global tube & pipe market: major trends and implications on the market in russia
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Major market fundamentals behind global trends in tube and pipe market particularly for oil & gas industry applications (OCTG tubing and casing and line pipe markets) as of November 2014TRANSCRIPT
Tube & Pipe Group
Global tube & pipe market: major trends
and implications on the market in Russia(November 2014)
Roman Filimonov
Consultant, Metal Bulletin Research’s Tube & Pipe Group
XVII МЕЖДУНАРОДНАЯ КОНФЕРЕНЦИЯ
РОССИЙСКИЙ РЫНОК МЕТАЛЛОВ10 ноября 2014 г.
Азимут Москва Олимпик
Tube & Pipe Group
Major fundamental factors affecting steel tube & pipe
markets in 2014
1. Declining oil prices
2. Economic slow down in China
3. Growing barriers for international trade
4. Growing complexity for oil and gas
production and usage of new technologies
Source: WTRG and MBR
GLOBAL TUBE & PIPE MARKETS
Brent crude oil North Sea spot
Tube & Pipe Group
Historically seamless steel pipe demand has a very similar trend
to oil price
0
5
10
15
20
25
30
35
40
45
50
0
20
40
60
80
100
120
LHA: Crude Oil Price* ($/barrel)
RHA: Seamless tubes market (kt)
GLOBAL TUBE & PIPE MARKETS
R² = 0.9592
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
0 20 40 60 80 100 120
Source: EIA, ITA and MBR
Seamless tube & pipe demand vs oil price
Tube & Pipe Group
Some 98% of crude oil and condensates from the United States
have a breakeven price of below $80 and 82% had a breakeven
price of $60 or lower
Breakeven Thresholds For U.S. Shale Projects
AMERICAN MARKETS
Source: EIA & MBR
60
100
140
180
WA
TT
EN
BE
RG
TIE
R 2
EA
GL
EB
LIN
E
PE
MB
INA
$/B
bl
80
Tube & Pipe Group
Seamless OCTG and linepipe market remains strong in N.America
while in S.America particularly in Brazil market is on decline
1500
1700
1900
2100
2300
2500
$/t
OCTG casing N80 (btc connection)
OCTG casing P110 (premium connection)
Source: MBR
AMERICAN MARKETS
0
10
20
30
40
50
‘000 t
Smls OCTG Smls LP
• Oil price around $80/bbl could have severe
consequences for drilling rates in Americas
• US shale development as well as Canadian oil
sands production will be affected by sustained
oil prices under $85/bbl
• Suspensions and cancellations in offshore
drilling in Brazil has already caused Petrobras
to reduce OCTG purchases
• Brazilian OCTG exports have increased by
nearly 50% y-o-y, adding competition to the
global market
• MBR Outlook
The current OCTG price straightening in the
USA may not last in 2015. In the S.America
market will continue to remain week into the
1Q 2015
USA OCTG prices
Brazilian OCTG and linepipe AC
Tube & Pipe Group
Most OPEC countries need oil price well above $90/barrel to balance
their books. Nevertheless Saudi Arabia have enough reserves to
cope with lower prices for some time
Source: WSJ and MBR
MENA MARKETS
$65
$70
$75
$90
$93
$98
$106
$117
$119
$121
$121
$140
$0 $20 $40 $60 $80 $100 $120 $140
Qatar
United Arab Emirates
Kuwait
Libya
Saudi Arabia
Angola
Iraq
Equador
Nigeria
Algeria
Venezuela
Iran
Estimated oil price needed to balance government budgets in MENA countries,
USD/barrel
Nov. 7 Brent crude price $83
Tube & Pipe Group
Seamless OCTG and linepipe demand in the MENA region
continues to be strong although prices are under strong pressure
from material coming from China and Brazil
500
1000
1500
2000
2500
$/t
OCTG casing L80 (btc connection)
OCTG casing L80 (premium connection)
Source: MBR
MENA MARKETS
0
50
100
150
200
‘000 t
Smls OCTG Smls LP
• MENA remains the most opened market in the
world for any international competition
• Cheap material is increasingly coming from
Brazil and China
• TPCO premium connections got approvals
from ADNOC and KOC
• Saudi Aramco started to use interchangeable
VAM connections from different producers
• Most MENA countries increasingly invest in
gas exploration
• MBR Outlook
It is difficult to see OCTG price growth coming
soon. Apparent OCTG demand is forecast to
decline in a short term due to over-stocking in
Saudi.
