Volume 11 - Issue 54
/ June 2022
281
https:// www.amazoniainvestiga.info ISSN 2322- 6307
DOI: https://doi.org/10.34069/AI/2022.54.06.27
How to Cite:
Korneyev, I. (2022). Current view on the study of current problems of price setting for pipe products: forecast of trends. Amazonia
Investiga, 11(54), 281-292. https://doi.org/10.34069/AI/2022.54.06.27
Current view on the study of current problems of price setting for pipe
products: forecast of trends
Visión actual sobre el estudio de los problemas actuales de la fijación de precios de los
productos tubulares: previsión de tendencias
Received: May 30, 2022 Accepted: June 22, 2022
Written by:
Korneyev Ivan112
https://orcid.org/0000-0001-9595-4728
Abstract
The purpose of the study is to determine the
factors influencing the price of tubular products,
taking into account the integration of the industry
in the global supply chain.
The methodological basis of the study was the
method of trend analysis in determining trends
with indexes of prices of tubular goods; the
method of comparative analysis to identify
structural shifts in the geographical and product
structure of exports and imports; the method of
deduction and induction in determining the
position of the pipe industry in global supply
chains; method of correlation-regression analysis
to identify factors significantly affecting the
price of tubular goods.
The scientific novelty of the results of the study
consists in singling out current problems
significantly affecting the price of tubular
products and constructing a correlation and
regression model to identify the positive and
negative correlation of factors affecting the price
of tubular products. The practical value of the
results of the study consists in the development
of recommendations for the identification,
analysis, and evaluation of price structure for
tubular products. Prospects for further research
will consist in the development of a set of
scientific and methodological provisions on the
participation of the pipe industry in global supply
chains.
The results can be considered as a holistic
concept to identify problems significantly
affecting the formation of prices for tubular
products, taking into account structural shifts in
supply and demand in the global market.
Key words: tubes, pipes, price, tubes industry,
steel tubes.
112
MBA, EMBA CEO LLS Plant Modern Technology of Isolation 121357, Moscow, Russia.
282
www.amazoniainvestiga.info ISSN 2322- 6307
Introduction
The pipe products market is a global player. Pipe
products are deeply integrated into global supply
chains, as they enable the operation of a wide
range of industries. The International Tube
Association (ITA) is the international platform
for cooperation among pipe manufacturers. The
association is a provider of technological
changes and innovations in the industry.
Modernization of production facilities, the
introduction of innovations, standardization, and
certification of products leads to increase of
production costs and accordingly to the growth
of prices. Standardization of carbon steel welded
pipes must comply with quality management
systems ISO 9001, ISO 14001, and OHSAS
18001.
The global market for pipe products is
represented by a wide range of pipes for the oil
and gas sector and other sectors, Fig. 1.
Figure 1. Product segments of pipe production.
Resource: SPA Securities Limited (2020)
Industry segments of the pipe industry are
constantly expanding, but the basis is the oil and
gas sector, the energy sector, and the automotive
industry.
Structural changes by industry segments, and
consumers of the pipe industry, for ten years, are
shown in Fig. 2.
Pipe Sector
Oil & Gas
E&P Seamless
Transport
HSAW
LSAW
ERW
Non-Oil
Gen. Engg,
Auto, Power
Plants Seamless
Water&
Sewage
DI/SI
HSAW
ERW
Metro, Airport,
Malls ERW
oil and gaz; 61
automotive; 11
mechanical
engineering; 7
building and
construction
activities; 3energy; 16
chemical and
petrochemicals;
1
others; 1
2010
Korneyev, I. / Volume 11 - Issue 54: 281-292 / June, 2022
Volume 11 - Issue 54
/ June 2022
283
https:// www.amazoniainvestiga.info ISSN 2322 - 6307
Figure 2. Structural changes by industry segment for 2010 and 2020, %
Resource: Care Rating (2021)
According to Figure 2, structural change has
shifted by 10% over the past 10 years from the
oil and gas sector. This trend is not due to
production cuts but to sanctions against Russia's
oil and gas sector, which launched a military
aggression against Ukraine in 2014. A positive
trend is structural shifts of 4% in the energy and
automotive sectors, driven by changes in
alternative energy and the development of
electric and hybrid cars. Positive shifts of 2%
were observed in the engineering and
construction sectors.
