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Released August 06, 2024 | SUGAR LAND
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Researched by Industrial Info Resources (Sugar Land, Texas)--Tenaris (Luxembourg, Luxembourg) officials said last week they expect a variety of factors, including a high rate of U.S. imports for materials related to the production of oil and gas ("oil country tubular goods"), and consolidation in the oil and gas industry, will affect demand for its steel pipes and tubing.
Tenaris, which is a global manufacturer of steel pipes, tubing and related components, expressed the sentiment amid its second-quarter earnings results. In the related conference call on August 1, Chief Executive Officer Paolo Rocca said, "These factors will affect our sales and results in the second half, when we expect that our sales volume will be 10% to 15% below those of the first half."
In particular, he said imports of oil country tubular goods (OCTG)--particularly from Asia--remain high, "accounting for 40% of [U.S.] demand, which compared with 20% for other steel products." He added, "This level of imports is affecting pipe prices and is causing damage to the domestic industry."
Also on the call, President Luca Zanotti said the OCTG industry expected increased activity at the beginning of 2024, but that demand did not materialize, leading to an inventory backlog. On the flip side, he said imports dropped "a bit" in the second quarter and expects that trend to continue, due in part to trade-related actions, such as steel tariff increases.
In May, the Biden administration said it planned to increase the tariff rate on certain steel and aluminum products originating in China from 0-7.5% to 25% in 2024. For more information, see May 17, 2024, article - Biden Administration Announces 25% Tariff on Chinese Steel Imports.
In a related press release, the company said, in addition to high OCTG imports into the United States, "oil and gas drilling activity is being affected by ongoing industry consolidation, low natural gas prices and high financing costs for smaller operators. OCTG inventories have risen and prices continue to fall."
In the call, Rocca said that consolidation "has led to some stop and reflection by some of the operators." The consolidation includes two major mergers that are pending an anti-trust review from the U.S. Federal Trade Commission: Diamondback Energy Incorporated's (NASDAQ:FANG) (Midland, Texas) proposed acquisition of Endeavor Energy Resources, L.P. (Midland), and ConocoPhillips' (NYSE:COP) (Houston) proposed acquisition of Marathon Oil Corporation (NYSE:MRO) (Houston).
But Zanotti said those two particular transactions would ultimately be a positive for Tenaris, as Diamondback and Conoco are two key customers in its portfolio.
For more information on oil and gas consolidation, including completed acquisitions, see July 12, 2024, article - Oil & Gas Consolidation Continues with Devon's Buy of Grayson Mill Energy, and February 13, 2024, article - Diamondback, Endeavor Plan Merger to Create Third-Largest Permian Basin Producer.
Rocca also said two other factors have the potential to impact oil and gas drilling activity moving forward: interest rates, which are "still relatively high compared with what we could expect in the long term," and the result of the upcoming presidential election.
Tenaris' capital expenditures (capex) were $333 million in the first half of 2024, compared with $282 million in first-half 2023. The company did not disclose any future capex amounts.
Industrial Info is tracking $600 million worth of projects attributed to Tenaris worldwide, including two capital projects at its Blytheville Hickman Steel Tube Mill in Arkansas. The mill has a production capacity of 250,000 tons per year. Tenaris is wrapping up a project that entails constructing a new building to house a new bundling/strapping station plus supporting equipment, with construction expected to wrap up around the end of the year. Tenaris also is planning a 2025 capital investment program that includes installing new equipment and upgrading existing equipment to improve operations. Subscribers to Industrial Info's Global Market Intelligence (GMI) Metals & Minerals Project Database can read more information on the equipment-addition and capital-investment projects.
In the earnings conference call, officials also touched on Tenaris' footprint across the globe, including Argentina: Rocca said, for example, "The necessary stabilization of the macroeconomic environment is delaying investment in drilling and the development of infrastructure in Vaca Muerta."
Still, he pointed to capital investment in a new electric arc furnace (EAF) at its steel mill in Campana, Buenos Aires, construction of which is expected to wrap up this month. The new unit will replace an existing EAF to increase the production capacity from 850,000 tons per year to 950,000 tons per year of steel pipes. Subscribers can click here to read a project report.
Click here for a full list of active and planned projects from Tenaris worldwide.
