Tube 2014: Saving Weight: Tipping the Scales

The Pipe Market - Trends and Outlook.

The market for steel tubes has been recuperating following the 2008 recession, yet it still has to reach the pre-crisis levels. For Germany's steel tube industry, the year 2012 was characterised by weak market conditions within the EU, which was offset only in parts by rising demand from third countries, especially the USA, stated Frank Harms, responsible for markets and technology at the trade association Wirtschaftsvereinigung Stahlrohre (German Steel Tube Association). Current manufacturing trends are towards reduced weights, increased toughness and lower manufacturing costs.

The Nord Stream project

Huge projects, such as the construction of the Nord Stream pipeline, caused a boom for companies such as Europipe.   Europipe recently delivered 860,000 tons of piping for the first part of the pipeline running through the Baltic Sea, with a length of around 990 kilometers. The company was also the main supplier for the second part which will have a length of approximately 850 kilometers. Large-diameter pipes with a total weight of 714,000 tons were being manufactured. Nord Streamuses pipes made of special steel, which can cope with the strict requirements needed for lying on the seabed. The pipes were made of high-tensile steel according to the DNV OS-F 101 submarine pipeline standard. Wall thickness is between 27 and 41 millimeters, depending on pressure and depth. The pipe’s inner surface is coated in order to reduce friction between the gas and the pipe wall. The twelve meter long pipe sections receive an anti-corrosion coating on the outside after which they are coated with concrete. The concrete coating adds weight to the pipeline and increases its stability on the seabed.


Fracking stimulates steel tube demand

Worldwide steel tube production reached new record levels after growing six per cent to 150 million tons in the full year 2012.   Main growth factor was disproportionate growth in China, where steel tube production rose by eleven per cent to 74 million tons. China's share of the overall global steel tube production thus rose to 49.5 per cent, declared Frank Harms of the German Steel Tube Association (WVS).   Steel tube production without China grew 2.3 per cent, hitting 76 million tons. Despite increased demand from third countries, production within the EU27 contracted  from 14.1 to 13.8 million tons. Weak economic conditions in Southern Europe are to blame. In Germany, the production output fell to 3.14 million tons, a decrease of three per cent.   Harm expects worldwide demand for oil and gas to continue rising, which will lead to increased demand for steel tubes.Increased exploitation of unconventional oil and gas deposits through fracking is set to stimulate steel tube demand.   Continued development of infrastructure in emerging markets, especially China, is also expected to have a positive impact on demand for steel tube products. European manufacturers are cautious with their outlook for 2013, due to the persisting economic situation, adds Harms. Both the financial and sovereign debt crises in Europe and the USA however should have less of an impact due to state intervention in the mid-term. Inventory-cycle effects could lead to growing demand, if market expectations rose over the course of the year, as stocks would be increased.


Plastic pipes on the move

In contrast to the steel pipe market, which supplies the oil and gas industry with pipelines that can withstand great pressure and aggressive media, most customers of the plastic pipe market can be found in the building sector. Here, plastic piping is used for water and gas supply, or drainage.   The plastic pipe industry wants to enter other sectors too, for instance industrial applications. Germany’s KRV envisions “that by further developing plastics, innovative plastic piping systems will pave the way for substituting steel pipes in higher pressure ranges and diameters, thus enlarging the market.”

Opportunity for GRP pipes

Pipes made out of glass fiber-reinforced plastic are becoming increasingly popular for building and renovating pipelines. GRP pipes are especially being used “wherever extreme hydraulic requirements demand exceptional diameters”, explains Amitech Germany. Advantages include “permanent resistance against corrosion and abrasion.”  

