October 5, 2010

SBB Pipe & Tube Trackers

Top News
Department of Commerce
European mills to review
fail to achieve Mexican,for
price increases Chinese pipe
October
The Department
HRC mills reducedofoffer
Commerce is initiating
prices last week to currently
but weak range
demand fromand3.76%
short to 11.5%.
lead-times N.America = 119
administrative
around reviews
€530-550/t of the antidumping
($714-740/t) ex-works in Importsthem
forced of the sameoffers.
to lower products from
The north -3 points
and countervailing
southern Europe andduty orders on
€570-580/t or light-
even China's Sun Group Co will also
European HRC market has been challenged be
walled rectangular tube from Mexico
lower in northern Europe. Meanwhile, and evaluated; its AD and CV duties
by cheaper southern material and volatile are
China.
sections mills sold October rollings at around currently
consumption. 246.64% and HRC
Southern European 15.28%,
mills
€580-590/t delivered in northern Europe and respectively.
have already reduced production levels to try World = 118
The DOC will examine importsEurope
from four +2 points
€530-560/t ex-works in southern (see to control prices and sources suggest
Mexican companies whose duties A decision is expected by August 31. World = 118
page 4). Sections mills across Europe had production cuts at northern HRC and sections
+2 points
targeted prices of €600/t delivered or more, mills are likely.
Turkish
Rex closes
rebar
$150.7m
offers fall
JV August to
Lakeside crude
raise C$18.3m
steel output
Independent gas firm Rex Energy of Canadian tubular producer Lakeside Steel
Pennsylvania has closed its previously plans to raise C$18.3m (US$17.8m)
announced $150.7m Marcellus Shale JV through a common offering of company Source: SBB Price Trackers
with a subsidiary of Japan's Sumitomo. stock, according to documents filed with
the Canadian government.
Sumitomo paid Rex about $99.5m in cash Quote of the Week
for about 13,000 net acres and a partial The offering will close October 5. About a “We’re only as good as one
interest in certain producing wells. The year later, Lakeside is expected to open a
deal was announced on August 31. C$40m mill in Alabama. company’s mistake.”
Kathryn Klaber of the Marcellus Shale

Editor’s Comment Coalition on the need for shale gas industry

Standards.

Bright future for North American line pipe makers?

North America’s vast natural gas supply is The US government is slowly but surely Late News
looking a little like a jilted prom-goer – all pressuring electrical producers to wean ■ Iran to halt imports of plate for large-
dressed up with no place to go. themselves off coal by ratcheting up diameter pipe
emission regulations. ■ Chelpipe commissions billet supply at
It won’t always be that way, however. Pervouralsk pipe mill
Taking into account future environmental As the thumbscrews gradually tighten, a
■ German steel construction improves
legislation, it simply can’t stay that way. relatively cheap and abundant supply of
clean-burning natural gas might not look so outlook
Despite otherwise tepid industrial demand, bad.
Contents
energy firms continue to horizontally criss-
cross the US and Canada’s shale plays, That gas is going to have to get to market. Production…………………………………… 2
driving up the rig count to satisfy leasing And it’s a bit harder to just dump it into a Market Survey…………………………….. 3
requirements. barge. Moving natural gas requires pipe, Imports/Exports..………………………… 2
and a lot of it. Regional Reports…………………………. 5
That’s good news for OCTG producers. But End-Use Markets….……………………… 2
energy firms are also capping a large North America’s line pipe producers may Company Profile..………………………… 2
portion of their wells while demand – and not feel awfully lucky at this point, but all
pricing – for their product remains weak. signs point to the market heating up in the
long-term. For subscription & other enquiries, contact:
Consequently, fewer pipelines are being
built for what is considered a low-margin Pittsburgh +1 412 431 4370
London +44 207 626 0600
commodity. Shanghai +86 21 5110 5488
Dan Hilliard, NA Tubulars Editor Singapore +65 6227 7811
Help for line pipe producers is on the way, Tubulars Market Report subscriptions@steelbb.com São Paulo +55 11 3371 5755
d.hilliard@sbb.com Bursa +90 224 234 1523
however – albeit from an unlikely source. www.sbb.com

