Come rain or shine you can always count on our OCTG “Annual Report” in February. This is the month when we pore over an avalanche of data to help formulate our forecast for 2014, which is included in this month’s Report. As most of you know, industry stats on shipments, imports and exports lag by two months, thus we’re now able to close out 2013 and zero in on the comparisons Y/Y. To break the ice, we expanded our year-end OCTG stats table (on page 6 of the February Report) to cover the last three years of activity. When presented this way, the visibility of market trends increases and record highs and some new lows between the periods become increasingly apparent.
2014 appears to be a year that will be marked by contrasts. For every positive barometer there’s a clear and present negative. The only way to correct this situation is to strike a balance, which hasn’t proven to be an easy task in the oil patch. As it turns out, after three consecutive years of growth, OCTG consumption Y/Y slipped. While more of an advisory than an alarm, this is a reflection of mounting pipe on the ground – a combination of imports and new domestic capacity. The fix here, while not easy, is obvious: supply needs to be reduced. That will come at the expense of importers or domestic mills. Only time, as the great equalizer, will tell.
As we went to press, preliminary decisions for the OCTG trade case were announced. The preliminary ruling was published here in our last blog post. Suffice it to say, many in the oil patch believe when the critical analysis of data on the affiliation of major Korean OCTG producers with various related entities is reviewed in July the outcome will change.
Meanwhile, back at the ranch, the prevailing outlook for demand continues brisk throughout 2014. Prices for crude are riding high ahead of refiners spring-maintenance season. The U.S. Energy Information Administration predicts crude prices will average $93/barrel in 2014, which is healthy enough to sustain robust drilling. Permit activity is heating up suggesting near-term improvements. Today’s increased demand translates into tailwinds for consumption improvements. As more pipe goes downhole tons per well moves up.
While it may not be all blue skies in the oil patch this year, the business climate for OCTG remains well above average, which is more than we can say for temperatures this season!