No demand surge in 2001

By Staff -- Purchasing, 3/8/2001

What's happening: Structural steel tubing is used in myriad applications-from piping and conduits to drains and railings, from building trusses and scaffolding to columns and bleacher frames, from parts for furniture and athletic equipment to shelving and towel racks. It's even used to make bicycles and outside lighting equipment. Used primarily in shapes made from round tubing, structural grades are sold most commonly as square tubing (from 1/2 in to 1 in) or as rectangular tubing (from 1/2 in x 1 in to 12 in x 20 in). Even round structural tube, which still is under material-substitution pressure from reinforced thermoplastics, has found new uses in the automotive and heavy-equipment applications. However, 80% of all structural tubulars consist of hollow structural sections (HSS,) which are finding growing acceptance in construction markets as substitutes for I-beam, H-beam and junior-beam steel products. End use for structural pipe and tube set a record at three million tons in 1999. But, after strong structural steel pipe and tube sales in the first half of last year, mill shipments in the third and fourth quarters declined rapidly. So, overall end use in 2000 dropped almost 7% to 2.8 million tons. Structural tubing use dropped 5.5%, while structural pipe use crashed by 17%. Atop that, the market has been showing signs of excess supply. Shipments by importers were equal to tonnage a year earlier, but rose to 25% of supply (from 21% in 1999). Foreign product sales would have been even higher, according to the market mavens, except that spot-market prices for structural tubulars dropped 3% last year.

Why it's happening: The structural tubing business is characterized by intense competition and limited product differentiation. LTV Copperweld (the result of a merger of LTV Tubular Products, Copperweld Corp. and Welded Steel Tube) is the largest supplier to this market in North America. However, the total supplier base is large, fragmented and growing through the emergence of low-cost regional capacity. Other key mill suppliers include Atlas Tube Inc., Plymouth, Mich.; Bull Moose Tube Co., Chesterfield, Mo.; Excaliber Tubular Corp., St. Louis, Mo.; Independence Tube Corp., Chicago; IPSCO Tubulars Inc., Camanche, Iowa; Leavitt Tube Co., Chicago; Maverick Tube Corp., Chesterfield, Mo.; Northwest Pipe Co., Portland, Ore.; and Valmont Industries, Valmont, Neb. Demand generally depends on the level of activity in the construction, transportation, agriculture, material handling and recreation segments. Thus, the anticipated meeker manufacturing and construction activity this year will cut into demand. Current estimates suggest a 2%-3% drop in end use to 2.7 million tons in 2001.

What to expect: There will be no major increases in market prices. Structural pipe tags have been sliding by 8% annually for the past two years as use has deteriorated. Today's construction methods don't rely as much on heavy-wall structural pipe as in years past. And that's why forecasters suggest structural pipe use at 209,000 tons this year, down from 213,000 tons last year. Structural tubing also is expected to slide to 4.5 million tons from 4.6 million tons last year. So, the mills will continue efforts to reduce the volume (and share of market) held by imports. Buyers will see continued heavy sales emphasis of hollow structural sections sold in round, square and rectangular shapes under a marketing program being orchestrated by the Steel Tube Institute of North America. HSS is high-strength, welded steel tubing produced to serve as a structural element in buildings and other structures, as well as in products manufactured for the automotive, truck, highway and transportation systems, bridges, farm and construction machinery, office furniture, recreational equipment and storage systems. HSS is sold as a competitive material against pre-cast concrete, open structural steel shapes and wood. "HSS has high strength-to-weight ratios," says Tim Andrassy, executive director of the Mentor, Ohio-based trade group, "as well as excellent compression and support characteristics and torsion resistance." The product also offers uniformity in size, shape, strength and tolerance, he says, "so it is cost effective to bend, form, punch, drill and otherwise fabricate."

What's up with STRUCTURAL TUBING