VOLUME 3 ISSUE 1 APRIL 2012
On the Cover: 10 ¾” 45.50# J-55 BT&C Range 3 surface casing, loaded and ready to be delivered to an MRC customer in the Eagle Ford Shale.
R
R
DISCLAIMER Copyright© 2012 MRC - This information is confidential and was prepared by MRC for the use of our customers; it is not to be reproduced, nor relied on by any third party without MRC's prior consent. Unless otherwise noted, information contained reflects conditions in the U.S. markets.
mrcpvf.com
INTRODUCTION // OVERVIEW BY SECTOR Introduction
1
Overview by Sector Upstream
3
Midstream
5
Downstream
6
MARKET INSIGHT Lead Time, Data, Price Trends
Raw Materials
7
Line Pipe
9
Carbon Steel Fittings & Flanges
11
Stainless Steel & Alloy Pipe, Fittings & Flanges
12
Valves & Specialty Products
13
Gas Products
15
OCTG
17
Oilfield Products
18
INSIDE MRC
19
4 1
mrcpvf.com
ctivity within the energy industry saw a significant pick-up in 2011 as the world recovered from the recessionary period experienced in 2009 and 2010. Pricing for PVF materials followed this growth in activity. In 2011, we saw price increases world-wide averaging between 5% to 10% (with some in excess of 20%) from manufacturers in every product line MRC offers. 2012 has commenced with a generally positive feeling about the global economy. According to a global survey of executives by McKinsey & Company, most executives are increasingly positive about current economic conditions at both the global and national levels. Concerns including the Eurozone economy, rising commodity prices and political instability still exist but appear to be tempered by other positive economic news such as job growth in the U.S., continued expansion in global manufacturing and regained momentum in China. In 2012, MRC anticipates activity in the energy industry will remain robust. Key spending areas include the North American shale plays, the Canadian Oil Sands, Australia, China, the Middle East and Asia. Activity levels in these regions are keeping manufacturers busy around the globe, resulting in extended lead times and sustainable price increases as seen over the past 18 to 24 months. The current economic environment emphasizes the importance of partnering with suppliers you can trust for quality products early in the procurement process. MRC continues to invest heavily in our supplier qualification process, which provides us with the quality material to meet our customer’s needs around the globe. On the following pages you will find more detailed information regarding PVF pricing and the dynamics that drive pricing in the markets we serve. We hope you find this edition of InSight informative and helpful.
For more information about MRC, please visit mrcpvf.com.
Gary A. Ittner MRC Executive Vice President Chief Administrative Officer
Rory M. Isaac MRC Executive Vice President Business Development
Scott Hutchinson MRC Executive Vice President North America Operations
Neil P. Wagstaff MRC Executive Vice President International Operations
InSight April 2012
5 2
UPSTREAM
Overview The global upstream market experienced increased activity throughout 2011. Average annual rig count increased 15%1 in every region of the world with the exception of the Far East. We anticipate this will continue for the foreseeable future as oil prices are expected to remain at or above recently achieved levels due to growth in global demand and OPEC limited spare production capacity. These historically high prices encourage exploration and production activity, which has been illustrated in the high demand for energy related PVF. Natural gas pricing, while more localized due to the “stranded” nature of the product, continues to harness activity in various regions of the globe. In North America, where over half of the rigs in the world are active, the “shale play” story continues, but with a slightly different twist. Natural gas pricing, which has declined to less than $2.00 for the first time since 2001, is no longer the most sought after fuel in these prolific plays. Oil and natural gas liquids (“NGL”) have claimed the top spot. The average annual rig count grew 20% in 2011. Oil and NGL focused rigs now account for 67% of the total rig count compared to only 47% one year ago. The largest shift in drilling for oil and NGLs occurred in the Eagle Ford and Bakken Shale basins. The largest decline in drilling rigs occurred in the Barnett and Haynesville shale plays as well as in the Rockies region. Activity in the Gulf of Mexico has grown to 46 rigs operating in the Gulf, up from 28 rigs last year at this time. Drilling permits have averaged approximately 1,360 per week for the first quarter of 2012. This is a decrease of 9% compared to Q4 2011. Oil sands activity in Western Canada has returned to pre-2009 levels with several large projects underway and more in various stages of planning and design. Outside of North America, the average annual rig count increased 10% in 2011. Baker Hughes / Spears projects that 2012 will bring on additional rigs in every region1. These additions would cause the average annual rig count to increase by 5%. China, Central and South America are projected to rank as the highest spending areas with the Far East, Africa and the Middle East not far behind. Overall, spending is projected to increase 17%1.
