STEEL TUBES

Vitaly GNATUSH, expert with DerzhZovnishInform

UKRAINE

Tube production in Ukraine has entered the year 2000 with a load of unresolved problems. Some of them have been caused by malfunctions of the Ukrainian economy, the others by business trends in global trade. Due to aggravation of these problems in January 2000, the January tube output came to only 73% of the quantity produced in December 1999. January’s average output was at 76% of the last year’s average monthly output.

Consequently, export of steel tubes went down too and, according to the preliminary estimates, equaled approximately 71% of the last year’s average monthly export figure.

Let’s now proceed to analysis of the general pattern of the Ukrainian market for steel tubes. Manufacturers, as the key players in the industry, were only able to produce 73,000 tonnes of tubes in January 2000 (see table 1). By the way, this figure is 1.7 times lower than the average monthly output in 1998 and is twice as low as that in 1997.

Only three manufacturers, that is to say Novomoskovsk Tube Works, Ilyich Iron and Steel Works of Mariupol and Lugansk Tube Works, were able to keep output at the level of December 1999. However, they have little effect on the overall manufacturing output in the tube sector because these companies accounted for only 12% of the total 1999 output. It is notable that production at Nizhnedneprovsk Tube-Rolling Works and Nikopol Yuzhnotrubny Works slightly outdid the 1999’ average monthly figures, whereas Dnepropetrovsk Tube Works’ output plummeted to the level 11 times lower than its average monthly output in 1999.

A resulting effect is a logical cutback in steel tube exports from Ukraine. According to the fresh data with the State Customs Service of Ukraine, export of steel tubes from Ukraine in January 2000 amounted to some 48,400 tonnes for the total of USD 18,100,000 Physical exports of tubes in January came to only 71% of the 1999’ average monthly figure.

The pattern of steel tube export changed radically. Hot-rolled tubes accounted for 77.0% of the January 2000 tube exports, as compared to 61.9% in 1999.

Along with that, the portion of welded tubes drifted downwards: the share of large-diameter welded tubes lowered from 16.9% to 7.8% and that of other welded tubes – from 21.1% to 15.2%.

Export dynamics in 1999-2000 featured unstable monthly turnovers, which is an indicator of short-term effect of contracts and vulnerable position of Ukrainian steel tubes on the world market (see the figure).

In January Ukrainian tubes were supplied to 28 countries worldwide (back in 1999 Ukraine made trade in tubes with 62 countries). As usual, steel tubes were mostly exported to CIS countries (82.0% of the total tube export from Ukraine), East European countries (4.4%), North and Central American countries (4.1%) and African countries (3.4%). For more details, see table 2.

Russia is the leading purchaser of Ukrainian-made tubes. This country consumed 31,100 tonnes or 64.3% of the total Ukrainian tube exports in January. Distribution of tube export to this country was as follows: seamless tubes accounted for 73.6% of the total Russia-bound tubes, other welded tubes – 15.5% and large-diameter welded tubes – 10.9%.

Seamless tubes

Russia was the primary consumer of Ukrainian seamless tubes in January 2000 importing approximately 22,800 tonnes or 61.5% of the total Ukrainian export of these tubes. Besides to Russia, seamless tubes were also bound to Turkmenistan (4,900 tonnes), Egypt (1,600 tonnes), Mexico (1,800 tonnes) and Bulgaria (1,400 tonnes). The regions importing the largest quantities of Ukrainian-made seamless tubes were the CIS (81.6% of the total Ukrainian export of seamless tubes), Eastern Europe (5.3%) and North and Central America (4.8%).

Large-diameter welded tubes

Ukraine’s position on this market remains rather shaky. Russia imported 89.9% of the total exportable large-diameter welded tubes from Ukraine.

Other welded tubes

In January 2000 around 75.8% of these tubes were dispatched to CIS member-states, including 65.6% to Russia. Among other regions consuming Ukrainian welded tubes, the EU accounted for 11.7% and the Baltic States for 8.7% of the total. Out of EU countries, Spain imported the largest quantity of 600 tonnes. Other welded tubes made in Ukraine were not exported to Asian, African or South American markets and countries.

Table 1. Output of steel tubes in Ukraine

In January 2000 Ukraine imported approximately 1,200 tonnes of tubes worth some USD 1,000,000. It is notable that hot-rolled seamless tubes made up 86.5% of the total physical quantity imported (83.7% in terms of value), while other welded tubes – for 13.5% (16.3%) respectively. No large-diameter welded tubes were imported during that month.

Summarizing the data on output, export and import of steel tubes in January 2000 and comparing these figures to the 1999’ performance results (see table 3), one can notice that the situation on Ukrainian market for steel tubes has changed for the worse.

Proceeding from this, we believe that in spite of the January decline, in the first three months of 2000 Ukrainian tube manufacturers will nevertheless manage to produce about as many tubes as in the first quarter of 1999. The Agreement among the European Commission and three Ukrainian tube plants (Dnepropetrovsk Tube Works, Nizhnedneprovsk Tube-Rolling Works and Nikopol Yuzhnotrubny Works) will definitely facilitate the recovery of manufacturing output.

