Steel Mills

OCTG Producer Tenaris Reports Declining Sales

November 1, 2019

Lower prices for line pipe and less drilling activity in the U.S. and Argentina contributed to declining tubular sales for OCTG producer Tenaris. Net tubular sales for the company totaled $1.8 billion in the third quarter, down 8 percent sequentially and year-over year, on shipments of 796,000 metric tons. Tubular shipments fell 6 percent from Q2 and 7 percent from Q3 2018 with average selling price dipping 3 percent from Q2.

Tenaris’ North American tubular sales of $772 million fell 11 percent from the second quarter and 13 percent from Q3 2018.

“In the U.S., the drop in operating rigs has been greater than we had anticipated, driving down the Pipe Logix price index by 8 percent in the last three months, and this is affecting our prices throughout the Americas,” said Tenaris Chairman and CEO Paolo Rocco. “In my view, provided that a price fall does not fall from current levels, the company should begin to generate a positive free cash flow and the number of operating rigs should begin to stabilize in the current month.”

The number of active drilling weeks reduced the size of the OCTG market, said Rocco, but the decrease in hot rolled coil also reduced costs, resulting in increased competitiveness in the welded pipe market. This led to a slight reduction in Tenaris’ share of the market and volumes.

Fourth-quarter drilling activity is expected to continue to slow in the USA contributing to further declines in prices.

In Mexico, drilling activity is increasing, supported by Pemex drilling as well as deep water projects. The number of rigs doubled from first-quarter 2018 to third-quarter 2019 and are expected to increase 20-25 percent in the fourth quarter, said Germán Curá. “I would say that in terms of the market activity and in terms of the product mix, Mexico is going to continue to be good news,” he added.

A second request for a tariff exclusion for steel bar imports to the Bay City, Texas, mill was granted in August, improving the competitiveness of the U.S. operation.

The acquisition of pipe producer IPSCO is expected to close at the end of the year. IPSCO is part of a long-term strategy that will give Tenaris steelmaking access in the U.S, said Rocco.

Tenaris currently has North American facilities in Texas, Arkansas, Louisiana, California; Calgary, Alberta, Ontario and Newfoundland in Canada; and in Veracruz, Mexico.