Average annual rig activity increased 15%1 in every region of the world with the exception of the Far East. Outside of North America, average annual rig count increased 10% in 2011.
1
3
mrcpvf.com
Source: Spears and Associates, “Drilling and Production Outlook”
Rigs
Incremental Change
% Inc.
2012 Spend
2011
2012
YOY 11 - 12
% of Total
8%
$134,500
$149,000
11%
41%
20%
8%
$26,900
$30,850
15%
9%
112
-3%
19%
$4,376
$5,726
31%
2%
2,387
2,590
20%
9%
$165,776
$185,576
12%
51%
861
887
3%
3%
$43,024
$46,865
9%
13%
-
-
0%
0%
$8,303
$8,979
8%
2%
$3,667
$3,966
8%
1%
Region
2010
2011
2012
U.S.
1,536
1,874
2,025
22%
Canada
348
419
453
Mexico
97
94
1,981 838
North America China Russia
Spending (Millions)
YOY 10-11 YOY 11-12
Central Asia
305
420
-
38%
Central & South America
286
330
344
15%
4%
$29,924
$35,874
20%
10%
Europe
85
96
101
13%
5%
$10,000
$11,100
11%
3%
Far East
259
243
258
-6%
6%
$24,400
$29,800
22%
8%
Africa
139
144
158
4%
10%
$17,300
$22,100
28%
6%
Middle East
203
233
249
15%
7%
$13,900
$17,300
24%
5%
ROW
2,115
2,327
1,997
10%
-14%
$150,518
$175,984
17%
49%
Totals
4,096
4,714
4,587
15%
-3%
$316,294
$361,560
14%
100%
InSight April 2012
4
MIDSTREAM
Overview Globally, we see healthy midstream markets that are a natural result of the increased upstream activity. In many cases, this activity is occurring in previously dormant or nontraditional areas, which has created a greater demand for midstream infrastructure. Over 118,000 miles1 (189,902.6 kilometers) of pipelines are either under construction or in planning phases. Asia Pacific and North America collectively account for 56% of this activity. In Asia Pacific, the most active region in terms of total activity and pipelines under construction, natural gas is driving the activity. China, India and Australia in particular have multiple pipeline projects underway and planned as the regions work to build infrastructure that can meet the significant increase in energy demand. In North America, the activity in the oil sands and shale plays is driving pipeline activity. These regions are the fastest growing production areas in the world and gathering and transmission lines are needed to bring the production to market. Production growth in natural gas found in shale formations has also created a need for additional gas plant infrastructure and product pipelines. Several new ethane plant projects are underway as a result of this robust activity. Also in North America, the gas utility sector invested heavily in 2011, and we see this trend continuing throughout 2012. While housing starts are not the driver for activity as they were in the mid-2000s, gas utility companies have taken advantage of the slowdown in housing starts to focus on pipeline integrity projects and the rebuilding of existing pipeline infrastructure. Eastern Europe (including Russia) and the Middle East are also experiencing noteworthy levels of midstream activity.
Planned Pipeline Construction
Over 118,000 miles1 (189,902.6 kilometers) of pipelines are either under construction or in planning phases. Asia Pacific and North America collectively account for 56% of this activity.
