Asia’s Demand for Steel Pipes Rising

Asian demand for steel pipes used in oil and natural gas production is recovering as rising energy prices prompt new drilling projects in India and Southeast Asia.

Major steelmakers are increasing the prices of oil-well pipes, with Japan’s Nippon Steel & Sumitomo Metal planning a 10% hike, Nikkei reported.

Oil prices have increased 80% from early 2016 on the back of output cuts by OPEC and other oil producers, and are now being pushed up further by rising tensions in the Middle East. Brent crude futures rose to $72 per barrel on April 11, its highest level since late 2014.

Natural gas prices also remain high on growing demand from China, which is gradually shifting power generation away from coal as it tries to reduce air pollution.

Kenji Hanada, head of Nippon Steel’s tubular goods marketing division, said demand for oil-well pipes is particularly strong in the US, India, Malaysia and Indonesia. The company is bidding to supply pipes for a drilling project in India’s Krishna Godavari Basin, where large natural gas deposits are being exploited.

Oil-well pipe prices are also increasing in China, as local blast-furnace operators have cut down manufacturing in response to government policy calling for a decrease in steel production capacity. This reduced capacity is pushing up prices for steel billets, from which the pipes are manufactured.

Nippon Steel’s plant in Wakayama Prefecture, which produces oil-well pipes, has been operating at full capacity since April 2017.

For the first half of fiscal 2018, the company expects a 40% increase in Asian orders compared to the preceding six months. In the same term, it also plans to raise prices 10% over levels in the last half of fiscal 2017.