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  • Writer's pictureSusan Murphy

As The ‘Pipe' Turns: Zooming in on the Annual State of the Industry Report


OCTG
Photo Courtesy Tex-Isle Inc.

This month we presented another episode of As The ‘Pipe’ Turns, aka our OCTG-rated, commercial-free, 37th “Annual State of the Industry Report.” In this action-packed edition we published a host of vital metrics for the past three years detailed in our 2022 year-end OCTG stats table (page 7) along with our between-the-lines commentary (edited) here and on page 8. Remember that government import stats lag our Report by two months, which is why we’re only now able to roll the closing credits and move beyond 2022.


2022 was a relatively black & white, good news/bad news year for the OCTG market depending on what side of the desk you occupied. At times it felt like we were binge-watching a made-for-TV mystery and the plot was, “where’s the pipe and can we afford it?” While it won’t be without the usual drama, this year is expected to be more clarifying.


But before we turn to 2023, we want to take a moment to broadcast the results of our predictions for 2022 consumption, the spot price high, imports and domestic OCTG supply as excerpted from our November 2021 Report. How did we rate? For non-subscribers, we’ll give you a hint: it was so close, close, ouch, and spot on. Well, three out of four ain’t bad in this biz, especially as most prognosticators were blindsided by a shipload of import outliers last year.


Analyzing inventory to mill sales metrics in our chart on page 2 confirmed that demand continued to eclipse inventories throughout the year—a good thing, thus far. The annual average has only been lower four times in the past 27 years: between 1995 and 2022. We’ll be monitoring this metric closely as we move into and through 2023.


While we dislike being the bearer of less than bullish news, we deal in reality, and there are several headwinds that must be considered at present. Our highly-coveted February Report details each one.


All this is converging with depressed Nat Gas prices and rigs that are falling in line. It doesn’t help either consumption or pricing that E&Ps view cash (flow) as king and are sticking to the financial discipline script for now. We anticipate a degree of caution from buyers and end users who often take a wait and see stance before adding to inventories, further depreciating new production, and forcing mills to roll with the punches yet again. Alas, the vicious circle of pipe.


This isn’t our industry’s first rodeo. If mills can weather any oncoming storms, it will be by sticking to a mantra of value over volume. It’s entirely possible by taking their foot off the gas and reining in production that OCTG producers can avoid the pitfalls of earlier downturns. Only they can prevent forest fires. Next month, in March, we’ll be publishing our annual US supply forecast for 2023. Meanwhile, if Nat Gas prices can settle at or above $3 MMBtu, and oil remain $75+/BBL we can expect OCTG demand to stay flat to halfway decent this year.


As we wrap another year in review, it seems fitting to say while 2023 may not be a rerun of the best of 2022, the OCTG network is still strong and the future’s worth watching.


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 Tex-Isle, Inc.

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