1
5
mrcpvf.com
Source: Pipeline and Gas Journal, “2012 Worldwide Pipeline Construction Report�
In North America, where spending has been tempered over the last few years, we see two main factors contributing to a healthy spend environment—low natural gas prices and revived project plans. Projections of long-term lower, stable natural gas and NGL prices, a key feedstock to the chemical industry, have revitalized the chemical industry and the view of infrastructure development in North America. Maintenance and turnaround projects that have been delayed over the past several years are now moving forward. 2012 and 2013 are scheduled to be large turnaround years at North American refineries. In the Middle East and Asia, development and expansions of refineries and chemical plants continue as producers seek to build regional capacity in order to handle the ever increasing energy demands of local developing economies. LNG plants, in particular, continue to be the newsmaker in Australia, where seven plants are under construction and eight more are in the planning / engineering phase. In Europe, news concerning the Petroplus bankruptcy, planned plant sales, over capacity and a weakening Euro continue to impact refiners’ profitability. Spending on scheduled maintenance and previously funded projects will continue at the currently scheduled levels and is expected to remain at those levels throughout the year.
Energy Prices
Cushing, OK WTI Spot Price FOB
Europe Brent Spot Price FOB
($ / Barrel)
($ / Barrel)
DOWNSTREAM
Overall spending in the downstream market globally is expected to increase in 2012 above levels seen in 2011 in spite of refinery closures, sales and bankruptcies in some countries. There are a number of different factors driving this growth.
Henry Hub Gulf Coast Natural Gas Spot Price ($ / MMBTU)
Note: Data is indexed to January 2008. Source: U.S. Energy Information Administration
Projections of long-term lower, stable natural gas and NGL prices, a key feedstock to the chemical industry, have revitalized the chemical industry and the view of infrastructure development in North America. LNG plants in particular continue to be the newsmaker in Australia.
InSight April 2012
6
7
mrcpvf.com
G
RAW MATERIALS
The following pages feature individual analysis by product market. From line pipe, to valves and specialty products, our Supply Chain team describes current North American market trends and how each product line may be impacted.
InSight April 2012
8
LINE PIPE
LINE PIPE Line pipe demand, both seamless and welded, continues to improve as our manufacturers’ capacity utilization increases and lead times are extended. This is especially true for large diameter ERW. The backlog of the domestic mills has pushed deliveries into Q4 2012 with the approval of several major projects in the last several weeks. We expect demand to be tight in this segment for the foreseeable future. The North American shale plays are the driving force of this increased pipeline activity. We continue to believe that this sector is ripe for increased expansion, with more capacity needed to carry products to market. The current low price of natural gas has caused many of the major producers to move drill rigs from dry gas areas into the more lucrative liquid plays. The Eagle Ford Shale in South Texas, the Bakken Shale in North Dakota and the Niobrara Shale in Northern Colorado/Wyoming are perfect examples of this robust liquid play activity. While this may change the product mix of line pipe being consumed, we do not feel it will negatively impact the amount of pipe consumed. Small diameter ERW is another matter. Demand is still strong and several mills have pushed deliveries into Q3 2012 for certain sizes. There is still availability in the near term as this is a very competitive market with an abundance of capacity. Many mills are reviewing their operating levels to balance the supply and demand. It appears the general carbon steel market has stabilized, and we anticipate a flat to slight decrease in pricing for the balance of 2012. While welded pipe pricing softened over Q4 2011, it did not see the same percentage decrease as the hot-rolled coil used to manufacture it. As hot-rolled coil fluctuates, welded pipe pricing should stay flat to a slight decrease. New seamless mills are beginning or will begin production in 2012. This activity will inject nearly two million tons of capacity into the market, much of which will be used in the OCTG market; however, some percentage will increase the supply of seamless line pipe. The demand for seamless pipe will continue to increase prices slightly and then stabilize as the new capacity enters the market.
It appears the general carbon steel market has stabilized, and we anticipate a flat to slight decrease in pricing for the balance of 2012.
