OCTG 2H23. "The Good, The Bad & The Ugly." The Sequel.
Updated: Jun 30
June in the oil patch can only mean one thing at The OCTG Situation Report—it means we hosted our midyear market calls throughout the OCTG supply chain in an effort to ascertain “the good, the bad, and the ugly” transpiring in the OCTG industry for 2H23. After rereading our June 2022 market update in light of where we are today, we can’t help but conclude the writing was on the ‘well’ back then. And thus, it’s not out of the question that the wellspring of conjecture we collected this time around could be viewed as a harbinger of what we might be confronting a year from now. And that’s something we should all contemplate.
A quick trip around the sun will take us from last June to now to set the table for this month’s editorial. One of the folks with whom we spoke offered this summation of the recent two-year period, and it really hits the nail on the wellhead: 2022 buying impulses reflected a rig count closer to 1K, while buying for 2023 (thus far) reflects a rig count closer to 500. Those impulses need to be tamed as they often are to blame for the glut punches that ultimately create turmoil in the OCTG market. We recount the events that occurred in 2022 that brought us to the market we’re in at present. We also relay how domestic mills are now faced with some consequential decisions.
But before we get into those concerns, let’s fast forward to expectations for the start of 2024. In other words, “the good” news. We list our thoughts on each of the positive signals we’re reading in the market in our June market intel. All the points we review contribute to marked improvements—but first—we need to get through “the bad”: a difficult Q3 into Q4 before the dust settles.
We can’t soft soap the coming interval (aka “the ugly”), as there will be significant gaps in mill order books, shifts will be cut, and crews will languish. Therein lies the danger. We make a case for this possibility in the June Report.
So, how do we prevent this vicious cycle from repeating incessantly? The answer starts by having the tough conversation. After countless conversations on the same we put forth our thoughts on how this might be better addressed in the future.
We close this month, by returning to the need for a full-court press on this issue. As the esteemed management consultant Peter Drucker would likely counsel, “You can either take action, or you can hang back and hope for a miracle. Miracles are great, but they’re so unpredictable.”
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 SM Energy Courtesy ©Jim Blecha www.oilandgasstockphotography.com