Market Overview
Have a look ...World Tube & Pipe Market: Factors influencing the current situation
Dr. Gunther Voswinckel – Update as per December 2024
Welcome to ITA’s and VOSCO´s regular presentation of the main worldwide economic factors influencing the tube and pipe industry. The year 2023 was a record year for the entire tube and pipe industry. Strong demand and high prices mainly driven by the oil and gas sector resulted in good profits for the tube and pipe industry. But already in the middle of 2023 the demand and prices started to erode which caused production cuts in the first 6 months of 2024 by -4%. India, USA, CIS and China had the largest cutbacks in tube and pipe production.
Geopolitical turbulences are still ongoing. Their supporting impact on the OCTG tubular market after a period of high demand is not so significant anymore. The oil prices stay relatively low and so far, there are no signs for major changes. The automotive industry, also an important market for tubes and pipes is recovering from slowdowns but undergoes major structural changes towards electro mobility. For example, in the EU due to political ban to sell combustion engine vehicles from 2035 onwards, such combustion car related production facilities move to other regions where combustion driven cars are allowed and required - tube producers may follow. Mechanical engineering and construction maintain their strong position despite temporary slowdowns. The necessary transition to environmentally friendly and carbon-reduced production is a central task for the industry. The consequences of the related costs increases are unevenly distributed around world. Europe is confronted with comparatively high energy prices and levies for carbon-intensive industries. Regions such as the USA, India, Turkey, Middle East and China are benefiting from lower energy costs. Political intervention and regulations are increasingly influencing the strategies and actions of the industry. Due to the dynamic nature of current developments, it is increasingly challenging for the industry to react appropriately. Some manufacturers are losing confidence in their ability to compete on the global market with the costs cost levels and are even reducing their involvement in Europe as a result. Some countries/regions are therefore looking for suitable political countermeasures to compensate for their cost disadvantages.
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 scrutinized, and one can only hope and warn that international trade will not suffer too much as a result. In particular, regional differences in energy prices will have an impact on the current landscape of the energy-intensive steel and tube industry.
However, disruptive times also always create new opportunities for economic success. New markets such as Carbon Capture Utilization and Storage (CCUS), new pipelines as well as networks for hydrogen transport, electromobility and productivity improvements at production sites as part of the transformation to more environmentally friendly plants offer opportunities that need to be exploited.
The availability of economical energy is a decisive factor for the industry. Geopolitical turbulences and political regulations have changed the regional balance with increasing challenges for the industry in regions with higher energy cost. The industrial landscape of the energy intensive industry is already taking consequences.
The prices for electrical energy, after turbulent periods, is now reported at a level of about 40-110 €/MWh (figure 1). In Europe the span of the average prices in 2024 is between 50 – 100 €/MWh. This corresponds to a price increase of 300% in the last 20 years! Some countries with larger nuclear energy sources, like e.g. France (ab, 70 €/MWh), or other base-load energy sources at reasonable cost, still have cost advantages. Considering for example US-Texas with an electrical energy cost level of about 60-70 €/MWh is about 25% lower than most European cost levels. It will even become more unbalanced if some more European punitive regulations or network costs become effective. On the other hand, some analysts see further cost reductions in the US. Countries like Saudi Arabia are even offering electrical energy at 40 €/MWh or less! This widening cost gap is increasingly forcing companies to relocate their production facilities to countries with more attractive energy cost levels.
Cost of natural gas, one of the most important energy source, after turbulent times in 2022 has now in 2024 reached a level of 1,75 to 3 USD/MMBtu (figure 2). The volatility of the natural gas price is still challenging the gas intensive industries and gas power plants. Regions such as Europe nowadays depend to a great extent on LNG (Liquified Natural Gas). LNG on the other hand is by far more expensive than normal natural gas. LNG consumers are confronted with cost levels of about 13 USD/MMBtu which is about 450% higher than normal natural gas (figure 3). In Europe, just Austria and Poland still benefit from low prices, sourcing their natural gas via Jamal pipeline from Russia.