9
mrcpvf.com
With announced changes to the API5L specification for line pipe being implemented in Q3 2012, distributors will need to be more discriminating in the selection of the product mix they carry. With few expectations, multi-grade material will no longer be produced, which may lead to shortages of certain OD/Wall/Grade combinations. End users need to be aware of these changes and may need to show some flexibility in the grade of pipe specified. The continued increased scrutiny by the U.S. federal government on pipeline owners is requiring operators to inspect and repair their lines more frequently. Older lines are no longer exempt from pipeline integrity inspections, which may lead to an increase in demand for line pipe as maintenance programs are implemented in order to meet these heightened government requirements. Due to these and other factors, our general long-term outlook for the line pipe market is favorable.
Commodity
Carbon Seamless Pipe
Carbon Pressure Tubing
Carbon Steel ERW Pipe
Carbon Steel Continuous Weld (CW) Pipe
Carbon Steel DSAW Pipe
Lead Time
Price Trends
Shop Loads
Domestic
International
Last 6 months
Next 6 Months
2” - 24”: 8 - 16 weeks
24 weeks
Up 5%
Flat to Slight Decrease
75%
1/8 - 1 1/2”: 4 - 8 weeks
24 weeks
Up 14%
Flat
75%
2”-16”: Stock to 16 weeks 18”-24”: 20 - 32 weeks
16 - 24 weeks
1/8” - 4”: Stock to 4 weeks
12 - 16 weeks
6 - 16 weeks
12 - 20 weeks
Dom: Up 6%
Dom: Flat to Slight Decrease
Int’l: Up 4%
Int’l: Flat to Slight Decrease
Up 35%
Flat to Slight Decrease
Dom: Up 18%
Dom: Flat
Int’l:
Int’l: Flat
Up 20%
75%
75%
75%
InSight April 2012
10
CS F&F
CARBON STEEL FITTINGS & FLANGES In general, the demand for carbon products remained strong in Q4 2011 and Q1 2012. This strong demand is expected to continue over the next six months, due in large part to lucrative oil prices and increased activity in the North American oil shale plays. Activity in the dry gas shale plays remains relatively strong as well, in spite of lackluster natural gas prices. Considering the continued strong demand, prices on carbon goods have remained relatively flat, with only small increases and rebalancing on selected commodities. Raw material costs of carbon products have fluctuated considerably over the past six months, but on average have remained mostly flat. Even with the strong demand, most manufacturers seem to be comfortable, but cautious, with current prices in the market on finished goods. However, any significant increases in raw materials should be expected to trigger small to modest price increases.
Commodity Carbon Steel Pipe Nipples & Swage Nipples Carbon Steel Butt Weld Fittings
11
mrcpvf.com
Domestic
International
Stock to
3 - 4 weeks
2 weeks
ex-mill
4 - 8 weeks
Price Trends Last 6 months
Next 6 Months
Flat
Up 5% - 10%
16 - 48 weeks
Dom: Flat
Dom: Flat
ex-mill
Int’l: Down 5% - 7%
Int’l: Down 5% - 7%
Forged Steel
Stock to
8 - 12 weeks
Olets: Flat
Olets: Flat to Up 5%
Fittings
4 weeks
ex-mill
Shapes: Flat
Shapes: Flat to Up 5%
Flat
Flat to Up 5%
Stud Bolts
Considering the continued strong demand, prices on carbon goods have remained relatively flat, with only small increases and rebalancing on selected commodities.