This Agreement provides for the rules of trade in Ukrainian tubes in Europe and, according to the information of Ukrainian News agency, contains a clause on the quantity of tubes that may be supplied duty-free.

Special certificates issued by tube manufacturers shall accompany duty-free tube supplies.

According to the available information, the three mentioned works have already partitioned the tube quota.

Table 3. Ukrainian market for steel tubes (‘000 tonnes)

Export of steel tubes from Ukraine in 1999-2000

Table 2. Ukrainian exports of steel tube in 1999-2000 (‘000 tonnes)

Table 4. Output of steel tubes in Russia

Sources: the State Statistics Committee of the Russian Federation, Interfax

RUSSIAN FEDERATION

Unlike in Ukraine, Russian steel tube-making enterprises manufactured 14.7% more tubes in 1999 than they did back in 1998. The statistical data of the Russia’s State Statistics Committee insist that the 1999 tube output amounted to 3,260,100 tonnes including 1,705,100 tonnes of seamless tubes (52.3% of the total) and 1,461.8 tonnes of electric-welded tubes (44.8%) (see table 4).

In 1999 output of casing tubes gained 13.9%, drilling tubes – 46.3% and service tubing almost 200% compared to the 1998’ figures. These figures confirm the opinion that steel tube output in Russia is on the rise owing to booming business of Russian oil and gas companies, the primary tube consumers. In addition, the Russians are quite active and successful in various tenders.

According to Interfax, Volzhsk Tube Works has won the tender on supplies of 16,000 tonnes of casing tubes to the State Oil Company of Syria. The works also profitably supplies spiral-welded header tubes, 720 mm and 820 mm in diameter, to JSC Transneft. It is estimated that JSC Transneft requires about 150,000-180,000 tonnes of tubes per year.

In compliance with the "Forecast for industrial development of the Russian Federation for the year 2000", the 1999 upturn in manufacturing output will generally be continued in 2000. It is supposed that large and medium-size enterprises will boost their manufacturing output by 1% in 2000. It is anticipated that domestic demand for ferrous metal products will gain approximately 2% mainly owing to increasing demands of oil and gas companies. Therefore, it is planned to increase steel tube output to 4,400,000 tonnes, which equals 138% of the 1999’ figure.

To be sincere, analysis of the 1998-1999 trends on the Russian market for steel tubes doubts the validity of rosy forecasts for the year 2000 (see table 5). Assuming a 2-5% increase in internal demand (which corresponds to the output of approximately 3,800-3,900 thousand tonnes of tubes) and considering the comparatively stable turnovers of Russia’s foreign trade, tube production can be assessed at 3,700-3,800 thousand tonnes at most. Russia’s imports are likely to lose some 30% due to an increase in local supplies to domestic market.

Due to the present volatility, Ukrainian tube traders have to constantly monitor the Russian market for steel tubes to be aware of the latest changes and be able to give a timely response.

GLOBAL MARKET

The world market for steel tubes has gained some speed recently due to growth of oil prices.

In 1999 the US market for oil tubes featured a prominent upward behavior. During June-December 1999 prices of service tubing and casing tubes gained an average of 9.9% (see table 6).

Average monthly prices for electric-welded casing tubes increased the greatest (by 13.7%), whereas those for seamless casing tubes made of carbon steel increased the least (by 6.3%).

The positive trend is still here at the beginning of 2000. According to the data CherMetInformatsiya Bulletin, USA-based Koppel Steel Corp. announced a mark-up of prices for oil tubes effective since February 1, 2000, following the similar moves of U.S. Steel Group of USX Corp.

In consequence, prices for tubes, 604 mm to 1,054 mm in outer diameter, have added USD 50 per short ton and prices for all the types of tubes, 101.6 mm to 127 mm in diameter, increased by USD 40 per short ton.

It is noteworthy that the leaders on the world tube market strive to expand their business influences. For example, Japan’s Sumitomo Metal Industries intends to construct a 180,000 tonne per year plant to manufacture steel tubes in Saudi Arabia. It is scheduled to put this plant in operation in June 2001. According to BIKI magazine, Saudi Arabian mills belonging to this Japanese company manufactured more than 1,500,000 tonnes of tubes in 1998.

Recently estimated at 800-900 thousand tonnes per year (in Metal Bulletin Monthly), the Chinese demand for oil tubes is expected to rise. According to forecast for the year 2000, Chinese demand for oil tubes will total 1,320,000 tonnes including 940,000 tonnes of casing tubes, 330,000 tonnes of tubing and 50,000 tonnes of drilling tubes.

Table 5. Russian market for steel tubes (‘000 tonnes)

Sources: Interfax, Metal Expert

Table 6. Average monthly prices for oil tubes on the US domestic market (Houston area) in 1999 (USD/tonne)

Source: OJSC CherMetInformatsiya Bulletin

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