China’s Seamless Pipe Output Rising, Profits Shrinking

August 02, 2010 in Blog by

Some industry experts predict China’s seamless pipe production this year could rise by 4-10% to 23m-25m tonnes, revising earlier predictions that China’s seamless pipe output will only see increase by less than 6% from 21.78m t in 2009.
 
The earlier predictions by the China Steel Pipe Association (CSPA) in the first quarter is believed to be too low, based on the up-to-date market situation, Baotou Iron & Steel director, Jing Yinong, told a pipe conference on 30 July attended by Steel Business Briefing. China’s total seamless pipe production during the first half of 2010 was 11.96m t, up 16% y-o-y, according to the National Bureau of Statistics.
 
Jing said many mills are operating with a financial deficit but they are not willing to withdraw from the market. “This high production, due to the country’s huge capacity level, has kept increasing market inventories since the market slumped in April-May,” he said.
 
As a result, overcapacity, higher raw material costs and low prices mean the industry’s overall profit level will remain low for the rest of this year, a senior CSPA official told the conference attendees.
 
The recovery of oil/gas drilling activities and downstream sectors such as machinery and power generation have boosted high value-added seamless pipe demand this year, the CSPA official said. But the consumption of low value-added seamless pipe (mainly used in construction) is expected to decrease from 2009 as the central government withdraws stimulus spending.

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