Steel Mills

Tenaris Suspends Welded Tube Operations in Texas

February 25, 2015

Tenaris announced it will temporarily suspend operations at its welded tubes mill in Conroe, Texas. The shutdown will result in the layoff of approximately 230 employees, effective April 2015.

“Record levels of unfairly traded imports of OCTG (oil country tubular goods) from South Korea and the sharp decline in the price of oil and consequential reduction in drilling activity have driven Tenaris to make this decision,” said the company in a press release.

Last week, the Tenaris executive team discussed OCTG market at length in the company’s Q4 2014 earnings call.

In 2015, we are facing a very different market environment,” said Chairman and CEO Paolo Rocca. “Customers are reacting to the collapse in oil, LNG prices by cutting their investment budgets and looking for a structural change in their cost of operations. We estimate that overall market for OCTG could decline by around 30% compared to 2014. I would like to clarify that this includes the impact of stock reduction.”

Rocca said Tenaris is “preparing for what could be prolonged downturn.” When questioned on how low prices could go before production cuts are necessary, Rocca noted that capacity reductions were already underway in the present price environment. He noted that some competitor prices have dropped 5 percent in the last two months.

Rocca said the demand for welded pipe is reducing faster than seamless. Part of that reduction in the U.S. is due to the high level of imports of welded pipe in January in February. He noted that competitors, as well as Tenaris, are reducing production as a result.

German Cura, North American Area Manager, discussed the US trade cases on dumping of OCTG:

“We have indicated before that we as an industry intend to file the administrative review and we need to wait until July. This is ultimately going to look at the results of the last six months and the Department of Commerce will take it on there. From our perspective, in an environment where we’ve seen price adjustment existing and on the margins as price is concerned that range from 10% to 15% and explosive level of increasing imports. We believe that the domestic industry has a solid case and we intend to fight it was we did the regional trade case.”