Industrial Info is tracking $10 billion worth of active and planned projects worldwide aimed toward manufacturing steel pipes and tubes; the majority of the activity is in China ($2.8 billion), U.S. ($2.6 billion) and Russia ($1.96 billion). Subscribers can click here for a full list of projects.
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
Tenaris, which is a global manufacturer of steel pipes, tubing and related components, expressed the sentiment amid its second-quarter earnings results. In the related conference call on August 1, Chief Executive Officer Paolo Rocca said, "These factors will affect our sales and results in the second half, when we expect that our sales volume will be 10% to 15% below those of the first half."
In particular, he said imports of oil country tubular goods (OCTG)--particularly from Asia--remain high, "accounting for 40% of [U.S.] demand, which compared with 20% for other steel products." He added, "This level of imports is affecting pipe prices and is causing damage to the domestic industry."
Also on the call, President Luca Zanotti said the OCTG industry expected increased activity at the beginning of 2024, but that demand did not materialize, leading to an inventory backlog. On the flip side, he said imports dropped "a bit" in the second quarter and expects that trend to continue, due in part to trade-related actions, such as steel tariff increases.
In May, the Biden administration said it planned to increase the tariff rate on certain steel and aluminum products originating in China from 0-7.5% to 25% in 2024. For more information, see May 17, 2024, article - Biden Administration Announces 25% Tariff on Chinese Steel Imports.
In a related press release, the company said, in addition to high OCTG imports into the United States, "oil and gas drilling activity is being affected by ongoing industry consolidation, low natural gas prices and high financing costs for smaller operators. OCTG inventories have risen and prices continue to fall."
In the call, Rocca said that consolidation "has led to some stop and reflection by some of the operators." The consolidation includes two major mergers that are pending an anti-trust review from the U.S. Federal Trade Commission: Diamondback Energy Incorporated's (NASDAQ:FANG) (Midland, Texas) proposed acquisition of Endeavor Energy Resources, L.P. (Midland), and ConocoPhillips' (NYSE:COP) (Houston) proposed acquisition of Marathon Oil Corporation (NYSE:MRO) (Houston).
But Zanotti said those two particular transactions would ultimately be a positive for Tenaris, as Diamondback and Conoco are two key customers in its portfolio.
For more information on oil and gas consolidation, including completed acquisitions, see July 12, 2024, article - Oil & Gas Consolidation Continues with Devon's Buy of Grayson Mill Energy, and February 13, 2024, article - Diamondback, Endeavor Plan Merger to Create Third-Largest Permian Basin Producer.
Rocca also said two other factors have the potential to impact oil and gas drilling activity moving forward: interest rates, which are "still relatively high compared with what we could expect in the long term," and the result of the upcoming presidential election.
Tenaris' capital expenditures (capex) were $333 million in the first half of 2024, compared with $282 million in first-half 2023. The company did not disclose any future capex amounts.
Industrial Info is tracking $600 million worth of projects attributed to Tenaris worldwide, including two capital projects at its Blytheville Hickman Steel Tube Mill in Arkansas. The mill has a production capacity of 250,000 tons per year. Tenaris is wrapping up a project that entails constructing a new building to house a new bundling/strapping station plus supporting equipment, with construction expected to wrap up around the end of the year. Tenaris also is planning a 2025 capital investment program that includes installing new equipment and upgrading existing equipment to improve operations. Subscribers to Industrial Info's Global Market Intelligence (GMI) Metals & Minerals Project Database can read more information on the equipment-addition and capital-investment projects.
In the earnings conference call, officials also touched on Tenaris' footprint across the globe, including Argentina: Rocca said, for example, "The necessary stabilization of the macroeconomic environment is delaying investment in drilling and the development of infrastructure in Vaca Muerta."
Still, he pointed to capital investment in a new electric arc furnace (EAF) at its steel mill in Campana, Buenos Aires, construction of which is expected to wrap up this month. The new unit will replace an existing EAF to increase the production capacity from 850,000 tons per year to 950,000 tons per year of steel pipes. Subscribers can click here to read a project report.
Click here for a full list of active and planned projects from Tenaris worldwide.
Industrial Info is tracking $10 billion worth of active and planned projects worldwide aimed toward manufacturing steel pipes and tubes; the majority of the activity is in China ($2.8 billion), U.S. ($2.6 billion) and Russia ($1.96 billion). Subscribers can click here for a full list of projects.
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