Lead Time
Stock to 3 weeks
Shop Loads
75% - 85%
85% - 95%
50% - 70%
60% - 80%
Carbon Steel
Stock to
16 - 20 weeks
Dom: Flat
Dom: Flat to Up 5%
Flanges
4 weeks
ex-mill
Int’l: Flat to Up 5%
Int’l: Flat to Up 5%
Malleable & Cast
Stock to
12 - 16 weeks
Iron Fittings
2 weeks
ex-mill
Flat to Up 5%
Up 5% - 10%
70% - 80%
Spiral Wound
Stock to
Gaskets
2 weeks
Flat
Flat
80% - 90%
80% - 90%
Stainless steel welded pipe manufacturers implemented a new sheet at the end of 2011, which represented a 5% to 8% increase and was a result of announced increases by primary stainless flat roll manufacturers in November 2011. Firming up the new price level for welded pipe, a second flat roll increase announced in Q1 2012 appears to have been embraced by the domestic producers. Weld fitting manufacturers faced with high raw material costs are increasing pricing as well. Stainless seamless pipe increased 4% to 6% during Q1 2012 due to continued currency fluctuations and an escalation in raw material and energy costs. Nickel spiked to just under $10 per pound in early February 2012 and is currently trading at $8.70 per pound. This is 4% higher than the levels seen in October 2011. Analysts are forecasting the average price for 2012 to be around $10.20 per pound. The higher forecast is based on three issues: Chinese growth, spending by the United States and stability of the debt crisis in Europe. Analysts also see two additional factors on the supply side holding nickel prices up. Highpressure acid leaching (HPAL) projects are not coming online as quickly as expected and are not producing as much nickel as originally anticipated. In addition, Chinese nickel pig iron (NPI) production, which was expected to be a lower cost alternative, is now being impacted by higher operating costs. Molybdenum has not experienced many fluctuations and is currently trading at $14.51 per pound. The average price for 2012 is expected to be around $15 per pound. As China demands higher quality steel, the price could rise to between $17 and $18 for 2013 and 2014.
Commodity
Lead Time Domestic
Price Trends
International
Shop Loads
Last 6 months
Next 6 Months
Flat to Up 8%
Flat to Up 5%
85% - 95%
Flat
Flat
80% - 100%
12� and smaller: Stainless Welded Stock to 16 weeks Pipe
14� and larger:
12 - 16 weeks ex-mill
SS ALLOY PFF
STAINLESS STEEL & ALLOY PIPE, FITTINGS & FLANGES
Stock to 30 weeks Stock to
18 - 22 weeks
6 weeks
ex-mill
Stainless
Stock to
16 - 20 weeks
Pressure Fittings
3 weeks
ex-mill
Stainless Flanges
Stainless Weld Fittings Stainless Seamless Pipe & Tube Chrome Pipe & Tube
4 - 8 weeks
12 - 16 weeks ex-mill
Small diameter:
14 - 25 weeks
8 - 12 weeks
ex-mill
26 - 36 weeks
Flat
Flat
65% - 85%
Flat
Flat to Up 5%
60% - 80%
Up 6%
Flat
80% - 100%
Up 5%
Up 5%
Nickel spiked to just under $10 per pound in early February 2012 and is currently trading at $8.70 per pound. This is 4% higher than the levels seen in October 2011. Analysts are forecasting the average price for 2012 to be around $10.20 per pound.
InSight April 2012
12
VSP
VALVES & SPECIALTY PRODUCTS 2011 proved to be a strong year for the valve industry and demand continues to be high for both valves and specialty products going forward into 2012. During the last six months, the market has seen moderate price increases and deliveries have become extended. Lead times for some valves have increased by one or two months due to current backlog and reduced raw material availability. With continued increases in raw material prices, along with rising costs of labor, energy and other manufacturing expenses, it is almost certain that another round of price increases will hit the market in the next six months. In addition, deliveries do not appear to be improving in the near future, as several manufacturers are currently running at 90% to 95% capacity.
(quadrillion Btu)
Project activity in the midstream and upstream energy segments remains strong even though the price of natural gas continues to reach new lows. The downstream sector is also seeing increased project activity around the world, leaving manufacturers looking forward to a very busy 2012.
With continued increases in raw material prices, along with rising costs of labor, energy and other a expenses, it is almost certain that another round of price increases will hit the market in the next six months.
