Tenaris Nears Finish Line for $1.85 Billion Texas Steel Pipe Mill

Researched by Industrial Info Resources (Sugar Land, Texas)--Global pipe manufacturer Tenaris Global Services (NYSE:TE) (Luxembourg, Luxembourg) is set to commission its $1.85 billion steel pipe mill in Bay City, Texas, later this year. Industrial Info is tracking more than $3 billion in active steel pipe and tube manufacturing projects in the U.S.

Located on a 1,500-acre site in Matagorda County on the Gulf Coast, construction of the highly automated, 1.3 million-square-foot facility began in 2014. It will produce 600,000 tons per year of oil country tubular goods (OCTG), mainly casing and tubing used in drilling, as well as line pipe and other pipe used in producing or transporting gas and oil. Production is expected to ramp up to 10,000 tons per month by the end of this year. Tenaris, whose main operations are in Argentina, touts the project as its first grassroot facility in the United States. The project even prompted a visit late last month by Argentine President Mauricio Macri.

Already, Tenaris is starting up the heat-treatment and threading facilities at the mill, using pipe from other mills. The commissioning is well timed, as Permian Basin oil production is surging in West Texas and eastern New Mexico. For related information, see March 27, 2017, article - Rising Production, Attractive Geology Draw Producers to the Permian Basin.

Tenaris estimates that global demand for OCTG products in 2017 will increase in the range of 35-40% with respect to 2016, primarily in the U.S. and Canada, the company said in its first-quarter 2017 earnings release. During the first quarter of 2017, sales declined 4% compared to the corresponding quarter of last year, but rose 10% sequentially, mainly reflecting a strong increase in demand in the U.S and Canada, the company reported.

At Bay City, the installation of the hot rolling mill is "advancing firmly and it should start up in the fourth quarter," Tenaris Chief Executive Officer Paolo Rocca said during the earnings presentation. For more information, see Industrial Info's project report.

Rocca used the earnings presentation to tout the company's "Rig Direct" service system, which emphasizes greater coordination with clients and shortened lead times for pipe deliveries. He said it already was serving nearly 50 customers and 150 rigs in U.S. and Canada.

Tenaris also is restarting its Canadian mills to capitalize on the North American energy boom. The company plans to resume operations at its Prudential mill in Calgary following a two-year halt due to low oil and gas prices, along with the impact of unfairly traded imparts.

"After two very difficult years, it is energizing to be restarting production at our Prudential facility," Guillermo Moreno, vice president and managing director for Tenaris in Canada, said in a press statement in March. "Growth opportunities through our Rig Direct commercial strategy, greater stability in oil and gas prices, trade remedies against certain unfair trade, and a renewed commitment from our employees has given us the confidence to resume operations." The $3 million restart is slated for July. For more information, see Industrial Info's project report.

Rocca said during the earnings presentation that he expects Tenaris to prosper under the Trump administration. Tenaris has substantial steel pipe mill assets in Mexico that export product to the U.S., but Rocca appeared unruffled by Trump's promise to revisit the North American Free Trade Agreement (NAFTA). "I expect that there will be some renegotiation and every party will sit at the table to introduce changes or improvement in this, but we do not expect really a breakdown of [NAFTA]."

Even if NAFTA were to be dismantled, Mexico would continue to be an important trade partner with the U.S.," Rocca said, adding: "Remember also that Mexico has a deficit in steel against United States. [The U.S.] is exporting to Mexico more products in steel than Mexico is exporting to the United States, so in our case, especially, we wouldn't be disrupted even by cancellation of NAFTA. We will be able to respond with no major disruption."

Trump has also ordered the U.S. Commerce Department to draw up a plan to force U.S. pipelines to use steel that is made in the U.S. But Rocco has said he expects that the creation of some 600 jobs at the Bay City mill will allow Tenaris to continue to import certain pipes into the U.S., according to a March 27 article by Bloomberg.

Another big steel pipe-manufacturing project nearing completion in Texas is the $500 million seamless steel pipe melt shop addition at TPCO Enterprise Incorporated's Steel Pipe Mill in Gregory, Texas. As part of a multi-phase, $1.1 billion project, construction of the 500,000-ton-per-year melt shop is expected to finish up this summer. Also aimed at the oil and gas markets, the facility is owned by Tianjin Pipe (Group) Corporation, which says the project will be the largest single investment by Chinese company in a U.S. manufacturing facility. For more information, see Industrial Info's project report.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.