OCTG prices have increased 80% this year

Seamless steel tube sales are made at record highs

by Tom Stundza -- Purchasing, 7/2/2008 8:52:00 AM

Steel pipe distributors and oil industry buyers are facing continued higher prices this month for oil country tubular goods (OCTG). According to buyers, purchases of down-hole seamless tubing transaction sales opened July at $2,640/ton, up from about $2,100 in June. This is close to the $2,654/ton mill-price being reported by Pipe Logix, the market research firm that tracks the OCTG market. Overall, OCTG-grade tubing costs 80% more now than in December.

U.S. Steel and other OCTG producers actually announced higher posted prices by $550 (to $2650) this month in light of increasing raw material, energy and transportation costs. This is on top of a $250-per-ton surcharge that U.S. Steel and other mills implemented in May.

Kurt Minnich, manager of the Santa Fe, N.M.-based researcher, says spot prices for seamless and electric-resistance welded tubing and casing already have been under upward pressure from an earlier series of mill price-hike announcements and sales now being made in the Oil Patch at “price-in-effect at delivery” terms. That’s a marketplace issue because delivery leadtimes for both foreign and domestic mills are four to five months out.

The American Metal Market newspaper is quoting pipe and tube distributors as saying that oil drilling activity is so active that further price hikes are possible this summer, much to the dismay of the service centers and the drilling-rig operators. “We are seeing continued craziness from a supply and demand standpoint,” one pipe and tube distributor tells AMM while another distributor says prices could go even higher. “The price is very high now, and a rational person might say 'Yes, there's been enough hikes,' but there is a demand out there," he says.

With crude oil prices slightly above $140/barrel and natural gas north of $13 per million British thermal units, North American oil-rig activity is quite strong. Baker Hughes of Houston, which tracks such activity, says 1,913 rigs are operating the U.S. and 356 are running in Canada.