13
mrcpvf.com
Price Trends
Lead Time Commodity
(add 4-6 weeks to “ex-works” lead
Shop Loads
Last 6 months
Next 6 Months
Flat to Up 8%
Flat to Up 6%
75% - 95%
Flat to Up 5%
Flat to Up 5%
65% - 80%
Flat to Up 7%
Flat to Up 5% -10%
75% - 85%
Flat to Up 6%
Flat to Up 5%
60% - 75%
Flat to Up 5%
Flat to Up 7%
70% - 95%
Flat to Up 6%
Flat to Up 7%
85% - 95%
Iron: 6 weeks
Iron & Steel: Flat
Iron & Steel: Flat
Steel: 12 - 18 weeks
Gas Distribution:
Gas Distribution:
Gas: 6 - 10 weeks
Flat to Up 5%
Flat to Up 3%
Poly: 4 - 16 weeks
Poly: Flat
Poly: Flat
Stock to 20 weeks
Flat to Up 8% - 10%
Flat to Up 4%
80% - 90%
Factory Stock to 40 weeks
Flat to Up 3%
Flat to Up 6% - 8%
80% - 85%
Flat to Up 4%
70% - 80%
times for international delivery) Commodity: 16 - 40 weeks ex-works Cast Steel Valves
Specials: 20 - 52 weeks Large Diameter: 20 - 50 weeks ex-works Commodity: Stock to 48 weeks ex-works
Forged Steel
Specials: Stock to 30 weeks ex-works
Valves
High Pressure Y Pattern: 4 - 8 weeks Bellow Seal: 12 - 18 weeks ex-works
Stainless Steel Multi-Turn Valves
Bronze & Iron Valves
Floating Ball Valves
20 - 52 weeks ex-works
Dom: Stock to 6 weeks Int’l: 16 weeks ex-works
Dom (U.S.): Stock to 12 weeks Int’l: 18 - 24 weeks ex-works Threaded: Stock to 6 - 8 weeks
Oilfield & Pipeline Valves
Flanged Floating: Stock to 18 weeks Trunnion Pipeline: 2” - 24”: Stock to 20 weeks Above 24”: 16 - 24 weeks
Lubricated Plug, Gas Distribution & Poly Valves
Iron & Steel: 75% - 80% Gas Distribution: 75% Poly: 50% - 75%
Energy Prices
Sleeve Lined Plug & Lined Ball Valves
Triple Offset Butterfly Valves
Steam Traps & Strainers
Pressure Gauges
Actuation & Controls
Traps: 1 - 2 weeks Strainers: Stock to 16 weeks
Traps: Flat Strainers: Flat to Up 5% - 17%
Stock to 6 weeks
Flat to Up 5%
Flat to Up 6%
90% - 95%
5 - 24 weeks
Flat to Up 4%
Flat to Up 2% - 3%
75% - 95%
InSight April 2012
14
GAS
GAS PRODUCTS
Medium Density Polyethylene (MDPE) Pipe MDPE resin prices have risen nearly 10% since Q3 2011 with announced increases in March and expected increases in April 2012, totaling 8% to 12%. Given the robust demand for polyethylene pipe, there is little reason to believe that these increases will not be implemented. At record levels, demand for MDPE in Q1 2012 remained very strong as utilities accelerated their cast iron and steel replacement projects. Resin supplies could become problematic as both demand and exports remain high. Strong demand for pipe will result in continued long lead times.
Wire Copper wire prices have risen between 2% and 3% since October 1, 2011, with increases in the range of 5% to 10% expected for the remainder of 2012. Improved economies in the United States and Japan, combined with lower worldwide copper inventories, will drive copper prices higher. Plant utilization remains adequate to meet expected demand.
Anodes Anode pricing has been flat since the beginning of October 2011. Slight decreases are expected in Q2 2012, mostly as a result of inventory reduction efforts by Chinese magnesium manufacturers. However, the soft construction market in the United States, combined with European efforts to cut back on spending, will reduce demand for magnesium, resulting in relatively flat pricing for most of 2012.
Polyethylene (PE) Fittings PE fitting pricing has been mostly flat for the past six months. Increases in the second half of 2012 may be incurred as resin producers continue to push increases to the market. Demand for fittings remains strong as utilities pursue integrity management projects and energy producers continue their strong pursuit of shale plays. At record levels, demand for MDPE in Q1 2012 remained very strong as utilities accelerated their cast iron and steel replacement projects. Lead times for meters has been pushed out to 10 to 12 weeks, or longer.
