Manufacturing recovery continues, slowly

The durable goods manufacturing index in December, as compared to November, increased by 1.0% but remains 2.6% below year-ago levels according to the U.S. Federal Reserve. Tubing-intensive segments that experienced growth included fabricated metal products (0.6%), machinery (2.1%), electrical equipment and appliances (1.8%), aerospace and miscellaneous transportation (2.5%), and miscellaneous manufacturing (1.0%). The only negative category in December was motor vehicles and parts, which was off by 1.6% from November. All of the aforementioned categories are below year-ago levels except for motor vehicles and parts, which is 3.6% ahead of last December.

The January Manufacturing Report On Business®, as published by the Institute for Supply Management® (ISM®), indicated that the Purchasing Managers’ Index (PMI®) was 58.7%; down 1.8 percentage points from the December reading of 60.5%. The New Orders Index fell to 61.1% which is down 6.4 percentage points from the December score of 67.5%. The Production Index was 60.7% and was lower by 4.0 percentage points from the December score of 64.7%. The Backlog of Orders Index registered 59.7%, 0.6 percentage points above the December reading of 59.1%. Key tubing-consuming manufacturing industries that improved in January include electrical equipment, appliances, and components; machinery; chemical products; fabricated metal products; transportation equipment; furniture and related products; and miscellaneous manufacturing. For more information, visit www.ismrob.org.

Domestic pipe, tube and steel mill news

Vallourec has announced an OCTG price increase of $425/ton effective with all Q2 2021 deliveries. U. S. Steel also has announced price increases on seamless OCTG ($450/ton) and seamless line and standard pipe ($200/ton). Both are effective with all new orders.

Tex-Isle Supply Inc. announced plans to open a new pipe and tube mill in Robstown, Texas, in Q3 2021. This greenfield project will be adjacent to the company's current heat-treating, inspection, and threading facility. The mill will produce OCTG, line pipe (to capitalize on its coating facility in George West, Texas), and structural tubing. Size range is 2 3/8 to 8 5/8 with an annual capacity of 350,000 tons.

Bull Moose Tube has completed several capital projects in Elkhart, Ind., and Trenton, Ga. The projects involved upgrades to drive and automation control systems, upgrades to the sizing section of the mill, installation of a new induction unit, and upgraded cutoff capabilities.

Shipping & Imports

Overall pipe and tube shipments for the sectors of the market that we cover increased in December from November by about 14.4% as both domestic and import shipments improved. December shipments were about 26.9% below year-ago volumes. Most of the deficit was in energy product shipments, which were off by 40.2% year-over-year. Imports increased in December 2020 from November 2020 by 57.5%, but were about 11.5% below year-earlier levels. Domestic shipments in December 2020 improved by 1.5% from November 2020 but were off by 32.6% when compared with December 2019.

In mechanical tubing products, December shipments decreased by about 8.7% from November and by about 27.3% from December 2019. From a percentage perspective, imports declined further than domestic shipments.

Flat-rolled steel

According to data from the SteelBenchmarker, the index for base hot-rolled band (HRB) prices increased to 114 in November from 91 in October. Data indicates that upward movements in pricing have continued. A look at the HRB price index versus the mechanical tube price index chart suggests that finished pricing is moving up more slowly than raw material pricing. The mechanical tube price index is a blend of import and domestic prices. Domestic prices have moved up much more quickly than imports because of longer import supply chains.

Outlook

The U.S. economy grew at an annualized rate of 4.0% in Q4, bringing the decline for the full year to 3.5%, which is the worst economic performance since 1946. The Congressional Budget Office, in a report issued in early February, predicted that the U.S. economy would reach its prepandemic level by mid-2021. However, the number of employed persons will not return to prepandemic levels until 2024. Nothing beyond the $900 billion December 2020 stimulus package was included in the calculation. In that report, the CBO projected that the U.S. economy would grow by 3.7% on a real GDP basis in 2021, and interest rates will remain low until 2024.

Manufacturing in pipe- and tube-intensive sectors continues to improve but has yet to recover to prepandemic levels in all segments except motor vehicles and parts. Most forecasters believe that construction spending will decline in 2021 from 2020 levels in key industrial and nonresidential building sectors. The rig count and oil and gas activity continue to improve.

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.