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 inch, hot-finished seamless, cold-drawn seamless, and drawn-over-mandrel products. The applications are broad, as is the manufacturing base.
This isn’t to exclude other tube and pipe products. Indeed, all pipe and tube products are significant contributors to the U.S. economy. In total this year, pipe and tube shipments from domestic mills will represent about 14 percent of steel manufactured in this country. To put this into perspective, based on data researched by Preston, auto manufacturing will consume a similar amount of steel this year.
According to the U.S. Census Bureau, durable goods manufacturing shipments decreased by 0.2% in December, the sixth consecutive decline. The decrease was driven by a 0.4% drop in shipments of transportation equipment. However, new orders for durable goods in December, again driven by transportation equipment, increased by 2.4%. Excluding transportation equipment, new durable goods orders fell by 0.1%. Total durable goods manufacturing employment in December was 8.06 million, up from 8.04 million a year ago.
While positive overall, the January Manufacturing Report On Business®, as published by the Institute for Supply Management®, noted that two sectors that consume substantial amounts of pipe and tube—transportation equipment and machinery manufacturing—remained negative. The PMI® was 50.9%, an expansion for the first time in five months. The New Orders Index also indicated expansion in January at 52.0%, up from 47.6% in December. Finally, the Production Index registered 54.3%, up from 44.8% in December.
January manufacturing performance and outlook reports from the five Federal Reserve districts that publish were generally positive and indicated further improvement in optimism regarding future activity. The New York Fed report index increased slightly to 4.8 but the outlook over the next six months remained “subdued” as the index declined by 3 points to 23.6. The Dallas Fed reported that the January production index rose 7 points to 10.5, and new orders went from 1.6 in December to 17.6 in January. The Philadelphia Fed reported that the general activity index increased almost 15 points in January to 17.0. The Richmond Fed reported a rebound in January manufacturing activity, with the composite index rising to 20 from -5 in December; shipments, new orders, and employment all improved. Finally, the Kansas City Fed reported that while manufacturing in January was basically flat compared with the December level, expectations for future activity expanded.
Tenaris completed its acquisition of TMK-IPSCO in early January. Tenaris primarily manufacturers OCTG and line pipe in the US. TMK-IPSCO facilities also manufacture those products, along with HSS and some mechanical tubing.
Many prices were on the increase in the last several weeks. Some announced that hot-rolled, cold-rolled, and galvanized products increased at least $40/ton in January. Increases on OCTG varied from $50/ton to $100/ton
Overall pipe and tube import market share in December decreased by 1.7 percentage points from the November level and, from a volume perspective, is at the lowest point this year. Import share is down by 4.7 percentage points from year-ago levels. Import share of mechanical tubing for December 2019 was 1.5 and 2.3 percentage points higher than the November 2019 and December 2018 levels, respectively. HSS product import share in December 2019 was on par with the previous month and about 1.4 percentage points higher than the December 2018 level.
The ITA issued two final results: an increase of 11.83% on welded carbon steel standard pipes and tubes from India and a decrease to 0.0% on heavy-walled rectangular welded carbon steel products for Ozdemir Boru Profil in Turkey. For more details, see the Trade Case Scoreboard column in the Preston Pipe & Tube Report.
Finally, President Trump announced in January that he would impose 25% and 10% duties, respectively, on many finished or semifinished products in which steel or aluminum make up two-thirds of the cost.
Overall pipe and tube shipments for the sectors of the market that we cover declined in December by about 4% and were about 17% below the same period a year ago. Imports fell by about 25% in December from November, while domestic shipments decreased by about 4.5%. Compared to December 2018, domestic shipments and imports are down by about 15% and 23%, respectively. Imports continue to be affected by the Section 232 duties.
According to data from the SteelBenchmarker, and as we predicted in the previous column, the index for base hot-rolled band (HRB) prices moved up to 0.73 in December from November’s index of 0.72 and from the October low point of 0.67. Price increase announcements in early January brought the total announced change to about $190/ton since late October. A quick review of articles on the subject suggests a consensus view of relatively flat pricing at early-February levels, which is about 7% to 9% above the December level. The relationship between domestic HRB prices and world export prices, as reported by the SteelBenchmarker, remains in favor of foreign pipe producers as the differential exceeds average ocean freight and insurance.
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