUBE announced another increase of $50/ton on A500, A513, and A53 products. In late September US Steel announced a $75/ton price hike on seamless oil country tubular goods.

Shipping & Imports

Overall pipe and tube shipments for the sectors of the market that we cover decreased in July from June by 9.5% as both domestic and import shipments declined. July shipments were 32.6% below year-ago volumes. Imports decreased from June 2020 to July 2020 by 21.8% and were 51.1% below year-earlier levels. Domestic shipments in July 2020 fell by 5.1% from June 2020 and by 33.6% from July 2019. It is worth noting that most of the shortfall is occurring in oilfield-related products.

In mechanical tubing products, July shipments decreased by 5.2% from June and by 19.0% from July 2019. Imports decreased by 14.7% from June 2020 and were 35.0% below July 2019 volumes. Domestic shipments dropped by 2.7% and 14.1% for the same periods. The year-to-date mechanical tubing shipment deficit is growing as recent months’ shipments represent an unfavorable comparison to year-ago levels.

Outlook

Preston has begun to track the CNN/Moody's Analytics Back-to-Normal Index, which is a combination of 37 metrics that measures the health of the U.S. economy. As of this writing (in mid-September), the index is 80. The low point was 59 on April 17; note that 100 represents the pre-pandemic level of activity. For more information, visit cnn.com/business/us-economic-recovery-coronavirus.

According to the OECD’s most recent Economic Outlook Forecast, published in September, global gross domestic product (GDP) is expected to decline by 4.5% this year which is a 1.5 percentage point improvement from the June forecast. Growth for next year is predicted at 5.0%. For the U.S., GDP is forecast to decline by 3.8% this year and grow by 4% next year. The U.S. unemployment rate fell in August to 8.4%, down from 10.2% in July.

Manufacturing gains have slowed, pandemic aid to businesses and the unemployed has virtually dried up, and talks of another boost from the federal government are at an impasse. The Coronavirus Aid, Relief, and Economic Security (CARES) Act and the Paycheck Protection Program (PPP) have been credited by many for the sharp rebound in economic activity so far, but without further action from Congress, it appears that the recovery is likely to stall.

From a pipe and tube perspective, import shipments, based on licenses for August, continue to decline, as do domestic shipments reflecting pandemic-influenced order patterns. While shipments in all products continue to weaken, pipe for the oil and gas sector has taken the biggest hit.

Hot-rolled Steel

According to data from the SteelBenchmarker, the index for base hot-rolled band (HRB) prices fell to 63 in July from 67 in June. Demand continues to improve, and the most recent price patterns in mid-September reflect that, along with rising scrap and iron ore costs.

Preston’s Research

The primary pipe and tube category that Preston analyzes that is of interest to the Tube & Pipe Journal readership is mechanical tubing. This category includes conduit, off-the-welder tubes with wall thickness less than 0.156 in.; hot-finished seamless; cold-drawn seamless; and drawn-over-mandrel products.

According to Preston’s data, the sum of all pipe and tube shipments from domestic mills in 2019 approximated the amount of steel used in the automotive sector, a clear indication of the significant contributions pipe and tube products make to the steel economy.

Founded in 1982, Preston Publishing Co. is a market research and consulting firm that provides steel tube and pipe market data, statistics, and analysis in the monthly Preston Pipe & Tube Report. Additional services include other monthly reports, custom research, consulting, expert witness services, and speaking engagements.