Tube distributors are afraid to build inventory due to worldwide market unrest, symbolized in the US by BP’s continuing struggle to cap and clean up the failed Deepwater Horizon rig off the coast of Louisiana.
“We’re in a market pause right now, across the board,” said one southern US trader. He added that economic strife in Europe, falling hot rolled prices and a recent 1,000-point drop in the Dow are compounding distributor skittishness. “People again have backed out of buying any kind of inventory. The problem is, at some point in time, the inventories on the ground are going to run out.”
Despite the current buying freeze, market observers have told Steel Business Briefing that the year could end unexpectedly strong, particularly for OCTG and line pipe, as offshore producers hop out of the water and into land-based drilling, as SBB reported yesterday.
“They’ve got to do major damage control right now,” one observer said, referring to large offshore petroleum producers. “But you still have the problem of limited pipelines. You only have so many pipelines out there and once these guys start putting more product out there, you’re going to see the pipe market really come alive.”