HOUSTON, TX January 31, 2022

Commitment to ESG Positions Tex-Isle as a Premium OCTG and Line Pipe Provider

Tex-Isle, Inc. (Tex-Isle), a leading manufacturer of oil country tubular goods (OCTG), line pipe, and standard pipe, today announced the findings of a third-party assessment of the company’s greenhouse gas emissions profile that revealed the company as a market leader in low-carbon and high ESG performance. Tex-Isle’s commitment to best practices places it in the top quartile of steel pipe providers in terms of Scope 1 and Scope 2 emissions. 

Steel Market Update

Steel Market Update

Given the significant delta between the U.S. market and global markets, steel importers had consistently been able to price HRC $300-$400 per ton beneath the current domestic spot price while still securing attractive margins.  It will be interesting to monitor the import price and volume as the domestic market comes back to a more reasonable level.

Over the next year, some of the large factors that will be able to move markets are the following: new domestic mill capacity coming online in the first half of the year, automotive demand, and trade issues. The following additions have already started commissioning or will over the next twelve months: Arcelor Mittal/Nippon Steel Calvert (1.65 million), North Star BlueScope (900,000), Nucor Gallatin (1.4 million), and Steel Dynamics (3.0 million).  It should be noted however, significant capacity has been idled or permanently dismantled in the U.S. as part of long-term strategic moves by some industry players.  Q3 automotive capacity utilization was down to 63 percent due to chip shortages.  This shortage of vehicles manufactured could take years to make up and should provide ample demand through at least 2022 and into 2023. 

Steel Market Update

Steel Market Update

Steel Market Update

Texas company announces new ERW pipe mill

Tex-Isle Inc is shifting from distributing to manufacturing steel tube and pipe for the oil industry using renewable energy and steel produced from recycled materials at its new electric-resistance welded (ERW) pipe-making facility in Robstown, Texas.

The Houston-based company, which has been a distributor of energy tubulars for more than 60 years, in January announced plans to open the new steel tubular mill in Robstown. The facility is scheduled for completion in the third quarter and will have the capacity to produce 350,000 tons per year, Tex-Isle said. Of that, 250,000 tons is slated for American Petroleum Institute (API) material and 100,000 for structural products.

Fastmarkets’ latest assessment for steel OCTG API 5Ct – Casing J55, fob mill US was $1,800-1,900 per short ton on May 25, up 19.35% month on month.

Steel Market Update

No matter where you look in the steel markets it is tough to find any sign of sustained downward pressure for prices. We thought we might have seen a market peak earlier in the month with the announcement that the European Union and U.S. government were exploring avenues for removing the 232 tariffs for steel. 

This resulted in near-term monthly futures contracts limiting down on consecutive days, but it was short-lived. The July contract traded at $1,644 a ton on May 11th before dropping to $1,451 on May 18th, an 11.7% drop, only to reestablish at $1,660 as of May 27th. The lion’s share of the pricing increases we have seen since last August have been driven by the strong automotive market, much of which calls for premium, value-added products like galvanized or cold rolled, which has left little supply available to standard hot rolled buyers. 

Import lead times, three to four months, and high prices, $1,480 to $1,510 provide a risky relief valve for some processors but are not enticing enough for consumers to step out and bring in sufficient tons to restock low inventories.

Steel Market Update

A question players in the steel space need to start asking themselves: Is this market different than previous bull runs? Since 2015 there have been six pricing cycles of varying lengths and amplitude. 

Steel Market Update

Our latest monthly update is much the same as the previous months’. Spot availability is non-existent, contract tons are being pushed out 10-12 weeks, and prices are up.

Steel Market Update

The Wall Street Journal recently published an article on the “bullwhip effect” in supply chains and how it is manifesting itself through the economy as supply chains have attempted to re-start from the strong downturns of the COVID pandemic.

 The name “bullwhip” is used as an analogy to show how slight changes in demand, the whip handle, can have outward effects on supply, the end of the whip, like the waves seen when swinging a bullwhip. In the steel market this is being illustrated by the fact that increased demand has resulted in an almost parabolic increase in pricing.

Steel Market Update

December and January saw little slowing down in the freight train that has been steel prices. Domestic Hot Rolled Coil has blown past the $1,000/ton level last seen in 2008 and is now $1,140/ton.

The supply shortage due to low inventories and a slow re-start of fully integrated facilities in the U.S. is now also being supported by a tremendous increase in scrap pricing, up from around $300/ton in October to a current price of $497/ton. 

Texas company announces new ERW pipe mill

HOUSTON, Jan. 14, 2021 /PRNewswire/ -- Tex-Isle Inc. (Tex-Isle), an industry leading provider of OCTG, Line Pipe, and associated services, today announced plans to open a new steel tubular mill located in Robstown, Texas in the 3rd quarter of 2021.  In 2009 Tex-Isle embarked on a vertical integration initiative, which, over the past decade has included the creation of two new divisions: Tex-Isle Coating in George West, TX and Tex-Isle Processing in Robstown, TX.  The greenfield project will be adjacent to the company's current OCTG heat treating, inspection, and threading facility in Robstown.  When complete, the mill will build on Tex-Isle's Asset Based Distribution® model and provide feedstock to its other facilities.  The mill will add to Tex-Isle's growing footprint in the coastal bend area and bring Tex-Isle's total capital investment in the region to nearly $100 million.

