End of year PVF market analysis
By Gary J. Cartwright,
President, Piping & Equipment Inc.
This report is published as a service to the PVF Industry, indicating the direction of prices, lead times and market conditions reported by various domestic and import manufacturers as they believe the direction the market is heading each quarter.
Market Condition & Activity Bulletin
October - November - December 2008
Stainless steel pipe
Manufacturers predict price decreases in the range of 5% - 10% due to falling surcharges, weaker demand, very low import prices flooding the U.S. market as business drops in other parts of the world and raw material costs.
Forecast lead times are 4 - 8 weeks with fill rates of 50% - 70% for commodity stainless pipe. Non-stock specials are forecast for 8 -20 week deliveries. Backlogs are down worldwide. Most service centers are not buying, and are aggressively de-stocking in the light of dropping prices according to manufacturers. Import lead times appear to have shortened considerably after coming back from the August holiday period.
One manufacturer states that pricing will not improve significantly until the larger global financial issues begin to be straightened out. Another manufacturer reports that the stainless market will struggle for the next 4 or 5 months. Energy related projects will rebound in the second quarter of 2009, making the 2009 year similar in overall volume to 2008. The weak economy and the government bail out of our banking system is the most troubling. Prices in the U.S. market are being dropped to ridiculous levels in some cases in an attempt to "buy" a backlog for the first quarter of 2009. One manufacturer state that the recent hurricanes have slowed business activity significantly at a time when orders were being placed at a comfortable pace prior to the storm's impact…now things seem very slow to come back.
Stainless steel weld fittings, 150 and hi-pressure fittings
Manufacturers of stainless fittings indicate pricing to be down 3% to 5% due to demand and competition. One manufacturer indicates there will be no change in pressure fittings.
Fill rates for commodity fittings are running 60% - 70%. Lead times for commodity material not shipping from stock is 4 - 8 weeks. Non-stock specialty items depending on material grades can go out as far as 8 - 16 weeks. Large OD fittings are forecast for 16 - 20 weeks.
Nickel pricing has dropped almost 30% since September 1, 2008. However, alloying ingredients like iron, molybdenum and chromium remain strong which have offset the net cost decrease for stainless steel PVF prices. A major manufacturer of stainless fittings that activity is still healthy; however, as compared to the 2nd and 3rd quarter of 2008, it may be down approximately 10%. We are hoping that after elections and year end, the activity is expected to pick up. There are still quite a few jobs that need to be purchased. Our economy is affecting other countries, which has helped the slow down in the PVF market. However, things should recover and start showing signs of improvement within the next six months. Another manufacturer that due to economic conditions, this 4th quarter may become soft. Some manufacturers may drop prices just to get an order. The Houston and surrounding markets may save the quarter due to hurricane recovery.
Stainless steel flanges
Manufacturers of stainless steel flanges forecast price decreases of 5% - 7% with reducing raw material costs. High nickel alloy and chrome alloy flanges may reduce 10% - 15%.
Lead times are forecast for 3 - 4 weeks with fill rates of 40% or more. Chrome is forecast for 6 - 8 weeks, and high nickel alloy is forecast for 12 - 16 weeks.
Manufacturers indicate distributor purchasing for stainless is cautious for inventory due to the drop in nickel pricing. The most volatile issues facing manufacturers are nickel pricing, volatile foreign exchange rates, high energy and gas prices, and unapproved import pricing.
Carbon steel pipe - seamless, ERW and continuous weld
Seamless Welded Pricing for carbon steel seamless pipe is forecast to increase 5% - 7% due to raw material costs, supply, capacity, demand, and labor following a new labor agreement at U. S. Steel. Carbon steel weld pipe is forecast for a decrease of 10% or more.
Fill rates for carbon steel is running 60 - 70%. Commodity material is shipping in 6 - 8 weeks for welded pipe and 3 - 4 months for seamless pipe.
Early indications are for a soft welded pipe market thru the 4th quarter. Dumping suits are pending for ERW from China and Korea. U.S. Steel Tubular announced a $200 per ton increase for all seamless and line pipe products effective for shipment in October 2008 or later. According to their letter, orders that were already placed will also be increased $200 as well as all new orders. United States Steel (Pittsburgh) and ArcelorMittal (Chicago) reached separate agreements on new four-year labor contracts with the United Steelworkers. U.S. Steel reached their agreement in early August that covers 16,000 workers employed at Granite City, Ill.; Gary, East Chicago and Portage, Ind.; Ecorse, Mich.; Braddock, Clairton, West Mifflin and Fairless Hills, Pa.; Fairfield, Ala.; Lorain, Ohio; Keewatin and Mt. Iron, Minn.; and Lone Star, Texas. This contract is the new standard in the industry. A second four-year agreement was reached with 900 USW employees at the company's tubular products Texas Operations division. ArcelorMittal and the United Steelworkers reach their agreement two days after the union membership authorized it bargaining team to call for a strike. The four year contract covers 14,000 steel workers at 14 U.S. plants. The deal was struck without any disruption to business operations.