October 5, 2010 © Steel Business Briefing 2010

Global Industry News
North America
Company news, investments, market news, relevant news (but SBB’s Tubulars Market Report
don’t duplicate other sections!)
North America
■ Korea’s Posco has signed MoUs with Chinese steelmakers, Jiangsu Shagang and Chongqing I&S, Latest Spot Prices
■ to
Theprovide its Finex
Marcellus ironmaking
Shale Coalitiontechnology to the“guiding
has unveiled companies.principles” its members will aim to
OCTG ERW, J55 4 1/2 –8 5/8 in.
■ embed
Taiwanese intosteelmakers,
their gas operations.
Yieh Phui and TheHaiprinciples
Kwang have include
beenprotecting the environment,
forced to halt production by
hiring
typhoon local workers
Fanapi, whichand
has operational
flooded sometransparency.
facilities. “The public doesn’t discern between
one company and another,” says Kathryn Klaber, the coalition's executive director.
■ Thailand’s
“We’re only industry
as goodminister, Chaiwuti Bannawat,
as one company’s mistake.”has promised to make a decision on his
country’s planned integrated steelworks project by November. ArcelorMittal, China’s Baosteel
■ A proposed
and Pennsylvania
Japan’s Nippon Steel andgas
JFEdrilling
have allseverance
submittedtax called
letters "insane"
of interest by some
to the is considered
Thai government.
a starting point for negotiations between Republican and Democrats, many industry Standard ERW 4 in.
■ The Libyan
players I&S Company
believe. The stateplans to increase
House its crude steel passed
of Representatives capacityand
by 53%
senttoto2.6m
the t/y and its
Senate a Standard ERW 4 in.
longs capacity
severance tax by 600,000that
proposal t/y would
to 1.6mcharge
t/y in a2012. It also39
minimum plans to for
cents increase
everyits1,000
HBI production
cubic feet
capacity.
of gas taken from the ground. The charge could rise depending on gas prices, but never
would fall below the initial levy.
■ Canada's Advanced Explorations Inc and China's XinXing Pipes Group Co Ltd are forming a Standard Seamless grade 8163 219x6mm
Asia
partnership to develop AEI's Roche Bay iron ore project. Xinxing will acquire 19% of AEI's
Standard Seamless grade 8163 219x6mm
■ stock
Koreanatcold-roller,
a price of 25 cents/share
Union – roughly
Steel Manufacturing, $5.3mfor
is looking - and
a siteup
forto
its $1bn in development
two planned 60,000 t/y
capital in exchange for a 50% offtake agreement.
colour coating lines, which it hopes to commission late next year.
■ North American hollow structural sections mills may have some difficulty pushing their Standard Welded grade q235 114x3.75mm
new $30/short ton price increase through the marketplace, distributors say A stockist in
Europe
the Midwest said the industry-wide increase announced late last week by major players Standard Welded grade q235 114x3.75mm
like Atlas Tube and Southland Tube came as a complete surprise considering the shaky
■ UAE rebarofand
standing rod producer,
a $40/s.t increaseESI,announced
plans to produce beams, columns,
in mid-August. channels
The $30/s.t and angles
increase at its
is effective
1m t/y rolling mill, which it hopes to commission in Q4 2011.
immediately for new orders, though current orders will be price-protected through
■ October 25.
Russia’s StavStal plans to build a 135,000 t/y rebar mini-mill in the southwestern city of Structural S235
Nevinnomyssk by the end of 2012. Structural S235
Asia
■ Turkish steelmaker, Kardemir, hopes to commission a new 550,000 t/y sections mill by the end
■ China’s seamless pipe exports dipped slightly month-on-month in August to reach
of next year.
339,029 tonnes. The August total fell by 7% from July – the same rate of decrease in July
from June – but soared by 42% year-on-year. The August figure took China’s total
seamless pipe exports during January-August to 2.47m t, up 19% y-o-y. China’s seamless Hot Rolled Coil
Hot Rolled Coil
Latin
pipeAmerica
production over the same period topped 16.43m t– up 19% y-o-y, according to the
National Bureau of Statistics.
■ ThyssenKrupp Stainless is considering shutting down its Nirosta plant in Düsseldorf-Benrath,
■ Domestic
Germany inprices
orderfor Chinese
to cut costs. welded pipe dipped during the last week before the National
Day holidays (October 1-7) as low end user demand caused some traders and mills to cut Stainless CR 304 2B 14 gauge
prices while other kept their prices unchanged. Traders in Shanghai were offering
114x3.75mm electric resistance welded pipes (Q235 grade) from northern China’s Hebei
province at around RMB 4,700-4,750/tonne ($703-710/t) with 17% VAT down around
RMB 20-40/t ($3-6/t) from last week. However, some traders kept their prices
Source: Steel Business Briefing
unchanged, because of the quiet market.