Chris Kayem, Tex-Isle's President, discussing the project.  "A pipe mill is the natural progression of our long-term strategic plan which started over a decade ago.  Our Asset Based Distribution® model of vertical integration combines the traditional benefits of distribution with the scope of a manufacturer, creating a unique blend of services for our customers.  Once complete, the new mill will dive a level deeper into our cost structure as we continue our crusade against inefficiencies in the supply chain.  Having these facilities, along with private ownership and a strong balance sheet, allows us to deliver customer first service and flexibility - which I'm certain will pay dividends to our clients, our community, and our company for years to come."

Steel Market Update

In a continuation of last month’s update, the entire steel market has continued its torrential move higher. Across the globe there are similar stories, with the takeaway being that this is a supply shortage. In an effort to shore up balance sheets consumers of steel allowed month to month supply chains to collapse, while steel producers deferred maintenance and idled any production they could. 

Steel Market Update

To say that steel prices have been on a run the past few months is an understatement. Climbing from July lows around $440/ton, domestic hot rolled coil prices are now safely over $700/ton, with futures contracts for December over $750/ton. The 60% plus increase in the spot price can be attributed to mills struggling to meet a strong resurgence in demand as the economy has reopened.  

Steel Market Update

The steel market’s delicate balancing act between increasing utilization and pricing has finally fallen apart. In the past few weeks, the cost of steel has seen sharp upticks around the globe on the back of rising raw materials costs and lengthening lead times. Further pricing pressure is being felt as mills have only tepidly brought back production capacity after the shutdowns earlier in the year as well as planned outages for some of the furnaces currently open. 

In the past week scrap prices have jumped around 10%, while domestic hot rolled coil has jumped 19% in the past month. A domestic price of $600 per ton for hot rolled coil is not out of the question, but market dynamics do not exist to hold prices much higher over the long term. Many of the domestic mills have announced immediate price increases, which may not even keep up with the current spot market’s upward trajectory. 

Steel Market Update

Domestic steel producers continue to play a chicken and egg game with pricing versus the industry utilization rate. With many industry participants thinking we have passed a bottom in domestic coil prices and lead times growing shorter, more mills have come back online. The most recent utilization rate for the week of August 17th was 61.5% or 1.377 million tons. Capacity utilization still lags the low 80% rate seen prior to the COVID shutdown but is above 60% for the first time since early April.

The spread between scrap prices and coil is still not above the ideal $200 per ton level for EAF participants, but with automotive demand rising again there is optimism. Higher activity levels in the auto industry increase both the supply of scrap in the market as well as the demand for premium cold-rolled and galvanized steels putting extra wind into the sails of market producers. 

Investing in Our Customer's Success

Tex-Isle developed proprietary steel grade to meet the performance requirements of horizontal drilling for 5.5” 20# production casing.

Executive Summary:

When tasked with delivering a high-performance product, our engineering team worked with our operations group to develop a reliable, cost-effective solution for our customers. By working with our steel providers on specific chemistries and dimensional tolerances, Tex-Isle was able to guarantee above API specifications for collapse, tension, and burst ratings. Our operations group’s tight production control during heat treatment ensures a “first time right” of ~98% on this grade.

Steel Market Update

In a continuation of the back and forth we are seeing across the entire economy, the domestic steel industry is struggling to find its footing. Hot Rolled Coil prices have deteriorated from their COVID recovery high of $520 per ton reached on June 11th.  Scrap prices have retreated as supply comes back online, although the price support it provided to sheet pricing has diminished. There was always an expected back and forth on prices as supply attempted to match demand, but the ~9% drop in coil prices has already claimed some as a victim. JSW Steel USA announced last week their plans to idle their Mingo Junction mill (1.5 million tons annually of HRC). The furnace was idled once earlier in the year, and had only been back online since mid-June. 

Several mills have restarted idled production in June and early July, which may lead to a further deterioration in sheet pricing if demand can not support the new capacity. Domestic mill utilization has continued to inch higher to 57.5%, but remains depressed compared to normal utilization rates. 

As the economy begins to open back up, the steel market as a whole is attempting to put a floor under prices. In May, many domestic Hot Rolled producers put through not one but two price increases totaling up to $100/ton. The first increase saw some success in bringing up prices, however the second hike has had less sticking power so far. As automotive plants have restarted for the last month or so, demand has started to pick up. Prices for domestic HRC have managed to stay close to, or above $500/ton since the beginning of the month and are on an upward trajectory. Capacity utilization in the U.S. has remained in the low to mid 50% range since May but appears to be moving up as well. USS announced recently their intent to restart production of one blast furnace at Mon Valley, JSW Steel will soon restart their Mingo Junction EAF, and there is talks from both Cleveland Cliffs and Arcelor Mittal of restarting some production to meet increasing demand from the automotive industry. This may result in short term pricing for steel as producers try to balance bringing capacity back on to meet uncertain demand.

In addition to rising demand, steel prices should feel increased price pressure from continued high scrap prices in the U.S., and a recent run up in the price of iron ore. Scrap has eased from its recent high of nearly $340/ton, but still remains high enough to cause pain for domestic steel producers. Iron ore’s recent surge is primed to cause a ripple effect globally. Iron ore futures rose up over 7% last week after Vale S.A., one of the world’s largest miners, was ordered by a Brazilian judge to shut down production at one of its mining complexes due to the large number of Covid-19 cases in the area. This complex represents more than 10% of Vale’s total production. The company is also under government scrutiny after a tailings dam collapsed in early 2019 killing over 250 people. Although Vale has maintained its previous guidance on total iron ore production for the year, the Dalian Commodity Exchange (DCE), has been forced to take measures to strengthen market regulation due to large market swings. This news coupled with the Chinese/Australian trade spat has the potential to push Asian metal prices higher.