Steel tubes are still a success story. Except for a downturn in 2009, global production figures have been pointing in one direction only – up. According to the German Steel Tube Association in Düsseldorf, steel tube manufacturers increased their worldwide production by another 7% in 2014, reaching a record 166 million metric tons.
As in previous years, the increase was due, in particular, to higher production figures in China. In 2014 the People’s Republic achieved yet another above-average increase in steel production by 11.6%, reaching 89 million tons. In the same year, 54% – over half the world’s steel tubes – was produced in China. China is even more dominant when it comes to seamless hot-rolled steel tubes, where its share in global production has reached two-thirds now.
In other parts of the world, growth was 4% – considerably lower. The European Union experienced a slight production increase in 2014, after the previous year’s sharp downturn. At 12.6 million, European steel tube manufacturers are still producing 4% more than in 2013.
German Steel Tube Market is Buoyant Again
A 4% production increase (2.7 million tons) was also recorded by the German steel tube industry in 2014. But 2013 had been one of the weakest years for a long time for Germany’s manufacturers. The industry is certainly still a long way off the record values of around 4 million tons produced between 2006 and 2008. Not all industry segments benefitted from the recovery. Gains were made, above all, by welded steel pipe manufacturers, while seamless steel producers experienced a decline. According to the German Steel Tube Association, the poor results in this market segment were due to a substantial drop in crude oil prices, particularly during the second half.
The main reason for the rise in German production was an increase in domestic demand. Germany’s foreign trade surplus, on the other hand, experienced a decline, as exports dropped 12% to 2.4 million tons. At the same time imports went up 5%, reaching 1.9 million tons. This resulted in supplies for the German market rising to 2.2 million tons – up 18%.
In addition to this development in volumes, the development of prices was equally important to manufacturers. After a general decline in the previous year, 2014 brought different results for different types of steel tubes. Whereas prices went up for large-diameter tubes, they went down for seamless tubes. For precision steel tubes, on the other hand, prices varied only very little.
Growth Mainly Outside Western Europe
According to Salzgitter AG, 2014 was marked by rising energy requirements in the BRIC countries, the development of the U.S. toward self-sufficiency in oil and gas and, at the same time, a decline in energy demand in the industrial nations caused by improvements in efficiency. These developments meant that growth opportunities for the tube industry largely shifted to regions outside Western Europe. Moreover, partly due to overcapacities on the steel tube market in 2014, several markets also saw stronger competition.
In its 2014 annual report, Salzgitter broke down global production into products and manufacturing processes. It shows that seamless tube production increased globally by just under 6%, reaching 49 million tons, of which 32 million was produced in China alone. The production of welded steel tubes up to 406 mm (outer diameter) rose to 94 million tons – a segment where the Chinese share reached 50% for the first time. By contrast, large-diameter tube production (over 406 mm outer diameter) stagnated globally at 22 million tons. Slight increases in the CIS, China and Japan were offset by a decline in production in the Western world. The downturn in large-diameter tubes was particularly noticeable in the U.S. – partly because U.S. production had been at such a high level in 2013.
North America Still an Important Market
According to Benteler International AG, positive signals came from the important OCTG market in the U.S. Due to a considerable increase in oil exploration and production, the demand for tubes rose substantially from mid-2014 onwards. U.S. anti-dumping measures against imports from various countries, particularly Asia, led to price increases in the second half of the year. Toward the end of the year, however, a major drop in oil prices began to cause a tangible reduction in demand.
Statistics of the various customer industries of German steel tube manufacturers show that the energy sector is the biggest single area, with around 40%. It is followed by the automotive industry (around 20%) and mechanical engineering (15%). Not surprisingly, therefore, the energy sector is seen in the industry as the biggest growth engine and global market of the future. According to a forecast published by Benteler, the production of shale oil, for instance, is expected to rise more than 100% between 2012 and 2025. The production of liquid petroleum products and liquid gas is apparently set to increase 100% in Latin America, 40% in North America and 35% in the Middle East.
Restrained Development on the Steel Tube Market in 2015
In 2015, however, the steel tube market did not confirm such forecasts. Overall, after the weakness of the first six months, this market continued to develop in a rather more restrained manner during the third quarter of 2015. This, at any rate, was the conclusion of Salzgitter AG in its provisional report for January to September 2015. One major reason for the situation in the industry was apparently the crude oil prices, which ultimately caved in again after a brief period of recovery. This led to weaknesses in exploration activities. The impact could be felt, above all, by seamless steel tube manufacturers which had to cope with up to 40 production slumps in North America. However, substantial downturns were also recorded in the European Union, including Germany.
In all the other segments, by contrast, the economic performance was more positive. In welded steel tubes up to 406 mm (outer diameter), manufacturers achieved a slight increase in production output. Increases were also recorded for large-diameter pipelines (over 406 mm outer diameter), especially in North America, Russia and China. In the EU, on the other hand, production was only a little higher than the very low level of the previous year.
Yet, in all, the number of new and existing orders recorded by Salzgitter’s Energy Division – which handles its tube activities – was lower for the first three months of 2015 than for the same period a year earlier. As oil prices continued to be low, numerous gas and oil exploration projects were postponed or even abandoned throughout the world. Reduced demand coupled with newly created production capacities, particularly in Asia, led to greater price pressure and to a massive decline in revenue. This development also affected HFI and spiral-welded tubes, a segment which recorded a tangible downturn in existing and new orders in the first three quarters compared with the previous year. The precision tube market, on the other hand, benefited from a good order volume coming from Germany’s highly export-focused car manufacturers during the first nine months of 2015.
After the continuing weakness of Europe’s large-diameter pipeline market throughout much of 2015, a number of facilities in Germany experienced an improvement in their employment situation at least.
No Crisis in the Steel Tube Industry
“The steel industry is going through a global crisis that even the German steel industry won’t be able to avoid,” said Hans Jürgen Kerkhoff, president of the German Steel Tube Association, in mid-December 2015. But Jürgen also admitted that the “weak economic figures in the steel industry are in contrast with the prospects of its big customer industries”.
Apparently, a positive picture continues to emerge and inspire confidence – partly from performance indicators but also from the forecasts of the most important steel-processing companies. Growth is expected in the German automotive industry and also the construction industry in the coming year. It seems that certain signs of stabilization can now be observed in mechanical engineering and construction. In total, production in the processing industry is expected to increase somewhat, while the need for steel will move slightly sideways.
The forecast is fairly good that 2016 will develop better for the steel tube industry than for the steel industry as a whole and that the upcoming Tube 2016 International Pipe & Tube Fair will take place in a favorable economic environment. Tube will return to the fairgrounds in Düsseldorf, Germany, April 4-8. Wire 2016 will again be held concurrently.
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