Europe
Numbers of the week
■ The European Commission has officially opened an investigation into imports of Chinese
seamless stainless pipes that may lead to antidumping measures in 2011. The complaint Indian
Turkish producer
crude steelAPL Apollo fell
production Ltdto– 1.7m
formerly
t in
was filed on August 16 by the defense committee of the seamless stainless steel tubes Bihar Tubes Ltd – plans to close on a $8.86m
July from 1.8m t in June. This was also less than
industry in the European Union, which represents more than 50% of producers in the acquisition of Lloyds Line Pipes Ltd by mid-
region. The investigation is set to examine stainless tubes and pipes except those used the 1.9m t produced in July 2009.
November.
with attached fittings to conduct gases or liquids in civil aircraft.
Turkish rebar exports
North American Cabot 50%
firmdropped Oil &y-o-y
Gas inCorp
the
■ After a relatively small dip through the summer, the European seamless carbon tube said it has spent $8.3m to placate
first eight months of the year to 2.7m t. Semi- the
market has firmed slightly this month into a relatively steady state. For mainstream Pennsylvania Department
finished steel exports doubledof Environmental
in the same period
grades there is little expectation of significant changes to volumes or prices in Q4. Protection and reimburse homeowners who
Nonetheless activity is greater than in 2009, allowing those in the supply chain to to 1.6m t.
allegedly suffered from methane infiltration
operate profitably. Higher quality tubes are said by some to be seeing firming base in their drinking water. The DEP fined Cabot
prices. $240,000 last year.

October 5, 2010 © Steel Business Briefing 2010

Production & Shipments Watch
SBB Tubulars Market Report

Nucor CEO predicts slow domestic growth in 2012

Nucor CEO Dan DiMicco says the
US steel industry shouldn't expect
significant growth in domestic
production or consumption in
2011, as the economy slowly
climbs out of the recent recession.
"It's going to be in for a real year
of slow growth. Sometimes it's
going to be so slow, it's going to
look like it's (reversing)," DiMicco
said on the sidelines of the World
Steel Association's annual meeting
in Tokyo.
The head of America's largest
steel producer says the US
economy won't recover fully
without certain impediments
being removed, such as onerous
taxation and a lack of
comprehensive energy and
infrastructure plans.
However, DiMicco says recently
approved legislation by the US
House regarding China's
undervalued currency is the first
step toward resolving the issue.

North American Production Split (s.tons, June) Canadian Domestic Shipments (metric tonnes)

Source: Statistics
Canada

*TOTAL is published total, including data unavailable at the product level.

