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OCTG's hot, standard's not: producers and distributors of pipe and tube products predict a distinctly different outcome for 2006, depending on which markets they serve.

Article Excerpt
THOUGH GENERALLY OPTIMISTIC about 2006, North American producers and distributors of steel pipe and tube display varying degrees of confidence. Those selling oil country tubular goods expect hot and heavy demand to continue into 2007, while those selling standard pipe products are bracing for further competition from imports.

The re-emergence of nonresidential construction, as well as strength in off-road equipment and the heavy truck market, are giving tubing suppliers reason to believe that 2006 could be even better than last year.

Norman Gottschalk, president of Marmon/Keystone Corp. in Butler, Pa., says about 95 percent of his company's customers expect growth in 2006. Larry Soehrman, vice president of materials management for Chicago Tube & Iron Co. in Romeoville, Ill., predicts pipe and tube demand could grow 4 to 5 percent this year.

"This is the strongest real market demand the industry has had for OCTG," says Doug Yadon, publisher of the Preston Pipe Report, Kehmah, Texas. Last year, OCTG shipments were up about 20 percent over an outstanding 2004, says Rene J. Robichaud, president of NS Group Inc. in Newport, Ky., who expects shipments in 2006 "to also grow smartly."

It isn't surprising that demand for energy-related pipe and tube products is so strong given the consistently high prices for oil and natural gas, which have given rise to scores of new drill rigs in the United States. The U.S. drill rig count averaged 1,380 rigs in 2005, up about 16 percent from the 1,200 rigs in 2004.

The count is expected to increase another 12 percent in 2006, says Robichaud. In fact, Houston-based Baker Hughes Corp. reported that as of Jan. 20 there were 1,472 active drill rigs in the United States, up 16.5 percent from the 1,263 in operation a year earlier.

Further growth in oil and gas exploration could be constrained by the availability of rigs and crews to man them, says Kurt Minnich, partner of Spears & Associates Inc., the Tulsa, Okla., publisher of Pipe Logix. "Any rig that can operate is operating," he says.

Dan O'Leary, president and chief executive officer of Edgen Corp., Baton Rouge, La., points to moves by energy companies to increase rig availability. "There has been more efficient use of rigs and new rigs under construction. I think there is a good match of supply and demand," he says.

This demand is being pushed by the unusually high energy prices, particularly for natural gas. About 85 percent of the...

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