If it seems as though we’ve spent the bulk of this year reporting on setbacks and challenges that have vexed the OCTG market that’s because we have, and September is no exception. We simply can’t dismiss what the impact this slew of aberrational market realities; some ongoing, some new, will have as we barrel towards the new year.
Putting yet another spoke in the (OCTG) wheel of fortune is the transportation hub of the supply chain, aka “the pain that keeps on giving.” The logistical nightmares that arose from the pandemic and continue to drive market dysfunction give new meaning to the expression made popular in the 70s, “keep on truckin’.” The American Trucking Association reported a record shortage of 80,000 drivers last year, a figure that could double by 2030. If only this was the end of it. US port congestion continues unabated and hasn’t been helped by strikes at key global ports. And if this volatile state of freight wasn’t enough to unleash a hoard of ‘freighty-cats’ across all industries, the US just averted a looming railroad strike, which had it happened would have been the first national rail strike in 30 years. Stunning to think that this strike could have brought nearly 30% of the nation’s freight to a grinding halt. Fortunately, the US dodged this oncoming train.
Furthermore, the super typhoon that struck South Korea in early September has added another wheel within a wheel. We discuss the ramifications of this tsunami on OCTG supply and pricing in this month’s market intel.
So why all the interest in these freight issues? Because these, too, can come to bear on OCTG prices especially as the holiday season is just ahead, further adding to the pain that’s already been inflicted on the supply chain. But wait, there’s more—because, well, this is the oil patch and as so often is the case, it’s rarely one and done. We’d be remiss if we didn’t mention the European energy crisis and the risk of disruption to deliveries now that Russia has choked off the supplies of natural gas that the continent depended on for years to run factories, generate electricity and heat homes. Compounding the exigency, other sources of power have lagged for reasons detached from Russia. Energy intensive European steel mills are coming to a standstill amid soaring costs. This situation and its impact on OCTG supply and pricing is analyzed in this month’s market intel.
Any one of these factors, while not a sea change in and of themselves, would make a market skittish, and here we’re experiencing all of them. And did we mention, the United Steel Workers (USW) are in negotiations with US Steel? Fortunately, the discussions are said to be amicable at this point and work is continuing all the while.
Let’s not forget on September 22 the International Trade Commission (ITC) will present its hearing in connection with the final phase of the October 2021 trade case investigations. This hearing will be the final determination on injury, based on all of the work done to this point. We consider the upshot of the potential outcome on OCTG pricing in our Report this month and review our thinking on pricing in 1H23 given the many curve balls.
It won’t be long before 2023 E&P CAPEX budgets offer some visibility into demand sustainability. While commodity prices are predicted to hold up into and through 2023 a decided sense of inflation fatigue mixed with concerns about drilling constraints/service capacity limitations has operators unable to forecast too far ahead so it’s difficult to foresee how this will factor into early budget plans.
But all is not for naught, just when we thought we’d be sobering up from much of the year’s cold, hard realities we discovered September is National Bourbon Heritage month. So, while bourbon may not be the answer to our industry’s various woes, we think it’s worth a shot.
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Photo Courtesy IOS Inspection Oilfield Services