Mexican Production (metric tonnes) US Shipments (s. tons)

Source: National Institute of Statistics and Geography Source: American Iron and Steel Institute via Steelfacts

October 5, 2010 © Steel Business Briefing 2010

Trade Watch
SBB Tubulars Market Report

US could reduce duties on Turkish light-walled rectangular tube

Antidumping duties paid on US imports of Duties on the Turkish pipe currently range
light-walled rectangular pipe and tube from from 27.04-41.71%.
Turkey's Toscelik could be reduced.
If the 0% duty margin is also found in the
The US Department of Commerce is currently DOC's final determination, importers will not
conducting an administrative review of the AD have to pay duties.
duties.
Turkish standard pipe carries countervailing
In its preliminary results, it determined a 0% duties between 0.84-7.26%. Additionally,
margin for Toscelik for the one-year period Turkish standard pipe carries a 3.28-28.28%
ended April 30, 2009. anti-dumping duty.

Top 15 US Pipe & Tube Import Countries of Origin (metric tonnes, preliminary license data, October 1, m-o-m change)

m-o-m % change
Source: US
Dept. of Commerce
-200% 200%

China down and out—Canada, Mexico backslide Countries

A spate of antidumping and giant on approximately the same Largest exporters to the US in Sep
countervailing duty cases filed over the footing by tonnage as India, Austria and
1. South Korea 101,796
past year against Chinese pipe and tube Taiwan.
2. Canada 53,101
appears to have allowed South Korea to
3. Mexico 36,050
step up to the plate. Imports from Canada and Mexico, both
traditional high-tonnage import sources,
Increasing m-o-m
Imports of South Korean tubulars fell m-o-m by double-digit figures.
1. Italy +872%
increased 16% from August to
2. Russia +718%
September, reaching a total of 101,796 Imports of Canadian tube fell 31% in
3. Romania +23%
metric tonnes. September to 53,101 t.
Decreasing m-o-m
China, meanwhile, fell 30% in the same Imports of Mexican tube likewise fell
1. Argentina -77
time period for a total of 13,517 t, 24% for a total of 36,050 t.
2. Turkey -61%
which puts the former pipe and tube
3. Japan -44%

October 5, 2010 © Steel Business Briefing 2010

Trade Watch cont.
SBB Tubulars Market Report

Japan warns that rising yen could mean falling exports

The recent appreciation of the yen is a Yet for now, the strong yen does not appear
“major concern” to Japanese steelmakers, to be having a major impact on direct
says Shoji Muneoka, president of Nippon Japanese steel exports.
Steel – not just for its impact on direct steel
exports but also on exporters of steel-
containing Steel exports in August rose 7.6% from July
goods.
and 5.2% year-on-year to 3.59m tonnes,
The yen has risen 12% against the dollar so according to Japan Iron & Steel Federation
far this year. In mid-September reached a 15 data released on October 1. As a result, the
-year high, forcing the Bank of Japan to January-August total reached 29m t, a huge
desperately buy dollars. 43% increase over 2009’s time period.

US Imports (metric tonnes) US Exports (metric tonnes)

Source: US
Dept. of Commerce

Product changes m-o-m

Imports Increasing Aug-Sep Exports Increasing Jun-Jul
1. Pressure +56% 1. OCTG +9%
2. Nonclass. +3%
Imports Decreasing
Exports Decreasing
1. Mechanical -25%
1. Line -25%
2. OCTG -17%
2. Mechanical -11%
3. Standard -15%
3. Standard -8%