These remarkable additional costs for LNG are applicable to such regions without sufficient natural gas supply. Europe is one of such regions with additional cost burdens. Europe is buying LNG from USA, Kuwait but also from Russia via third countries. Extended European local gas exploration or shale gas exploration are politically banned. Therefore, hardly any short- or mid-term measures are visible to overcome cost disadvantages European high energy consuming industries are confronted with.
The long-term strategy to shift towards green hydrogen to replace fossil energy sources such as natural gas, are also questioned by specialists. Hydrogen production via electrolysis in an industrial scale requires not only masses of clean water, but also a lot of electrical energy. About 55 MW electrical energy per ton of Hydrogen must be considered. Furthermore, the chemical process, the electrolysis, requires permanent electrical energy 24 hours over 7 days per week with limited power network variations. The lifetime of the electrolyse stacks is significantly reduced in case of larger power supply volatility. Therefore, green hydrogen production seems only feasible in regions with steady electrical power supply from sun, wind, water or nuclear sources. In most parts of Europe such constant power supply at reasonable cost is still hardly to be realized by the green energy sources. Some specialists e.g. from OECD therefore consider producing hydrogen in regions with steady and reasonable electrical supply such as some places in Middle East or Africa. Economically transportable goods shall than be produced near the electrical source and then further processed in the industrial centres like Europe or northern Asia. DRI could so become an ideal import product which could then be further processed in electrical steel plants to a wide range of specifications. Such value chains as proposed by OECD specialists would secure most technological knowledge and employment levels for the traditional metallurgical plants. Unfortunately, such ideas are still not supported by most European politicians.
The total world tube and pipe production in first 6 months 2024 was 82,2 million tons. After the record year 2023 the market calmed down a bit again. If this production volume 2024 is extrapolated to full year, we report a world tube production cut of - 4% (figure 4).
Figure 5 report the volumes of the major tube and pipe production segments in the first 6 months of 2024. The largest segment are tubes and pipes with a diameter < 406 mm (<16”) accounting to 46,4 million tons, followed by seamless tubes and pipes accounting for 22,3 million tons and welded tubes and pipes > 406 (> 16”) mm diameter, mainly pipeline pipes, accounting to 11,5 million tons.
Looking at the different regions, significant different trends regarding tube and pipe production are reported (figure 6). India (-25%) indicates the largest cut in production. We know from previous years, that the reported Indian figures are always low for the first 6 months of a year, anyhow cuts of -42% for tubes < 16” are quite remarkable. Despite such alarming figures we think that the Indian tube and pipe producers will further benefit from the economical- and GDP growth as well as the demand for pipelines to supply oil and gas to the county and its distribution throughout the country.
In China the entire steel industry was already suffering from production cuts in 2023 whereas the tube and pipe production was experiencing record high figures. Now in 2024 first 6 months also the tube and pipe industry was hit by production cuts of -8%. Consequently, Chinese producers seek for new additional markets to compensate such market losses. Remarkable is the cut in pipeline tubes >16” with – 14%. This may be caused by delays for scheduled pipeline projects still to come.
The USA, being a very price sensitive market, after steady growth in the past years reacted immediately on the smaller demand for OCTG products wit production cuts of -12%. Particularly the production of pipeline pipes > 16” with -17% is striking. Here the incoming president Trump has already announced to revive some of the pipeline projects which were suspended under President Biden.
Europe´s tube production kept relatively stable with -1%. In fact, the production of seamless tubes following the closure of Vallourec’s European plants appears to have more than compensated for their production with only 500,000 tonnes less. Just the production of pipes > 16” was suffering with production cuts of minus 10% caused by delayed projects.
CIS suffering also from production cuts of -11%. Just the pipeline pipes >16” were boosting their production (+9%) due to pipeline projects to redirect the Russian Oil and Gas resources.
