What’s Up Downhole in “The Year of the Water Rabbit”
As we enter “The Year of the Water Rabbit,” one can’t help but wonder if it will be as hair-raising as the three years that proceeded it? Chinese lore has it that the Water Rabbit symbolizes peace and prosperity so we can all hope for better. If nothing else, the results of our exclusive 4Q22 OCTG Inventory Yard Survey are in harmony with the hares’ propensity to multiply as inventories of prime, finished OCTG grew by leaps and bounds over the past quarter.
Our vast resource of yard managers on the ground across the country revealed that stockpiles of OCTG sprung forward in Q4, bucking the general trend for year-end inventories. Fun fact: inventory counts have been down in the fourth quarter for 11 of the past 16 years. Additions were posted in every product category (both SMLS & ERW) in the tri-state this past quarter. Our January Report goes into great detail on all the segment breakouts.
In our October (Q3) Inventory Quarterly editorial we presented a deep dive into the tri-state processor segment when numerous hurdles were supersizing inventories, compounding the cascade of kinks in the supply chain. We’re pleased to follow up on this report and inform readers that our Q4 survey revealed that processors have made significant strides in working down backlogs and getting inventories under better control.
We also brought readers up to date on the active versus stalled/obsolete inventory segment in the 7th annual installment of our special report. This analysis is always a big help in further dissecting inventories, shedding light and providing color on the past quarter’s activity.
By now you know we lean heavily on our inventory metrics to illuminate apparent consumption and months of supply data points. Without accurate inventory counts, consumption and months of supply stats are nothing more than guesses. Our January intel provides both the prevailing quarterly months of supply data point as well as the quarterly months of supply stat with the obsolete inventories factored into it for an even more granular approach to understanding the current state of the market. That finding prompted us to remind folks if inventories continue to head north throughout the year, tomorrow’s surplus will be yesterday’s dearth. Slow and steady wins the race, as told in Aesop’s cautionary tale, “The Tortoise and The Hare.”
At present, US Capex is being calibrated based on commodity forecasts for 2023 and will continue to be fine-tuned over the next month or so bringing the present moment’s ‘crude’ picture into focus. If operators take their foot off the gas this will further pressure tubular prices as will a continuing flow of imports the likes of which we saw in 4Q22. Several issues, many global, (war, recession, inflation & interest rates among them) remain that need to be addressed, if not resolved, to determine what outcomes will ultimately emerge for OCTG this year. Can the US stay out of the crosshairs and pull a rabbit out of the hat? It may all come down to a leap of faith and the luck of the water rabbit after all.
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Photo Courtesy Photo Courtesy Welded Tube Of Canada Corp.