Imported Line Pipe Prices Threatening Domestic Production
Sources within the domestic line pipe production industry are worried that the low prices of imported line pipe will have a negative effect on domestic production.
“We will not achieve our return on investment because prices have deteriorated since we made this investment two years ago and costs have pretty much remained flat,” Ray Dubreuil, VP of sales at CSI, said at a recent U.S. ITC hearing.
CSI, like other U.S. manufacturers has made a significant stake in new line pipe mills, some costing upwards of $100 million. Line pipe producer Northwest Pipe opened a new domestic mill in Atchinson Kansas this year as well as a result of a failed venture into the OCTG market. The project was undertaken in order to expand their product offering and increase capacity. According to Robert Mahoney, Northwest Pipe’s senior VP of strategy & business development, the company did not receive return on their foreign investments, and was forced to write off the expenses.
Imported line pipe prices are so low, they’re comparable to current domestic coil prices. This is worrisome for many U.S.-based producers, as they fear that local distributors will most likely purchase as much foreign line pipe as possible, store it in inventory, and sell it for a profit at a later date.
As a result, some domestic mills are taking drastic action. This has included closed-down production plants, and reduced work hours. Most problematic however, are the required lowered bids that domestic mills must submit to their customers, some slashed by up to $1 million.
Jd Fields will continue to monitor the fallout of the effects of this year’s foreign OCTG ruling.