Tube and Pipe manufacturers buy hot-rolled coils, round billets, or plates as input material for their production lines. 72 % of the total world pipe production, i.e. in 2024 about 116 million tons/year, are welded tubes and pipes. Welded tube producers are therefore highly dependent on attractive hot rolled coil prices and large OD (> 406 mm diameter) pipeline producers, on plate prices. Average prices for hot-rolled coils in the US came down from January 2024 (ab. 1130 USD/ton) to December 2024 (ab. 690 USD/ton) (Figure 7). Some Countries, such as Turkey (600 USD/ton) or India (540 USD/ton) trade even lower.
Furthermore, tube producers suffer from shortages in the availability of special tube material specifications. Special alloyed HRC as applied e.g. at OCTG tubes and pipes, are traded at significant higher prices. Low grade Steel plates (S275) are traded according Kallanish on 2nd of December 2024 for at about 650 USD/ton and S355 at about 690 USD/ton.
Billet prices, applied for seamless tubes are traded for an average of around 525 USD/ton.
In 2024 almost all prices for tubular pre-materials were coming down. Anyhow it remains challenging to predict the pre-material price developments.
Figure 8, shows the price development for two representative tube grades since June 2022:
- P110 OCTG O.D. 5,5” alloyed casing pipe.
- S235 non alloyed structural pipe.
The OCTG pipe price for P110, after its hight in October 2022 (ab. 3.900 USD/ton) experienced a price decline of ab. 58% until August 2024 (ab. 1.650 USD/ton) - however, since then, it seems the price has stabilized at a level of 1.750 USD/ton.
The structural pipe S235 although on a much lower price niveau, characterized by much less volatility almost maintained its price level at ab. 610 USD/ton. Comparing the price difference between HRC and finished structural tubes and pipes type S 235 on Turkish basis, it becomes obvious how small the margins for tube producers of such products with about 30 USD/ton are. There were even time periods, with negative margins.
The major driver of the tube and pipe industry is the oil and gas market representing about 51% of the world tube and pipe production. The consumption of OCTG tubes directly relates with the oil price (figure 9, see also previous tube market reviews). OPEC+ during the past years have unsuccessfully tried to keep the oil price at a minimum level of 90 USD/Bbl. by voluntary supply cuts of 2 million barrel/day. These cuts have only recently been prolonged until mid-2025 to stabilize the oil price. Anyhow the oil price WTI eroded in 2024 from April (87 USD/Bbl.) to December (67 USD/Bbl.). The USA on the other hand extended their oil production capacity becoming the largest oil and gas producer in the world. The new president Trump even announced to further encourage US companies to pump more oil and gas. This announcement does not stimulate the oil price to rise despite the numerous political risks within the middle east oil and gas producing countries. The oil price volatility anyhow ticks higher with more geopolitical risks simmering.
The USA to soften the inflation and to sacrifice the crude oil demand enlarged its crude oil production almost linear from 12 Mio. Bbl./day in August 2022 to
13,3 Mio. Bbl./day in February 2024 (+ 11%) by increasing the number of drilling rigs and their productivity (Figure 10). Since then, the US production remains on such high level.
The number of US drilling rigs was enlarged to about 800 by December 2022 (Figure 11). In 2023 due to improved productivity and declining oil prices, the number of rigs was reduced until December 2024 to 589 rigs. Of these 589 rigs, 482 are dedicated for the extraction of oil and 102 for gas. The US oil exports have reached a remarkable new all-time high with about 5,5 million Bbl./day representing about 41,6% of the total crude oil production.
Efforts to reduce dependence on fossil energy sources can hardly be successful in the short term and can only contribute in medium term. For our pipe industry, however, this means that crude oil prices can be expected for 2025 at around 70-80 USD/Bbl. unless the geopolitical situation does explode.
The need to secure the world energy supply will keep the demand for tubular products high. Another driving factor is the record high global LNG production. Katar, USA and Australia have record high LNG production. Consequently, the demand for OCTG products remain high. The LNG supplies ease the energy supply crisis especially in Europe to compensate the stopped Russian pipeline gas supplies, unfortunately at much higher cost.
Pipeline projects will continue despite the current delays (figure 12). Geopolitical changes in the distribution of oil and gas require new distribution networks.
