Page 8 - ITAtube Journal 32022

Market information
Dr. Gunther Voswinckel, VOSCO GmbH
World Tube & Pipe Market: Factors influencing the current situation
Dr. Gunther Voswinckel – Update as per December 2022
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Welcome to ITA’s and VOSCO´s regular presentation of the main worldwide eco- nomic factors influencing the tube and pipe industry.
In many regions of the world, the corona pandemic seems to be under control. Nevertheless, we can understand its impact on the supply of goods, especially in China, where some important cities are again affected by corona lock down.
The Ukraine war represented another striking turning point this year. Russia,
as one of the main suppliers of fossil energy commodities, gas and oil, was hit with sanctions as a result of its invasion of Ukraine. Europe in particular, which
is highly dependent on Russian gas and oil supplies, is being hit hard by the resulting skyrocketing energy prices. The consequences of the cost increases are unevenly distributed across the world. Regions such as the USA, India, Turkey and China are benefiting from lower energy costs. In addition, massively
rising inflation and its countermeasures threaten our industry and present it with unexpected challenges that are difficult to calculate. As always in such disruptive times, we see crisis winners who max- imise their profits - but also crisis losers who have to fear for their existence. Due to the dynamics of these developments, it is usually very difficult for the crisis losers to react appropriately. As a result, some regions are looking for suitable political countermeasures to compensate for their cost disadvantages.
Whereas previously only quality, delivery time and costs were decisive, geopolitical and logistical risk considerations as well as current and future energy costs are now increasingly taking centre stage. All sources of supply are being critically scru-
tinised and one can only hope and warn that international trade will not suffer too much as a result. In particular, the regional differences in energy prices will have an impact on the current landscape of the energy-intensive steel industry. For many years, Europe benefited from relatively cheap pipeline gas from Russia. As this will no longer be available for some time, Europe will have to compen- sate for these supplies with much more expensive other sources. As a result, energy prices will remain at a much higher level unless Europe produces more gas from its own territories despite all political opposition. On the other hand, regions like the US, China and India will continue to expand their energy-in- tensive industries because energy costs are much lower there.
More than 70 % of total world pipe production, i.e. about 110 million tonnes, is welded pipe. Welded tubes are highly dependent on hot-rolled coil prices and, to a lesser extent, on plate prices. Average prices for hot-rolled
coils jumped from September 2020,
from around USD 450, to a peak of USD 2,000 in September 2021. Prices then fell throughout 2022 to around USD 620. This price rally posed major challenges to our pipe industry. Although tube prices also peaked, the price increase was higher for hot-rolled coils than for welded tubes. Most forecasts now predict that prices for hot-rolled coils will settle down and increase by a maximum of another 80 UDS by 2023. But demand for pipes is also calming down with similar effects on prices. Prices for commodity pipes in Europe are currently around 830 USD/tonne, resulting in a value added of only 210 USD/tonne at most. Only the US market is still quite demanding at a high price level. OCTG pipes, which have a
ITAtube Journal December 2022