2Q22 OCTG Inventories: The Definitive Situational Analysis
It was an all hands-on-deck endeavor this month as we tackled our exclusive 2Q22 OCTG Inventory Yard Survey. While most of you know the ropes, we want to remind everyone that we host our quarterly inventory surveys to measure demand for upstream OCTG throughout the entire US supply chain, delivering the most accurate metrics in the oil patch so subscribers can better navigate the course ahead. This quarter we simply couldn’t leave well enough alone. With prices at an all-time high we mounted an intensive effort to categorically demystify the causes for this and neutralize any confusion as a result of misinterpreting OCTG inventory levels.
But first, the results of our survey (period ending 6/30/22) revealed a small percent of prime, finished OCTG was added to the supply chain Q/Q. Of those tons, only a fraction were intentionally built for a planned mill maintenance outage. From a historical perspective, inventory totals are similar to those counted 14 years ago.
The greatest increase this quarter was the hike from the swamped L48 processor segment. Inspection facilities, in the same boat as processors, reported moderately healthy increases Q/Q. Mill inventories were far more subdued than last quarter.
In the interest of providing the most comprehensive inventory intel available anywhere we also conducted a midyear “active” versus stalled and/or obsolete OCTG inventory survey to further evaluate the totality of tons registered this quarter. The results of our aged inventory survey revealed several key shifts in stocks on the ground. The survey also spoke to the extent that the robust market has helped to clean out older inventories. Our July Report details the results of this study.
We also performed an in-depth analysis into the portion of upstream inventories dedicated to the GOM/deepwater segment this quarter to further parse inventories of OCTG on the ground. Those results were also detailed in this month’s market intel.
Armed with our exhaustive inventory data points we were able to shore up our ‘Situational’ analysis. Both our midyear inventory aging report and the GOM inventory examination were instructive in helping to dissect inventories to provide the first of its kind: an onshore quarterly months of supply metric.
While it’s been hard for some to fathom how OCTG prices have remained elevated, “despite the volume of inventories,” we trust our 2Q22 deep dive into OCTG inventories makes it crystal clear that with few exceptions, there’s scarce surplus and lean speculative supplies left beyond well-aged GOM/deepwater tons in any segment of the supply chain. It also must be understood that planned maintenance outages for a handful of domestic mills this fall and constrained imports will offer little in the way of relief for either spot inventories or prices for the remainder of the year.
In closing, the best anyone can hope for in this situation is that knowledge and understanding will help to put things on an even keel. And after all, mates, smooth seas never made a skilled sailor.
NOTE: Our monthly blog posts offer a slice of the content we publish in The OCTG Situation Report® every month. To subscribe and/or request a complimentary copy of our Report for review please visit: https://www.octgsituationreport.com/subscribe
Photo Courtesy Vallourec USA