Carbon Capture Utilisation and Storage (CCUS) is another upcoming interesting market for higher alloyed tubes (figure 13). The storage of carbon requires extensive exploration incorporating various drilling alternatives (figure13).
CCUS will also require new pipelines to allow the scalability of such technology. Pipelines can be expanded and interconnected to create CO2 networks that link multiple sources of emissions to centralized storage locations. This network approach reduces costs by sharing infrastructure across industries, making CCUS more viable and attractive for widespread adoption. By leveraging existing pipeline technologies and developing new infrastructure for CO2 transport, we can accelerate the deployment of CCUS projects and contribute to global emissions reduction goals. Despite the benefits, there are challenges. High upfront costs, public acceptance, and regulatory approval are significant hurdles to building new CO2 pipelines. Additionally, as more CCUS projects come online, it’s crucial to ensure that pipelines can meet the growing demand for CO2 transport, which requires strategic planning and investment in infrastructure. The technological acceptance of such technologies seems to raise not only in the US and Middle East but also elsewhere in the world.
Hydrogen pipelines will create further additional markets for steel tubes (figure 12).
The automotive market, accounts for around 15% of the global tube and pipe market. With most car manufacturers and many of their suppliers now reporting that overall car sales figures are slowly rising again - with global deliveries expected to reach 82 million units by the end of the year 2024.
As the macroeconomic outlook for the automotive industry deteriorates, a modest return to growth in new car sales is expected over the next three years. ABI Research forecasts global vehicle sales growth of 11.5% in 2025. Furthermore, car manufacturers can expect sales to exceed the 92 million units’ level again in 2025 (Figure 14).
In terms of regional growth in vehicle sales, according to IHS, the recovery process in the volume markets of Europe and North America will take longer. Future growth will primarily take place in Asia, particularly in China. However, China could increasingly become a sales problem for the western automotive industry due to the American decoupling tendencies and the strengthening local car industry in China.
However, the tendency to further reduce the weight of vehicles supports the trend towards the use of tubular products. The transition to electromobility BEV (Battery Equipped Vehicles) and PHEV (Plug-in Hybrid Electric Vehicles) can also support the use of tubular components, as the additional weight of the batteries must be compensated as far as possible. The automotive industry offers many attractive applications for tubular products. The slight decrease of cars with combustion engines (ICE - Internal Combustion Vehicles), as indicated in figure 14 may be questioned, since many recent forecasts view the prospects of ICE vehicles more positive. Anyhow stainless-steel tubes for exhaust systems will most likely face a negative CAGR of about -5,4%/year.
Overall, the automotive industry faces the challenge of the transition to electromobility and the question how they can continue to serve markets in which electromobility cannot be introduced due to restrictions in the availability of electrical energy. Car manufacturers must therefore pursue all drive technologies to avoid losing major market potential. Environmentally friendly combustion technologies will continue to have their place. Political institutions, such as those in Europe, on the other hand, are setting deadlines to ban combustion technologies. From 2035, no new cars fuelled with fossil diesel or petrol may be registered in Europe. There is to be an exception to the ban on combustion engines for e-fuels. This already determines major structural changes for automotive industry including those suppliers of tubular products. In this area of conflict, the automotive industry, including its suppliers of tube products, must find suitable business approaches. Industrial relocations to non-European countries are increasingly being observed.
The mechanical engineering market segment, which accounts for around 9% of global pipe production, has developed well in recent years in line with global GDP (figure 15).
During the financial- and corona crisis, the market was characterized by higher volatility with sharp slumps and rapid recoveries. Since 2023, the current further recovery was slowed down by geopolitical circumstances. Asia, and China in particular, although increasingly self-sufficient, are still the largest markets for the purchase of machinery. It remains remarkable that the Chinese industry has taken the global lead in machine sales since the coronavirus crisis.
The USA’s intentions for decoupling must be considered, which could become a game changer for the global mechanical engineering industry. The USA and Europe also remain important sales regions. This market segment certainly offers the greatest variety of tubular products. Cylinder-, precision-, ball bearing- and turned part tubes, to name just a few prominent representatives of this market segment, certainly offer interesting prospects for tube and pipe manufacturers.
