Q3 OCTG Inventories: “Déjà Vu All Over Again”
The results of our exclusive Q3 OCTG Inventory Yard Survey are in and in keeping with the fall season we’re happy to be the bearers of better news and report that inventories of “prime” upstream OCTG are falling, too. In fact, OCTG products in the L48 experienced a “déjà vu all over again” moment this quarter, returning within tons of ending inventories in 1Q20. This rolls back inventory stocks to their lowest volume in a decade—the most advantageous position for inventories in an uncertain market.
Our October OCTG Situation Report goes into great detail about inventories in every segment of the supply chain including mill/processors, inspection yards and truck terminals.
Inventory draws were reported in every product category throughout the tri-state (TX, OK, LA) in Q3, returning a number of product groups back to historic lows. Seamless stocks saw a considerable retrenchment Q/Q. Carbon materials were pared significantly this past quarter, too. Much of the reduction in these materials is owing to the sharp contraction in imports over the third quarter. Further detail is presented in the charts, tables and commentary in our current market intel.
Most industry folks know lower inventories are a good thing but this metric alone can’t salvage a lackluster market. Yes, inventories are at historic lows but the “inventory per rig” stat is higher than ever, which makes it feel like much more, which is why you may hear that inventories of OCTG are high right now. Coupled with this metric is the current drag on balance sheets: “months of supply.” The months of supply stat gets to the crux of why OCTG prices are more or less stalled despite the fact that certain inventory items are in short supply and raw material input costs are escalating.
It’s worthy of note that had inventories mounted this past quarter months of supply would have followed suit, making a challenging market all the more precarious. On the flip side had demand accelerated sharply in Q3, months of supply would have fallen—a far more favorable environment for prices, at least theoretically. We discuss how this is impacting OCTG pricing now and what we anticipate for the remaining months of the year along with our thoughts on OCTG inventories in Q4.
As we close the books on October and look to November, we’re reminded that our 2021 OCTG forecasts are nigh. At the very least, in view of the inventory results, we can be thankful that it isn’t the sky that’s falling this month.
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Photo Courtesy SeAH Steel USA New Tubing Mill