Page 8 - ITATUBE Journal 1 2020

Market information
Dr. Gunther Voswinckel, VOSCO GmbH
World Tube & Pipe Market – some influencing
factors on the present situation
Dr. Gunther Voswinckel – Update as per April 2020
This column/article, in a consecutive way, discusses several economic consequences for the tube and pipe industry.
These last weeks have really caused unforeseen con- sequences to the world. The corona pandemic start- ing in Asia, mainly in Wuhan and the Hubei province, has meanwhile took control of Europe, the USA, and many other countries. It is even very likely that we will experience the corona roll out throughout the entire world. In consequence many countries have already limited some substantial human rights, such as the freedom of movement as well as the freedom of property and the freedom of practicing an occu- pation. Many countries have decided to lock down major parts of the public, industrial and private activities to protect human lives.
In this article I will not discuss the sad and dis- astrous consequences for the mankind (as of 21. April 2020 worldwide ab. 2,5 Mio. known persons in 185 countries are infected by Covid-19 and about 165.000 persons have died being infected by Covid-19). The latest epicentre being the USA with 790.000 infected persons and 42.200 killed persons. The comments on the human consequences of this sad catastrophe shall be made by analysts who are mor experts in this field.
In the following I will only concentrate on the fast-developing consequences for the tube and pipe industry.
Many countries have decided to lock down major parts of the industry. Consequently, major supply and service chains are not working any more. It will take quite some time to recover the well-established globalized production network. In the meantime, the consumption of energy and most industrial goods has fallen apart.
The by far largest market segment for tubes and pipes is the OCTG (Oil Country Tubular Goods) market. With about 51 % of the world tube and pipe market share it is largely dependent on the oil and gas price, which still can be considered as the blood
line of industrialisation. The daily consumption has reached a peak value of about 100 Mio. barrel/day early 2020. Since the corona pandemic started in China, the world oil consumption dropped by more than 30%. A tremendous oversupply of oil was the consequence immediately reflected in an oil price drop of about 60% (60 US$/Barrel to 25 US$/barrel in only 5 weeks). The OPEC lead by Saudi Arabia, and major non-OPEC oil producing countries tried to find international agreements to reduce the daily oil production. But due to the significant implications of such measures to some countries first attempts for an agreement failed. Subsequent internal conflicts between the oil producing countries even put further pressure on the oil price level. Only on April 20th the oil producing countries could agree to reduce the world daily production by about 10 million barrel/ day for the months May and June. This reduction of the daily production anyhow did not show the desired consequences, since even this reduced pro- duction level is by far higher than the present world oil demand caused by the lock down due the corona pandemic. Unless the world oil demand will raise again or the oil producing countries can agree on further significant reductions on the oil production, the oil price will probably remain on such low level.
Due to the crash of the oil price, the world drilling activities are significantly reduced having negative impact on the tube and pipe industry. The tube and pipe industry is partially still covered by long-term delivery contracts, anyhow it can be expected, that the renewal of such delivery contracts will be chal- lenging for the tube and pipe industry.
Other tube and pipe markets such as the automotive (15%) and the mechanical engineering (9%) are also significantly hurt by the industrial shut down caused by the corona pandemic. Many automotive produc- tion plants and mechanical equipment plants around the world were shut down during April 2020. Even the world car sales volume collapsed by about 70% this month. Now since China and some other coun- tries are restarting its production facilities, there is hope for a fast recovery within 2020.
ITAtube Journal No1/July 2020
8