October 5, 2010 © Steel Business Briefing 2010

End Use Oil & Gas
North American rig count increases on strength of oil, lease interests
The North American rig count rebounded
slightly in the latest count by petroleum
industry consulting firm Baker Hughes.
The US rig count increased by nine net
active rotary rigs for a total of 1,659.
Rigs geared for oil production increased
by 14, though rigs geared for gas
production fell by five.
The Canadian rig count also increased in
the latest count, gaining 31 rigs for a total
of 313.
Rig Count by Country: Oil / Gas split
Rig Count by US State: Land / Offshore Split
Source: Baker-Hughes
October 5, 2010
The steadily rising rig count can b e
attributed to drilling primarily to hold
leases and the price of oil, which has
crested $75/barrel, according to analyst
Collin Gerry of Raymond James Energy
Group.
Gerry said domestic natural gas prices will
likely remain depressed for the next five
years.
Oil, however, is expected to enjoy a strong
run worldwide, leading to an increase in
US and offshore drilling.
w-o-w % change
-10% 10%
Rig Type
Offshore
Land
© Steel Business Briefing 2010
SBB Tubulars Market Report
Analyst Roger Read of Natixis Bleichroeder
noted at the American Institute for Interna-
tional Steel’s Gulf Region conference Sep-
tember 30 that increased drilling in uncon-
ventional oil and gas plays will necessitate a
boom in steel infrastructure—particularly
pipelines.
As an example, he pointed out that high-
quality crude from the Bakken shale for-
mation in the upper Midwest has to be
shipped to the Gulf region for processing in
rail cars, which is highly inefficient.
“We need all kinds of infrastructure systems
in the field, and then you need pipelines to
move the stuff,” he said.
Pennsylvania posted a significant gain in the
latest rig count, rising by nine net active rota-
ry rigs.
The state’s average number of operating rigs
is up 10% from August, despite lackluster
natural gas prices.
Drillers are primarily targeting the Marcellus
shale formation, which blankets most of the
state.
End Use Oil & Gas cont.
SBB Tubulars Market Report

Offshore industry to emerge in Brazil, west Africa

Offshore drillers are likely to shun establish its own, homebuilt fleet, he
the Gulf of Mexico for the time being said.
due to a government moratorium But the majority will likely head to
placed on drilling following the BP the west coast of Africa to explore
Horizon deepwater explosion and deepwater reserves, Gerry said.
subsequent gusher.
“Half of the new oil found in the
The 33 rigs previously operating in world has been offshore – you’re
the Gulf won’t sit idle forever, going to need the infrastructure to
however, according to analyst Collin develop that,” Gerry said.
Gerry of Raymond James.
“There is a huge infrastructure build-
A few rigs may be bought by Brazil, up in the deepwater that’s coming,”
though the country is eager to he added. “We’ve clearly delayed
that in the US gulf of Mexico.”

Natural Gas Wellhead $ / mcf Natural gas prices are in a late-summer slide,
falling about 7.1% month-on-month to
$4.05/mcf.

Gas prices have been hovering around $4/

mcf since April due to tepid industrial de-
mand.

Sources remain divided as to whether cool

winter weather—traditionally a driver of
higher natural gas prices— will be enough to
substantially perk up the price.

WTI Crude Oil $/barrel

Sturdy oil prices are driving increased drilling
in the oilfields of the US, though the global
supply of oil—primarily from OPEC—appears
to be stagnating, according to a report by
financial services firm Raymond James.

OPEC production hit a low in January 2009,

falling below 27m barrels/day.

The organization has been slowly ramping up

production since, reaching just over 30m
barrels/day in September.