Structural changes in the production of steel
pipes over 10 years showed significant shifts,
which actualizes the need to forecast prices in
individual industry sectors and the study of
factors affecting them.
Literature Review
The pipe products market is studied by analysts
of the international level: Gunther Voswinckel -
President of ITA, as well as specialists of
regional markets Volkova (2021), Drobot &
Veremeeva (2018). Besides ITA, analytical
papers on trends in the pipe market are prepared
by companies and agencies: BP Equities Pvt.
Limited, Care Rating, Eurofer, Global “Steel
Pipe Market”, Freedonia, Pipe Industry
Development Fund. An assessment of pipe
production embedded in global value chains is
made in Mattera (2018). The author used cost-
output tables to calculate the comparative
advantage for each product type and estimated
their position in the steel production market for
individual countries, which reflects the role of
each product type's production. The study reveals
the country's specialization based on the
calculations, and the Cost-Output tables reveal
the country's position in global value chains.
The study of the North African regional market
in global supply chains is devoted to an article
(Giovannetti & Vannelli, 2020). The authors
based on the Economic Complexity Index (ECI)
and the Product Complexity Index (PCI). Spatial
positions of related products for HS 730630
“Pipes etc nes, iron/steel welded nes, diameter
<406.4m” were studied at the disaggregated level
(6 figures).
A comprehensive study of South African
participation in global value chains is presented
in (Rustomjee et al, 2018). The authors
demonstrated the value chain for the more
concentrated pipeline segment, revealing a
propensity for price collusion and market
allocation. The book noted Arcelor Mittal's
abuses, pointing to the company's market
dominance, therefore pointing to the need for a
more competitive policy to lower steel prices.
A study of product price changes in Latin
American exports is conducted in Fujii-Gambero
& Morales-López (2021). The authors look at
production depending on the level of export
sophistication by monitoring the unit price of
exports of petrochemical chain, iron, and steel
production.
An article Abramova & Garanina (2018) deals
with topical issues of modernization of Russian
multinational companies under sanctions. The
article presents four types of global value chain
(GVC) modernization strategies.
The article (Drobot & Veremeeva, 2018) is
devoted to important aspects of the impact of
oil and gaz;
51
automotive;
15
mechanical
engineering;
9
building and
construction
activities; 5
energy; 18
chemical and
petrochemica
ls; 1others; 1
2020
284
www.amazoniainvestiga.info ISSN 2322- 6307
anti-dumping measures, because the market of
steel products, which directly affects the price of
products if anti-dumping measures are taken, is
the most exposed to anti-dumping investigations.
The market for civil engineering, which accounts
for around 5% of global pipe production, is seen
by analyst Gunther Voswinckel as an attractive
market for pipe manufacturers. The impact of the
pandemic on this market segment in 2020 was
much less severe. Some regions, such as the US,
managed to avoid negative growth altogether.
The construction market is growing steadily
along with GDP growth and is expected to
expand in 2022 (Voswinckel, 2022). Thus, we
are witnessing gradual positive changes in the
structure of demand for pipe products.
The pipe industry in the global market is
represented by large multinational corporations.
TOP Manufactures in Steel Pipe Market are:
Nippon steel and sumitomo metal corporation,
Baosteel Group corporation, Arabian Pipes
Company, American Cast Iron Pipe Company,
JFE Holdings Corporation, United States Steel,
Arcelor Mittal, Evraz Plcevraz plc, Anhui Tianda
Oil Pipe Company Limited, TMK Group,
Zekelman Industries, Hyundai Steel Company,
Steel Pipe Market Share (Wicz, 2022).
According to Arcelor Mittal Flat Carbon Europe
(Arcelor Mittal, 2021), which has more than 30
years of experience in pipe steel, welded pipes
for the oil and gas sector, delivers more than
450,000 metric tons of hot-rolled steel annually
to the global pipe industry.