15
mrcpvf.com
Transition fittings may see price increases, resulting from announced resin increases and increased costs for steel and brass.
Risers and Meter Set Assemblies (MSAs) Riser and MSA costs have been relatively flat in the past six months after experiencing some increases in Q3 2011, mostly as a result of a rise in PE pipe, valve and regulator costs. Large fabricators have an ample supply of “stock� finished goods, but smaller fabricators have extended lead times, mostly due to component part availability. Plant utilization rates should allow for any increased demand for risers and meter sets, depending upon availability of component parts.
Meters Some increases in meter and regulator pricing were experienced at the end of 2011. A more concerning issue is availability, as lead times have been pushed out to 10 to 12 weeks, or longer, especially for regulators. MRC is taking steps to reduce these long lead times by placing forward orders with regulator and meter set assembly manufacturers. All end users are encouraged to engage MRC Supply Chain at the outset of any project planning that may require meters and/or regulators, so that any delay due to these lead times can be avoided.
Commodity
Lead Time
Price Trends
Shop Loads
Last 6 months
Next 6 Months
10 - 12 weeks
Up 8% - 10%
Up 10% - 12%
100%
Stock to 4 weeks
Up 2% - 3%
Up 5% - 10%
90%
10 - 12 weeks
Up 3% - 5%
Flat
90% -100%
Anodes
2 - 3 weeks
Flat
Down 3% - 5%
55% - 65%
PE Fitting
3 - 5 weeks
Flat
Up 5% - 7%
65% - 80%
Transition Fittings
3 - 5 weeks
Flat
Up 5%
65% - 80%
Stock to 6 weeks
Flat
Up 3% - 5%
50%
3 - 5 weeks
Up 4%
Flat
75% - 85%
Medium Density Polyethylene Pipe
Wire
Meters and Regulators
Risers
Meter Set Assemblies
InSight April 2012
16
OCTG
OCTG The U.S. rig count continues to be robust at just under 2,000 rigs, 13% above the same time last year in spite of a transition from dry gas drilling to more oil and wet gas activity. Weak natural gas pricing continues to plague the industry with little relief expected in the near future. OCTG inventory remains at relatively steady, healthy levels, although there are now some areas of oversupply due to the dry gas drilling reductions in certain basins, such as the Marcellus, Barnett and Haynesville. Increased liquids activity will present additional opportunities as operators move to more lucrative plays like the Bakken, Eagle Ford and Permian. The mills are starting to feel the effects of the slow down as operators reallocate their capital budgets. Additional capacity is also slated to come into the market during the second half of 2012. V&M and JMC (Lakeside acquisition) will be coming online with additional capacity, coupled with earlier additions from Tenaris (Tamsa), Boomerang and US Steel Lorain. If the market consumption does not expand as these facilities ramp up, an oversupply could occur. Correspondingly, the outlook for pricing is seen to be flat to slight decline. Imports continue to be a major issue in the OCTG market due to representing over 50% of the demand in the U.S. because 50% of the market is currently supplied by imports. Korea, Canada, Austria and Mexico lead the nations importing OCTG into the U.S. 2012 is expected to be a transition year, as operators adjust their portfolio of properties and activity to match the huge disparity between oil and natural gas pricing. Continued strength in oil pricing should support solid operating levels throughout 2012.
Commodity
OCTG
OCTG inventory remains at relatively steady and healthy levels‌ 2012 is expected to be a transition year, as operators adjust their portfolio of properties and activity to match the huge disparity between oil and natural gas pricing.