Source: Energy Information Administration

October 5, 2010 © Steel Business Briefing 2010

End Use Industrial
Industrial production ticks slightly upward
US industrial production remained
relatively flat month-on-month, with most
gains hovering at just about 1% month-on-
month, according to the latest data
collected by the Federal Reserve Bank of
St. Louis.
In August, the most recent month for
which data was available, fabricated metal
products posted the largest m-o-m gain
with 1.16% according to the Fed’s overall
production index.
US Production Indices (2007=100)
Source: Federal Reserve Bank of St. Louis
Auto Sales (seasonally adjusted annual rate)
Source: Federal Reserve Bank of St. Louis
October 5, 2010
SBB Tubulars Market Report
That represents an index value of 91
according to the Fed’s scale.
Primary metal production appear to has
recovered from a dip in July, returning just
under the May and June index results.
That amounts to a 1.05% jump m-o-m, or
a production index value of 84.
Machinery production posted the flattest
results, rising just 0.36% m-o-m.
“Machinery” (NAICS* code 333) includes
machinery used in agriculture, mining,
heating, and factory production. The sec-
tor was up slightly at 0.36% in August.
“Fabricated metal products” (NAICS code
332) includes condensers, boilers, and fin
tubes. The sector was up 1.16% in Au-
gust.
“Primary metals” (NAICS code 331) in-
cludes steel pipe and tube alongside steel
mill products. The sector was up 1.05% in
August.
*North American Industry Classification
System
© Steel Business Briefing 2010
Economic Indicators
Manufacturing looking up, long-term
The Institute for Supply Management
manufacturing index fell to 54.4 on
October 1 from its September 1 reading
of 56.3.
This exceeded the forecast consensus of
54.0 and signals continued expansion in
manufacturing.
The Federal Reserve is considering
additional stimulus through purchases of
long-term treasuries, mortgage-backed
Title
Source: Federal Reserve Bank of St. Louis
October 5, 2010
SBB Tubulars Market Report
Exchange rates
securities and other assets.
Bill Dudley, president of the Federal
Reserve Bank of New York, called current
levels of inflation and unemployment
“wholly unsatisfactory.”
Analysts expect the Fed will use asset
purchases to bring inflation closer to 2%.
Additional measures are expected to be
announced after November 3.
Source: Federal Reserve Bank of St. Louis
© Steel Business Briefing 2010
Company Profile
SBB Tubulars Market Report

Atlas Tube
What is the company? A brief history of Atlas Tube
Atlas Tube is one of the largest North American producers of hollow structural sections and a
division of the John Maneely Company. The firm’s main plant is located in Harrow, Ontario.

What does Atlas produce? Frank Riddick III become

2010 CEO; former CEO Barry
Atlas produces hollow structural sections in rounds, squares and rectangles. They also host custom
fabrication and coating lines. Zekelman becomes
executive chairman
What is the company’s financial position? John Maneely states
The company is privately held between the Zekelman family and the Carlyle Group. It does not 2009 interest in acquiring
openly discuss their annual sales or revenues. Lakeside Steel; Lakeside
rebuffs offer
Why is the company interesting?
Merges with John
■ Atlas maintains five manufacturing facilities throughout the US and Canada, producing more 2006 Maneely Company,
than 1.2m short tons of hollow structural sections annually. parent of Wheatland Tube

■ Tubular goods produced by Atlas have been incorporated into several landmark structures,
Purchases HSS business of
including the Rock and Roll Hall of Fame and Museum in Ohio; Glitter Gulch in Las Vegas; and the
2005 Maverick Tube and
“Tower of Power” ride in Ohio’s Cedar Point amusement park. Copperweld
■ Atlas supplies the hollow structural sections for Skyjack lifts. It also supplies the structural
tubulars for Marathon gas stations and Home Depot outlets. Expands original Harrow
1999 facility with a 12-square
■ Atlas installed one of the largest mill cut-off systems in North America in its Chicago facility in late quick-change mill
2009. The installation idled the facility’s large-diameter line from November 23 through January
1.
Expands by opening
■ The company operates on a low-inventory, fast-cycling business model to minimize the effect of Plymouth, Michigan,
carrying an inventory and to keep lead times tight. 1997
works

Quick-change mill
1994 installed, creating two-
week production cycle
and allow for low
inventories
Founded by Harry
1984 Zekelman in Harrow,
Ontario

Workers service a quick-change mill at an Atlas facility. A mill’s size can be changed For more information, visit:
in as little as two hours using a quick-change system. www.atlas.com

October 5, 2010 © Steel Business Briefing 2010

North American Pipe & Tube Map
SBB Tubulars Market Report

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October 5, 2010 © Steel Business Briefing 2010