Methodology
The article uses trend and correlation analyses to
study the dynamics of export prices for pipes,
making it possible to identify periods of decline
and growth in export prices. The analytical
material was obtained on the basis of TradeMap
database and FRED Economic Data.
The forecast method is based on data obtained
from the U.S. Bureau of Labor Statistics (Fred,
2022). The forecast horizon of 5 years was
carried out by the method of linear regression in
Excel.
The analysis of the pipe market was performed
by means of geographic and product structure of
export and import of pipes for 2012 and 2021,
which enabled the definition of structural shifts
in the global trade of pipes and identification of
trends in pricing policy.
The correlation and regression analysis revealed
the factors influencing price changes for steel
pipes.
Results and Discussion
Product prices correlate quite strongly with
export trends, as China and Russia will mostly
meet their domestic demand. But if we look at the
structure of demand by industry, exports are a
priority for manufacturers. Global exports of
tubular products by HS 7303-7307 are shown in
Fig. 3.
Figure 3. HS 7303-7307 World Pipe Exports Trends 2013-2021, $ billion U.S.
Resource: (TradeMap, 2022)
Based on Fig. 3 trends reflect a significant drop
in exports from 2013 to 2016 of nearly 45% to
$73.5 billion. In 2020, the pandemic resulted in a
17% drop to $62.3 billion, and in 2020, due to the
pandemic. This was due to a decrease in market
demand due to the closure of many plants or a
shift to part-time production. Growth trends may
be driven by higher prices, requiring a price
index analysis.
Volume 11 - Issue 54
/ June 2022
285
https:// www.amazoniainvestiga.info ISSN 2322 - 6307
Global steel pipe demand will grow 3.5%
annually to 79.7 million metric tons in 2019. This
slowdown will reflect slower construction
activity in China and less oil and gas exploration
in North America. Steel remains the dominant
pipe material in use in the energy sector but will
face more competition from plastics in other
markets.
Freedonia's (2016) study estimated the global
steel pipe market in 2016 at a physical volume of
67.1 million metric tons.
According to the Global “Steel Pipe Market”
(GlobeNewswire, 2022), in 2020, the largest
segment of the global steel pipe market was
$42,580 million. By the end of 2027, it is
expected to reach USD 51,490 million. This is at
a CAGR of 2.2% during 2021-2027. Thus,
according to 2020 data, 2/3 of the market for
tubular products is the steel pipe market.
The dynamics of producer price indices are
formed on FRED Economic Data. In order to
identify problems in the pricing of tubular
products, let us analyze the dynamics of the
producer price index for the sectors: the
production of iron and steel tubes and tubes made
of purchased carbon steel and the producer price
index for the product: steel metal tubes, Fig. 4
and 5, respectively.
Figure 4. Producer price index by industry: production of ferrous and steel pipes and tubes of purchased
steel: pipes and tubes, carbon.
Resource: U.S. Bureau of Labor Statistics (Fred, 2022).
The data in Fig. 4 reflects the fall in the price
index in 2016, but in 2020 the fall was
insignificant. Thus, the reason for the decline in
exports in 2016 was a significant drop in prices.
However, in 2022 there is a sharp increase in the
price of carbon (with coal) pipes, almost 2 times
to 250.
Figure 5. Producer price index by commodity: metals and metal products: steel pipes and tubes.
Resource: U.S. Bureau of Labor Statistics (Fred, 2022).
286
www.amazoniainvestiga.info ISSN 2322- 6307
Based on the trend in Fig. 5, the steel pipe market
shows a similar trend as the carbon pipe market.
According to the forecast we made by the linear
function, there will be a gradual increase in prices
for the next 5 years.
According to the ITA President (Voswinckel G.,
2022), the pipe price index has increased by
about 80% since January 2021. In any case, long-
term pipe contracts could not benefit from this
increase in pipe price on the spot market. In
contrast, most pipe products suffered from the
fact that they could not pass on price increases to
the cost of production (e.g., higher energy and
materials prices).
