API steel outlook defies oil and gas supply uncertainty

Disruption to Red Sea shipping routes caused by attacks on cargo vessels did not trigger the expected uplift in oil and gas prices.

Despite upward price pressure resulting from escalating tensions in the Middle East, supply disruptions in Libya and the ongoing Russia-Ukraine conflict, the price of Brent Crude remains below USD80 per barrel – around 17% down on last September’s 2023 peak of USD94.

Last year the annual average price of Brent Crude oil was around USD20 per barrel less than the 2022 average. Current global supply challenges are placing upward pressure on oil prices. However, weak global economic growth forecasts for 2024 are likely to limit any upward price movements.  

Nonetheless, MEPS International's analysis of demand for the American Petroleum Institute (API) certified steel required by developments in the oil and gas sector indicated a positive outlook.

Demand for API steel

Steel market participants continue to report that the short-term outlook for the line pipe market remains positive, particularly for large-diameter API pipe. There is still an encouraging number of enquiries for projects in several regions, including the Middle East, United States and South America.

The UK government's recent granting of new licences enabling companies to drill for more oil and gas in the North Sea, meanwhile, is likely to boost activity in that region.

EU X60/X65 hot rolled plate selling values were unchanged from the previous quarter and are regarded by most as being at the bottom of the current price cycle.

Following a decline in offshore wind requirements, where programmes are being delayed by high borrowing rates, increased volumes of API plate are currently being made available by producers.

Consequently, API plate mill capacity remains good but is expected to tighten in the second quarter of 2024 when more projects are released.

EU X60/X65 hot rolled coil prices showed a slight increase quarter-on-quarter as a result of rising mill input costs, despite demand remaining at a low level.

Risk to Asia-origin imports

In Asia, X60/X65 hot rolled plate prices were also unchanged from the previous quarter and are comparable, in euro terms, to those offered by European suppliers. As a result, there is available capacity in the region and new production lead times are short.

Attacks on cargo vessels destined for the Suez Canal have prompted many shipping companies to detour around South Africa’s Cape of Good Hope, while others have raised the price of transit. The resulting issues may further limit the interest in importing Asian API plate and coil into Europe in the near term.