Absorbing OCTG’s ‘InTAXicating’ Increase in 1Q23
It’s that taxing time of year when subscribers count on us to roll up our sleeves and crunch the numbers in order to provide an accurate accounting of OCTG inventories on the ground. Our analysis, derived from our exclusive quarterly yard survey of the US OCTG supply chain, is essential in bringing a high degree of certainty to otherwise elusive inventory metrics—a claim no other trade publication can declare. And thus, we commence our audit of first quarter OCTG inventories.
Make no mistake, an ‘inventorrent’ of tubulars is upon us as revealed by our Q1 2023 OCTG Inventory Yard Survey of prime, finished OCTG. Stockpiles of OCTG in the “tri-state” (TX, OK, LA) region swelled, too. OCTG inventories outside the tri-state region grew only slightly. Additions were posted in every product category (both SMLS & ERW) in the tri-state this past quarter. Details can be found in the charts, tables, and commentary on pages 7 and 8 of our April Report.
Our Q1 survey made it clear that the tri-state processor segment is hitting the bottlenecks once again, increasing cumulations by a healthy percentage Q/Q. Contributing to this state of play is unfinished imported OCTG shipments for Q1, adding additional pressure on processors. Following what many called an “unprecedented year” in the processing sector in 2022, our inventory survey tells us to expect more of the same for 2023.
Knowing what we do now about OCTG inventories in Q1 offers insight into what we might expect as we move into the year. You simply can’t dismiss the impact of inventory when formulating business plans and tracking supply direction trends. And you can’t control what you can’t measure. As it stands at the end of the first quarter, we’re coming off a year of tubular shortages that in turn has resulted in an understandable inventory overhang; one that was aided by a sudden escalation in imports. The outcome of this situation will be tied to demand. Until that quotient is less murky, we anticipate a lull in mill order books for Q2. Thus far into the year we’re fortunate that the reduction in activity has been gradual enough not to trigger any alarms—but caution is well-advised so as not to potentiate the all-too-common vicious cycle of oversupply.
On a lighter note for this taxing season we leave you with the words of Benjamin Franklin, one of our nation’s founding fathers and an innate accountant of sorts, who expressively said, “in this world nothing can be said to be certain except death and taxes.” We can’t be certain, but we can’t help but wonder if our ‘dependents’ on oil might qualify as an itemized tax deduction? Many happy returns!
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