Middle East (Jebel Ali cfr) OCTG prices
MENA* OCTG and linepipe AC
* Aggregated monthly consumption in KSA, UAE, Kuwait, Oman, Qatar, Iran, Iraq, Egypt, Algeria and Libya
Tube & Pipe Group
Profitability of Chinese tube producers is on decline.
Anti-dumping cases against Chinese steel
tube & pipe producers
N. America: USA, Canada
S. America: Brazil, Columbia
European Union
India
EEC: Russia, Belarus and Kazakhstan
Source: Baosteel and MBR
ASIAN MARKETS
7%
3%
2%
4%
2%
0%
1%
0%
1%
2%
3%
4%
5%
6%
7%
8%
2007 2008 2009 2010 2011 2012 2013
Average gross profit margin for steel tube &
pipe industry in China
Tube & Pipe Group
South-East Asian offshore projects are vulnerable towards low oil
prices.
500
700
900
1100
1300
1500
$/t
OCTG casing N80 (btc)
Source: MBR
ASIAN MARKETS
• Week domestic OCTG demand in China
coupled with international trade limitations is
forcing producers to operate with minimum or
no profit margins
• Cheap material with premium connections is
coming from Brazil
• Total has accepted Chinese TPCO premium
connection for their Indonesian operations
• The combination of predominantly offshore
production with maturing fields in countries like
Indonesia and Malaysia makes oil production
costs one of the highest in the world
• MBR Outlook
Current oil price could seriously affect some
major high cost offshore projects resulting in
decrease in OCTG demand. Price pressure
from China and Brazil is likely to remain.
China export OCTG prices
MENA OCTG and linepipe AC
China domestic OCTG prices 7” – 9 5/8”, RMB/t
Tube & Pipe Group
There is a strong concern that low oil prices (if remain longer) may
affect E&P investments and production rates in Russian oil & gas
industry
Main market factors in 2014
• Rouble depreciation makes commodity grade imports
uncompetitive
• Low oil prices could lead to decline in E&P spending
• Significant investments within the last decade allow
domestic producers to
• Comply with most demanding technical
requirements and start penetration into such
areas as offshore drilling and directional drilling
• Have enough capacity in place to keep up with
growing demand
• Russian market is relatively closed
• Potential effects of sanctions
Source: Minenergo and MBR
RUSSIAN MARKET
3%
5%
92%
20%
50%
80%
0% 50% 100%
Offshoredrilling
Tight oil & gas
Conventionaldrilling
Local content Share in production
MBR Outlook
MBR is forecasting a mid-term growth for Russian seamless tube market within GARG 3 to
4 percent. We do not expect sanctions to make any strong impact over the same period on
oil production and consequently seamless pipe demand. Low oil prices could have a
serious negative effect, but unlikely to last for long time. Gas contracts with China will drive
oil & gas development in E. Siberia and seamless demand.
Technologies localisation in Russian
oil & gas industry
New tracker reports published by the Tube & Pipe team
Industrial and Structural Tube & Pipe Market Tracker, covering the market for HSS,
mechanical tubing, precision tubing and standard pipe
Re-launched the Seamless OCTG & Linepipe Market Tracker and the Welded OCTG &
Linepipe Market Tracker.
“I have read your trackers, this is really good stuff.” - Industry
association
“The new Seamless OCTG & Linepipe tracker has brought global
OCTG analysis to a whole new level.” - Pipe division, Duferco
MBR’S TUBE AND PIPE TEAM
Tube & Pipe Group
Thank you for your time
CIS/SEA:
Roman Filimonov
Tel: +44 207 827 6443
Americas:
Kim Leppold
Tel: +1 610 404 0801
Europe/MENA/Asia:
James Ley
Tel: + 44 207 779 8521