The three major segments of pipe and tube
production reported subsequent production
volumes. The seamless market updated about
+6%. The most significant slope was recorded
for seamless pipe in the U.S. (+22%) and Japan
(+15%). Welded tubes >16 OD (>406mm), with
losses to 27% in 2020, the market recovered by
about 8% in 2021. The best recovery was
reported by Japan (+23%). Only Europe still saw
a significant drop in production in 2021 (– 15%).
It is necessary to supplement the understanding
of the pricing problems in the pipe market with
the analysis of the product range and geographic
breakdown, which helps assess the scale of sales
and, accordingly, the scale of the problems.
The structure of global pipe exports for 2012 and
2021 is shown in Fig. 6.
Figure 6. Structure of global pipe exports for 2012 and 2021, %
Resource: Made by the author based on data (TradeMap, 2022)
Accordingly, Fig. 6. The structural shifts in the
product exports occurred in the direction of
reducing the nomenclature of HS 7304 from
37.1% to 19.5%, i.e., almost 2 times. The share
of HS 7306 tubes rose from 25.7% to 29.7%, i.e.,
by 4%, so the demand for them in 2021 increased
significantly.
Let's analyze the geographical structure of HS
7306 pipes export, Fig. 7.
Volume 11 - Issue 54
/ June 2022
287
https:// www.amazoniainvestiga.info ISSN 2322 - 6307
Figure 7. Geographic structure of 7306 pipe exports for 2021.
Resource: Made by the author based on data (TradeMap, 2022)
The data in Fig. 7 data reflecting the cumulative
share of exports is occupied by the EU countries
- 29%, and China - 15%. The cumulative share of
the top 15 exporting countries accounts for 76%.
In monetary terms given by TradeMap, the pipe
market under HS Code 7306 for 2021 was $820.8
billion. US dollars.
According to ITA estimates, China produced 96
million tons of steel pipes in 2019, which is 55%
of global production, in the seamless pipe sector
its share is 65%.
Analyzing the global pipe market, we should
note the positions of the leaders occupied by the
EU countries and China, which, in turn, as active
participants in the global supply chains of
intermediate products (pipes) significantly affect
the price of products at each stage of production.
Due to the fact that China, starting from May 1,
2021, abolished export benefits for its
manufacturers of seamless pipes, Chinese
companies will have to squeeze in this market.
Their products have become 15-17% more
expensive, which is already having a noticeable
effect on the market. In addition, one of the
global players, Spain's Tubacex, did not work
due to a strike by its workers. The producers'
market has partly changed, and this has caused
another important trend, there is a sellers' market
rather than buyers', as demand overtakes
production. According to these trends, prices for
seamless pipes have risen - by 3-5% on average.
For example, experts in the Indian market have
noted positive changes in the production of
carbon and steel pipes, which is one of the key
domestic market infrastructure development
sectors. The overall size of the industry has
grown at an ambiguous rate over the past four
years and is now estimated at 60,000 crore
rupees. The major growth drivers for the industry
include demand stemming from domestic water
infrastructure, oil exploration, and
transportation, construction, irrigation,
infrastructure, and expansion of gas pipelines
such as the national gas grid and urban gas
distribution. Although the COVID-19 pandemic
caused some disruption, the industry has seen a
V-shaped recovery after restrictions were lifted
and exceeded before COVID, as evidenced by a
16.61% increase in steel pipe consumption in
March 2021 compared to March 2020.
During the fiscal year 2020-21, however, the
industry recorded a decline of nearly 15% due to
a drop in production and consumption during the
global quarantine period.
Going forward, CARE Ratings believes that the
industry is resilient enough to return to a growth
path, although it is unclear to what extent
industry players will be able to combat the surge
in commodity prices and protect their
profitability. The industry has felt consolidation
with the increasing dominance of larger players,
especially in the electric welded resistance
(ERW) segment, which has been the most
fragmented historically. The operating margins
of the industry's major players increased by