The construction market, which accounts for around 5% of the global pipe market, represents another opportunity for pipe manufacturers with growth potential.
The Construction Market size was valued at USD 10.43 trillion in 2023 and is predicted to reach USO 16.10 trillion by 2030, with a CAGR of 5.9% from 2024 to 2030 (figure 16).
The construction industry plays a vital role in the economy. The sector is involved in a wide range of projects, including residential, commercial, industrial, civil engineering and institutional construction, with multiple stakeholders such as architects, engineers, contractors, suppliers, developers, investors and government agencies involved in the process. Despite the challenging macroeconomic and geopolitical environment, the global construction industry has shown moderate growth momentum in 2024, with output increasing by 1% in real terms. Construction activity in the US and Northeast Asia also picked up in the first half of 2024, driving global construction output growth. With high interest rates, new investment in residential construction fell sharply. The infrastructure, energy & utilities and industrial sectors will remain the main drivers of construction output.
With an increased emphasis on environmentally friendly practices, such as the use of green building materials and energy-efficient designs, the industry will experience positive growth. In addition, factors such as rising per capita incomes in emerging markets and now lower interest rates in developed markets are expected to support the expansion of the construction market.
The penetration of structural tubes in the building and construction market has been uneven throughout the world. In North America and parts of Asia, pipe products are widely used in building construction. In Europe, on the other hand, standard concrete or open steel structures are still dominantly used. The tube industry must continue to promote the benefits of tubular applications and demonstrate the architectural prospects. Tubular profiles are an ideal choice when visible structures are desired due to their versatile shapes and closed cross-sections combined with smooth sides. The best mechanical properties and the ability to bridge large spans are further highlights of tubular profiles.
In addition to round structural tubes, rectangular profiles dominate in architecture (Figure 17).
Such profiles are usually cold-rolled and formed in so-called “Turk’s heads”. In this process, attention must be paid to the metallurgical properties of the edges. Generally, unalloyed steel is used, but alloyed steels with their improved material properties should also be considered. In terms of carbon footprint, pipe profiles are of great advantage as the steel used can be produced from metal scab in electric arc furnaces powered by green electricity.
There is room for additional production capacity for structural tubes, particularly in India, to keep up with the market trend.
The majority of pipe manufacturers were able to report significantly improved economic figures in 2023. However, declining demand from 2023 onwards, persistently higher energy costs in some regions and the additional CO2 levies adopted by the European Community pose major challenges for pipe producers, especially those based in Europe. Some pipe producers are losing confidence in their ability to compete on the global market in the future with these additional costs. As a result, some pipe producers are even reducing their involvement in Europe.
Continued demand for oil and gas, new cars, machinery and building construction, particularly in GDP growth areas, as well as new emerging market segments such as carbon capture and storage and hydrogen pipelines, will maintain demand for tube products and require larger volumes of alloyed tubes from 2025 onwards. In general, there is sufficient production capacity to meet the growing demand for tubes in all market segments. However, the trend towards manufacturing close to customers will continue to influence the landscape for tube producers. Raw material prices for the steel and tube industry appear to have stabilised. However, the markets are nervous and there is potential for further volatility.
A further challenge could arise if political measures to prevent climate change are not introduced in a balanced manner, which could lead to the relocation of energy-intensive industries to regions with lower energy costs. However, as the supply and demand balance in the tube industry has largely been restored, price volatility has calmed down.
The transition to environmentally friendly pipe production with low carbon pipes has become an increasingly important task for the industry. Pipe producers are converting their production facilities from gas to electricity.
At the same time, they are improving their productivity, flexibility and customer service. In this context, innovative tools such as artificial intelligence (AI) and Industry 4.0 are being introduced. So far, artificial intelligence has only been used to analyse the vast amounts of data available to the industry, but self-learning AI solutions will further revolutionise the pipe industry.
Many technology providers have already responded by adding green and digital solutions to their product portfolios.