Growth markets for steel pipes

Steel pipes will find growth elsewhere. Growth markets here include engineering, oil & gas, automotive, medical engineering, and aerospace. The aircraft sector is booming in the age of globalization. Demand is high due to fleet modernization and the need to decrease costs.Large-scale pipeline projects, such as South Stream and Nabucco, also result, if realized, in major orders for the pipe industry. In the case of South Stream the pipeline will be 3,600 kilometers long – around 63 billion square meters of gas would be pumped through the Black Sea from Russia to Southern Europe. However, at the earliest this would happen in 2015.   The Nabucco pipeline, planned to reduce natural gas dependency from Russia, requires pipes for a total length of 3,300 kilometers from the Caspian region to Western Europe. 

Huge markets in BRICS countries

The entire pipe sector has high hopes for the dynamically growing BRICS countries: Brazil, Russia, India, China and South Africa. Especially China and India are huge markets. In Russia and China, there are efforts to create an own aerospace industry.Russia’s oil & gas industry is of great importance. 

Export champion China

The BRICS countries don’t exclusively rely on imports. China exports great amounts of steel pipes itself.China is increasingly changing from a former steel pipe importer to a country that can satisfy its own demand, and more. In addition, the country is increasing its export activities, WVS noted.A similar, less obvious picture can be seen for welded pipes of up to 16“. Chinese producers are in a dominating position, even if this is not as evident as in the market for seamless pipes. According to the WVS,the largest producers in the large-diameter arena (over 16“) are China, the Far East and the CIS. However, the role of Indian producers is increasing.    

Specialization and quality

More than a few Western pipe producers are brooding in view of the current developments. How can they withstand competition from Asia? “Increasing international competition makes specialization a necessity”, declares Harms of the trade association WVS. Companies that can offer products with higher material quality, better tolerance levels, and cost efficient production will have better chances of prevailing. In addition, buyers of steel pipes expect low fault tolerances, a consistent level of quality, and delivery reliability. Low temperature properties are also an increasingly important issue. 

A further trend is to lower wall thickness, as thinner walls save weight. Sectors such as the car and plane industry want lighter products, which require less fuel. It also means less CO2 emissions. In the case of electric cars, less weight translates into higher ranges.

Losing weight is a trend

Buyers pay attention that pipes have a low weight. This tips the scales towards the current trend to reduce weight. Due to reducing weight by saving on materials, pipes are in part not produced as classic seamless or welded pipes, but as tailored blanks, which are rounded and welded.   Companies are also expanding subsidiaries in important industrial nations. Vallourec & Mannesmann Tubes is expanding its plant in Youngstown, USA,with a new production area. It produces small-diameter pipes, mainly for shale gas extraction. A new facility is put into operation in Changzhou, China. A new Vallourec & Sumitomo Tubos do Brasil steel pipe factory is beginning to operate in Jeceaba, Brazil.  

Western technology

China’s aspiration to become a large exporter of pipes is set to provide European machine builders and plant manufacturers with another market for their products. Chinese manufacturers namely rely on Western technology to be able to produce their wire range of pipes.

New strategies

Internet-based network and sales structures are becoming increasingly important for the pipe sector. In 2007, the company took an innovative approach. The start of in the Netherlands marked the beginning of the internet age for laser cutting. After offering internet-based procurement of 2D flat cuts in the market, started to offer tube and sheet metal processing by laser in early 2011.

New applications

While plastic pipes are increasingly finding their way into industrial applications, new, yet proven markets are opening up for the steel pipe sector. Deep-sea exploration and drilling projects, for instance still remain lucrative. The oil spill resulting from the explosion of the Deep Horizon platform in April 2010 in the Gulf of Mexico hasn’t changed a thing.Various new areas of application are presenting themselves for steel pipes. They include extraction of unconventional gases and sedimentation and fixation of CO2 emissions from power plants, states WVS. Renewables are also becoming an increasingly important market.

The sector’s problem children

However, the sector has to pay heed to elements of uncertainty. Rulings by the European Commission concerning climate policy are worrying. According to WVS, these will lead to higher costs in the medium term, “from which competitors outside of Europe remain exempt.” These concerns are also shared by other industries – despite an otherwise good outlook.