Japan steelmaker sees high-alloy oil pipe demand up 25% by 2011

Tag : high alloy steel
Japan's Sumitomo Metal Industries sees demand for high-alloy oilcountry tubular goods, used for oil and gas rigs, growing to around 26,000mt/year in 2011, or up by 25% from 2008, a company spokesman said Wednesday. The company estimates the current global high-alloy pipemarket to be roughly 20,000 mt/year. Oil and gas producers will be drilling deeper as there islimited availability of oil and gas retrieved from shallower wells. "Thereis increased demand from our customers, the energy majors, forhigh-grade pipes to be deployed in harsher environments," the spokesman said. Natural gas production is increasing in the US and other partsof the world, contributing to increased demand of high-alloy pipe. Gasdrill pipes need to withstand sulfuric gases that advance metal corrosion. Sumitomo Metal's high-alloy pipe contains up to 40% nickel andsome zircon, and less than 50% iron. In 2007, Norwegian oil producerStatoil signed a contract with Sumitomo for supply of 500-1,000 mt/year ofhigh-alloy pipe from 2008-2012. Sumitomo Metal estimates it currently holds a 90% share in theglobal high-alloy pipe market. It is a small market -- accounting for lessthan 0.5% of Sumitomo's annual steel production -- but profitable, accountingfor 11% of the company's operating profit. High-alloy pipe prices are five to30 times higher than those for carbon steel pipe. Other steelmakers have an interest in this profitable segmentbut Sumitomo Metal is confident that it will retain its 90% marketshare in the coming years. "Our strength is that we are quite self-sufficient ... we canmake steel for the pipe, while our possible competitors in the West would belooking for steel material suppliers," the spokesman said. The company produces various seamless pipe products, includingthe high-alloy pipe, at the 1.15 million mt/year Wakayama plant and the70,000 mt/year Amagasaki plant, both located in Japan. In addition tohigh-alloy pipe, it produces OCTG pipe with 13% chrome content as well aslow-alloy pipe. To expand its production capacity further, Sumitomo Metal hasset up in Brazil a pipe joint venture with Vallourec, a French pipe producer. Construction work for the 600,000 mt/year Brazilian pipe plant isexpected to start by the end of this year, and is slated for completion inmid-2010. For similar news, request a free trial to Platts Steel MarketsDaily at http://www.platts.com/Request%20More%20Information/index.xml?src=story or subscribe now at http://getsteelmarkets.platts.com