‘Holmes-ing’ In On 1Q22 OCTG Inventories: Not So “Elementary My Dear.”
“There's nothing more deceptive than an obvious fact.” ~Sherlock Holmes. Holmes knew data can be powerful, but not on its own. Only through pragmatic analysis can raw numbers be made into something practical. In other words, facts point to things which exist but don't necessarily explain how or why they got that way. Our main goal at The OCTG Situation Report is looking beyond the obvious so our subscribers can make sense of the stats and put them to work for their operations. And so, in the spirit of Holmes, we’re back on the case presenting the evidence gathered from our exclusive 1Q22 OCTG Inventory Yard Survey. The results are factual, the reasons for them aren’t as cut and dried. Let’s investigate.
While seemingly detached from the current state of the industry, inventories of finished upstream OCTG throughout the L48 were up—but not in the conventional sense of the word. A curious paradox where the ripple-down effect from multiple supply chain disruptions only thickens the plot. We’ll explain, but first, our survey conclusions uncovered a fair percentage of prime, finished OCTG was added to the supply chain Q/Q. Inventories, nevertheless, remain still at their lowest volume since 2Q08. Additionally, inventories of OCTG in the “tri-state” (TX, OK, LA) region increased as did inventories outside the tri-state region.
Gains were posted in every product category throughout the tri-state in Q1. Interestingly, the greatest increase in inventories was the hike from the L48 mill segment—an important clue to solving this puzzle. Processors accounted for less tons than the mills but still posted gains citing increased inbound shipments (domestic & imported) for the upward move.
Lest one miss the forest for the trees, this quarter’s inventory build does not suggest that inventories of tubular goods are suddenly climbing out of a hole. We attribute this rise to a transitory phenomenon based on the timing of our survey along with preset supply chain production procedures. The bulk of the mill increases registered for this quarter are mainly “make to order” materials with only a couple outliers. One mill reported some “make to stock” tubular goods were strategically built but not yet allocated to buffer a planned outage, another had added some strategic imports all of which were reserved. The rest of the OCTG producers stated that any “quasi-inventory” build was sold. We discuss interesting and important trends in consumption, months of supply, and pricing and the reasons for them in our April OCTG Situation Report.
We’d like to remind folks that there is an upside to all this insanity. It doesn’t take a sleuth to understand the operative word for 2022 is “demand.” “Elementary!” we suspect most would say, but all indicators lead to this conclusion. Case closed…until next quarter.
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 U.S. Steel Tubular Services Pipe