Seamless Pipe Production Capacity GCC Sept 8 9, 2014

Transcription

1 John Blomberg, Director, Duferco SA, Switzerland Majed Al Dawas, Commercial Director, Jesco, Saudi Arabia Seamless Pipe Production Capacity GCC Sept 8 9, 2014

2 Our topics today Seamless pipe production capacities in the GCC Seamless pipe consumption in GCC and in all MENA Challenges facing local seamless producers And an update on Jesco, Jubail, Saudi Arabia

3 GCC Local Seamless Suppliers

4 Major GCC Seamless Suppliers Jesco, KSA 450,000MT seamless rolling and finishing, KSA ArcelorMittal, KSA 600,000MT seamless rolling and finishing, KSA Saudi Seamless (V&M), KSA estimated 100,000MT heat treating & threading, mainly premium connections (importing green pipes) Tenaris, KSA estimated 35,000MT threading, premium connections, KSA (importing plain end OCTG) GIPI (TMK), Oman - 50,000MT finishing of ERW large diameter casing, and potentially also TMK seamless plain end Theoretical MENA Capacity approx.: About million (however, real production capacity depends on product mix)

5 Why these investments in local capacity Local Demand: GCC is the world s leading hydrocarbon supplier and hence consumes vast quantities of API pipes Local Wealth: GCC economies combined GDP is today over $1.5 trillion up from $713 billion in 2006 (>$30k per citizen) Local Employment: GCC population grew from 33 million in 2004 to 47 million in 2013 increasing dramatically the need to create local industries and job opportunities Large Importer: And, the region has up until recently been almost 100% reliant on imports of API pipes

6 The desire to localize production of seamless is facing a wave of imports

7 Why such large import volumes? Several prestigious local NOC s require big quantities of OCTG and Line Pipe, both in API and Premium grades and finishes Import trend is accentuated by trade restrictions / or commercial barriers elsewhere that distort global flows in seamless pipe: EU dumping barriers USA dumping barriers Canada dumping barriers Much of Central & South America dumping and / or commercial barriers India recently restricted Chinese seamless imports Result = seamless trade flow to open markets, such as MENA, causing a local over supply

8 Import statistics Country Type Kuwait OCTG 130,744 29, , , , ,131 LP 43,593 49,156 59, ,564 60,516 81,350 Saudi OCTG 257,097 49, , , , ,888 LP 168, , ,054 89,447 90, ,030 Qatar OCTG 46,211 37,666 17,159 19,879 42,494 18,222 LP 20,314 5,636 8,460 12,979 9,475 7,799 UAE OCTG 157, , , , , ,890 LP 249, , , , , ,903 Oman OCTG 85,816 24,872 63,377 92, , ,753 LP 20,041 4,424 32,756 24,051 67,747 18,021 Total GCC OCTG 677, , , , , ,884 LP 502, , , , ,103

9 Country Type Algeria OCTG 199, , ,305 50,387 52,371 32,812 LP 210,267 52,512 96,934 76,625 28,093 72,467 Libya OCTG 87,929 76, ,690 30,668 13,944 35,775 LP ,037 11,705 7,681 14,038 Egypt OCTG 119, , , , , ,092 LP 73,252 34,612 58,237 44,716 71,007 60,310 Syria OCTG 37,384 64,390 40,612 35,375 10, LP 24,378 21,250 10,920 18,104 1, Iraq OCTG 3,413 56,745 45, , , ,733 LP 16,912 35,142 39,503 43, , ,699 Yemen OCTG 19,706 4,937 17,431 1,915 5,016 3,744 LP 3,209 2,655 3, ,801 Total OCTG 466, , , , , ,200 LP 328, , , , , ,152

10 Total MENA Seamless Market If you consider local production plus imports, we estimate the MENA Seamless market (OCTG & LP) to be: Item OCTG '565 1'166' LP ' ' Total '796' This does not include Iran that likely would add 300,000 tons or more to the total

11 Major suppliers to the region (cumulative, , in MT) Shipments to MENA % Share 2013 Tier 1 OCTG 313' ' '094 30% Tier 1 LP 103' '494 76'563 9% China OCTG 453' ' '316 31% China LP 434' ' '003 60% Tier 1 Mostly Premium Material or regular API for IOC s or countries that do not accept Chinese Chinese Mostly API commodity grade and API connections

12 Where does this leave local producers? Challenging environment Commodity API pricing depressed by subsidised Chinese imports Premium segment dominated by Tier 1 suppliers And local NOC s that still have not fully changed buying practises to reflect local supply chain options What must be the response by local entities Seamless producers: develop premium connections and grades as well as supply chain capabilities NOC s: modify buying habits to reduce pipe inventories, emphasizing the short delivery times available from local seamless suppliers Governments: prevent predatory trade practises by foreign seamless suppliers and enforce local content rules to allow local seamless producers time to stabilise operations and product capabilities

13 JESCO An update

14 Jesco, Jubail, Saudi Arabia FQM mill supplied by Danieli, $800 million investment Complete with rolling mill, heat treatment, finishing, coupling shop, laboratories 450,000 metric ton capacity out of which 230,000 is heat treated 4.1/2 16 inch size range Capable to make most API grades including sour service and high collapse products Almost 4 full years of operations 40% Saudi employee base

15 Our accomplishments to date Major supplier to Aramco of both API Casing and Line Pipe Successfully supplied through Q125 casing, and X70 sour service line pipe Successfully supplied premium connections in large volumes Completed tests in Europe on a Cal IV premium connection on internally produced T95 and currently completing testing of a second connection Approved by many major NOC s in GCC & MENA Supplied over 230,000 tons of casing to North America gaining wide acceptance among many end users

16 Jesco s positioning for the future Working to expand capacities: Increase finishing capacity to 450,000 tons Increased heat treat capacity to 230,000 tons Continuing R&D into more premium connections and grades Working to diversify our Bloom supplies: Bloom supply now includes MENA suppliers with quick lead times Analysing opportunities to Vertically integrate into steel production Expand production range to cover tubing sizes Expand our capabilities locally to offer full supply chain services

17 Thank you