International Steel Mills

Tenaris Expects Weaker Global OCTG Demand in 2020

Written by Sandy Williams

International OCTG producer Tenaris had net sales of $7.3 billion in 2019, a 5 percent decrease from 2018 that reflected lower drilling activity in Canada and the U.S. and lower sales in the Middle East and Africa. Net income fell 16 percent to $731 million.

Fourth-quarter North American tubular sales increased 1 percent to $779 million compared to the third quarter, but fell 19 percent year-over-year. The quarterly gain was primarily due to seasonally higher sales in Canada.

In outlook remarks Tenaris said: “Drilling activity in the U.S. shales, after declining throughout 2019 as oil and gas companies adjusted to lower cash flows and a less accommodating financial environment, is expected to stabilize at current levels provided that oil and gas prices and global demand expectations are not further affected by the coronavirus outbreak. Offshore drilling activity in the Gulf of Mexico, however, is expected to show some recovery during 2020. Drilling activity in Canada, which declined 30 percent in 2019, is expected to remain close to last year’s level.”

Global OCTG demand is expected to decline slightly in 2020 due to lower demand in the U.S. and continued destocking in the Middle East. A recovery in Brazil is expected, but uncertainty in Argentina is likely to postpone new investments by oil and gas companies.

“Despite lower market demand in the USA and Argentina and lower prices in the Americas, we expect to increase sales in 2020 with the expansion of our position in the U.S. market through the integration of IPSCO and higher sales of premium products for offshore drilling projects,” said Tenaris. “We expect margins in the first quarter to be in line with those of the fourth quarter as they will be affected by the current losses that IPSCO is incurring, but should recover during the year as we realize synergies from the integration and work on reducing costs and working capital throughout our operations.”

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