Metal Bulletin Research Strategic Outlook for the OCTG Heat Treatment 2 | Page 4

A Strategic Outlook for the OCTG Heat Treatment, Threading, Coupling and Premium Connection Sectors out to 2020

2. Latin America
We are also forecasting growth in Argentinean demand. Buttressed by development of unconventional gas
assets, the country may retain its position as the largest gas producer. However, we are cautious on foreign
investment, thanks to a protectionist government and caution that capital controls and other issues may
impact development. Domestic output will remain elevated but reliant on the export market, which may
struggle over 2013/14.
In Venezuela, after low consumption levels in 2009/10, we are forecasting sharply higher consumption
over 2011-14 as investment returns to the sector. By 2016, we expect consumption to return to its previous
levels of 150,000 tpy. While this is a compound 12% growth rate, it is from very low levels. We caution that
this is subject to potential political disruption. However, we do not believe that proposed OCTG output will
return, with only limited production gains taking it to well below previous peaks.
In other markets, Colombian growth will continue through to 2014, as liberalisation and new exploration
contributes to the market size moving into line with Argentina. Other markets are likely to be stable to
slightly higher, as the development of unconventional gas assets continues and demand growth and
ongoing liberalisation continue to drive OCTG demand. Imports will primarily be from within Latin America.
We do not expect to see a dramatic change in the industry structure, with OCTG output dominated by V&M
in Brazil and Tenaris in other markets. Any variation in the threading capacity utilisation will be driven by
differences in local consumption patterns, as well as the level of integration of the production facilities into
the global supply chain.
Tenaris and Vallourec will continue to expand their presence in local markets by enhancing local threading
capacity both directly and via licensees. The use of third-party threading capacity by other major premium
threaders via licensing is also likely to be the main strategy for market penetration, particularly in smaller
markets. This offers some opportunities for growth for the independent sector – at least until the market
reaches a certain size.

2.2 Tubular plant profiles
Tenaris
Tenaris has the largest tubular capacity of just less than 2m tpy at four production facilities. Despite a
degree of flexibility in terms of output, OCTG has accounted for just less than half of the group’s Latin
American output.
Tenaris output in Latin America
Figure 39: Tenaris output in Latin America

Other pipe/tubes
output
53%

Source: MBR

OCTG output
47%

Source: MBR

This is in line with the group’s dedicated OCTG capacity in 2011 of about 920,000 tpy.
zz The Campana, Argentina-based Siderca seamless pipe mill is the largest facility in Latin America with
a total production capacity of 820,000 tpy, of which approximately 600,000 tpy of OCTG. The plant
uses a DRI-EAF facility with around 65% DRI, 35% scrap to produce round billet up to 310mm that is
fed into onsite seamless mills. For the finishing phase, the plant has three threading lines with a total
See www.metalbulletinresearch.com for more information

71