“H-Town” plays host to a Texas-sized A-list in March during CERAWeek and the world’s largest Livestock Show and Rodeo. While RodeoHouston never fails to entertain, some found CERAWeek to be “all hat, and few cattle”: suggesting the splashy headlines and big pronouncements of previous years events were in short supply.
The takeaway sound bite for this year’s CERAWeek seemed to be “$100 a barrel is becoming the new $20.” Oil executives took the opportunity to hammer away at the need to rein in runaway prices as unconventional exploration becomes more challenging and production costs continue their upward trajectory. This cost containment is clearly trickling down throughout the supply chain. While OCTG often accounts for a relatively small slice of the ‘budget’ pie, it too is feeling the heat as reflected in the pages of our Pricing Situation again this month.
This discussion segues well into the aftermath of the surprising negative preliminary decision on alleged dumping of OCTG imports. Without rehashing the determination, we feel obliged to remind our readers that this case would not exist without a decidedly favorable market for foreign pipe. You simply can’t champion jobs (economic growth and prosperity) in America while supporting jobs overseas. There has to be a balance. And the balance needs to be struck for many of the same reasons that we’re putting so much energy into weaning ourselves off foreign oil.
This isn’t our first rodeo. As recently as 2009, U.S. mills were fixing to bite the dust as the market was saddled with an inventory overhang from a glut of Chinese OCTG imports. Mass casualties were averted during that period due to a combination of tight supply, full mill capacity and high OCTG prices that prevailed until demand plummeted in late 2008. The stiff tariffs that were imposed on Chinese imports set the stage for the rebuilding process.
Five years later we face a potentially similar outcome as unbridled supply threatens to upset the status quo. Demand remains steady today but we are reminded that no one could have predicted its precipitous drop in ’08. As we examine the current trade case we can’t help but recall the quote, “those who ignore history are destined to repeat it.” And that, folks, is “no bull!”