JimL, hello,
My take is slightly different. Late '99 steel prices were around $650/mt, now they're around $900-950. Forward contracts for 2001 are looking for about $1100/mt or higher.
For reference, steel has historically been $1100/mt for <$20 oil, or this is about what it sold for in '96-'97.
The mills and suppliers are all saying that their inventories (old stocks) are nearly depleted, which means that prices are headed even further up, IMO, because the price of smelting and milling is energy related - unless it's coal fired.
I think the current slight softness in the prices has more to do with the expectations shortfall in Q4 drilling activity. And this "working through high-cost inventories" comment is, to me, BS considering that energy costs are the major factor in play.
My conclusion is that the OCTG / drillpipe mills will be very busy next year, but they will find themselves squeezed between higher demand and more intense competition from foreign (state owned) mills with cheap energy supplies. Hence a squeeze on profit margin.
Having said that, I've got a pretty good position in GRP right now, largely because of their leadership in drillpipe.
Good luck to All, (got my absentee ballot a few minutes ago - if an Aggie can do it you can too!)
Aggie |