17
mrcpvf.com
Lead Time Domestic
International
12 - 16 weeks
16 - 24 weeks
Price Trends Last 6 months
Next 6 Months
Up 20% - 30% Flat to Down 10%
Shop Loads
70%
Epoxy and ethylene resin prices have inflated since our last edition of InSight. Upward demand trends in the oil patch have kept pressure on pricing for both fiberglass and polyethylene pipe. Lead times for these products have extended and producers are running at near capacity. New capacity is being brought online in anticipation of continued strong activity. Fiberglass piping and fittings increased by 6% in Q1 2012. Lead times for high pressure pipe have been running 30 to 32 weeks; however, with additional capacity coming online, the market is expected to see some improvements on delivery by as much as 4 to 8 weeks. High density polyethylene pipe increased by approximately 3 cents per pound in March with an additional 3% proposed for April. Mills continue to run at full capacity; however, the addition of new lines running during Q2 2012 for many of the major producers will take some pressure of delivery. Oilfield products continue to see an increase in demand led by the aggressive drilling programs in the market. Raw material costs seem to be the driving force behind price increases from 6% to 8%, respectively, for mill supplies, tape, tools and safety items in Q1 2012. Even with the growth in activity, lead times are generally holding for standard commodities.
Commodity
Lead Time
Wellheads
4 - 6 weeks
Fiberglass Pipe and Fittings
High Density Polyethylene Pipe
Price Trends
OILFIELD
OILFIELD PRODUCTS
Shop Loads
Last 6 months
Next 6 Months
Up 6% - 8%
Flat to Up 5%
100%
Up 5%
90% - 100%
Up 3% - 5%
100%
Pipe/Fittings: Up 6% 4 - 32 weeks
Select Centron Fittings: Up 25%
4 - 6 weeks
Up 3% - 5%
Oilfield products continue to see an increase in demand led by the aggressive drilling programs in the market.
InSight April 2012
18
On April 12, 2012 MRC Global Inc. became a New York Stock Exchange (NYSE) publicly traded company under the ticker symbol “MRC.”
MRC Opens New RDC 2852 Christensen Road Cheyenne, WY 82007 In January 2012, MRC established a new Regional Distribution Center in Cheyenne, WY in the heart of the Niobrara shale play. This branch is strategically located to best serve our customers in this up-and-coming region. The facility will also include 80,000 sq. ft. (7,432 sq. m.) of warehouse space, 5,000 sq. ft. (464.5 sq. m.) of office space and a 4,000 sq. ft.
“This is a major milestone in our 91 year history,” MRC Chairman, President and CEO Andrew Lane said. “I’m very proud to lead more than 4,400 global employees who maintain a very complex, highly technical global supply chain and deliver value to our customers every day.” Headquartered in Houston, Texas, the MRC family of companies is the largest global distributor of pipe, valve, and fittings (PVF) and related products and services to the energy industry, based on sales, and supplies these products and services across each of the upstream, midstream and downstream sectors.
(371.6 sq. m.) shop.
In March 2012, OneSteel Piping Systems joined the MRC family of companies. Operating as MRC Piping Systems Australia (MRC PSA), the Sydney, New South Wales headquartered company added a distribution network of 12 sites in Queensland, New South Wales, Victoria, South Australia, Western Australia and Northern Territory and continue to grow our own international service footprint. The combined capabilities of MRC PSA, MRC Transmark and MRC SPF in Australia will provide our key customers and suppliers a one-stop solution for all their PVF needs. The addition of MRC PSA to the MRC family of companies demonstrates our commitment to the Australian market and to being the Global Supplier of Choice to the industries we serve around the world. For more information about MRC Piping Systems Australia and the entire MRC family of companies, visit mrcpvf.com. ®
19
mrcpvf.com
marketing@mrcpvf.com
For questions or comments regarding MRC InSight , please email marketing@mrcpvf.com.
InSight April 2012
23
Corporate Headquarters 2 Houston Center 909 Fannin, Suite 3100 Houston, TX 77010-1011 Phone: (877) 294-7574
MRC Branches Regional Distribution Centers Valve Automation Centers
mrcpvf.com
Scan our QR code and directly connect to mrcpvf.com. Download a free QR code scanning app from your smartphone’s app store today.