Carbon steel weld fittings and flanges
Fittings and Flanges Manufacturers indicate price reductions of 3% - 5% on flanges to match competition; however, butt welding fittings are expected to remain stable thru the end of the year.
Lead times for commodity material is 3 - 4 weeks with fill rates of 80% - 90%. Non-stock specials are forecast for delivery in 6 - 8 weeks.
The price of A106B seamless pipe and lack of availability is pressuring scheduling in production to meet demand; however, most manufacturers are still meeting the 3 - 4 week lead time. There are no indications in the industry for pursuing anti-dumping litigation for carbon steel welding fittings or forged steel flanges. Pricing for steel scrap has softened somewhat. The weakening of the U.S.dollar, higher energy costs, strong offshore demand, higher costs and longer lead times for offshore materials and strong demands in the energy sector are placing stronger demands on domestic production. Tenaris, a Luxembourg manufacturer of tubular goods and related products, has announced plans to build a plant in Mexico. The 450,000 tonnes capacity facility will produce up to 7-inch diameter piping for the oil and gas markets.
Forged steel fittings
Pricing from manufacturers is forecast to remain stable this quarter for forged steel fittings following the price increase announced on 8/25/2008.
Fill rates of 95% with deliveries forecast for 1 - 3 weeks for commodity forged steel material not in stock. Specials are forecast for 3 - 4 weeks.
Manufacturers comment that the weak dollar continues to prevent European competition. The former demand of AML approved material has moved to domestic. The scrap prices have reduced to March levels, thus decreasing special bar quality steel used to manufacture forged steel and branch connections. This reduction will alleviate discussion regarding additional forged steel / branch connection increases in the near future.
Stainless steel gates, globes and check valves
Pricing for stainless steel gate, globe and check valves is expected to remain the same thru the end of the 4th quarter.
Deliveries for commodity items is forecast for 6 - 12 weeks with fill rates improving to 60% - 70%. Non-stock specials are forecast for 16 -20 weeks or more.
The demand for stainless steel valves is strong. Pricing is currently stable with raw materials for stainless valves.
Bronze and iron gates, globes and check valves
No change is forecast for bronze or iron valves through the end of 2008.
Deliveries are running 4 - 8 weeks for iron valves and 3 - 4 weeks for bronze valves. Fill rates remain around 80% for both bronze and iron valves. Non-stock specials are forecast for 12 -16 weeks for iron valves and 6 - 12 weeks for bronze valves.
Bronze valve pricing is stable currently. Price declines are predicted for copper in 2009. However, copper and brass scrap remains in strong demand, but supplies are limited not only by low operating rates at brass mills but also the absence of building demolitions as a scrap source.
Cast steel gates, globes and check valves
Manufacturers of cast steel valves are not forecasting any changes in the fourth quarter.
Fill rates are 60% - 70% for commodity cast steel valves with deliveries forecast for 6 -8 weeks on commodity cast steel with specialty cast steel valves running 16 - 20 weeks or more.
The costs of molybdenum are expected to increase in 2009 driving up the pricing on chrome alloy valves.
Forged steel gates, globes and check valves
No price change is forecast for forged steel valves during the fourth quarter of 2008.
Standard commodity forged steel valves are shipping in 6 - 12 weeks. Fill rates are running 50% - 70%. Deliveries of special non-stock forged valves are forecast for 8 - 16 weeks or more.
Quarter turn valves - ball and wafer
No changes are forecast in the quarter turn valve market during the last quarter 2008.
Fill rates are running 50% - 70% for commodity material with lead times of 6 - 8 weeks. Non-stock specials are forecast for 12 - 16 weeks or more depending on the material. One manufacturer notes that they are depending more on foundry sources for machined components.
Manufacturers indicate that supplier backlogs remain high; however, they are concerned over the possibility of a global slowdown that might eventually reach the Energy and Hydrocarbon processing markets. Customers in the "Tar Sands" region of Canada have serious concerns with projects that may be cancelled or delayed because of limited financing from major banks. Market competition remains high from India, Korea, and the European Union for high-end metal seated valves.