As demand is higher than production, prices for seamless tubes and pipes have increased by an average of 3-5% The previous year has changed a lot. A black swan in the form of a pandemic has made us more prudent, flexible, purpose-driven, and high performed.
By the end of 2020, it has been clear that COVID-19 is likely for long. Therefore, we have made rather guarded plans for 2021.
Our immediate goal has been keeping head above ground, and the rest ones ─ as one thinks fit.
But six months have passed. A good period of time to match our expectations with real trends, and the world tube market has several trends.
Firstly, demand is higher than expected
According to Fitch forecast, the world economy growth will be more than 6% this year. This is a very good value after its drop by 3.4% in 2020.
We become aware of economic growth in terms of the number of orders. We have more orders than expected. Centravis is still over-fulfilling the budget and, most likely, it will over-fulfil it by the end of 2021.
We have good demand for tubes and pipes due to the project businesses, namely in chemical, petrochemical, energy sectors. The projects those have been forced onto the back burner or slowed down are being implemented in full.
Our distributors are also active. The stocked products are sold quickly, they need to be replenished quickly, and this market sector is also OK.
But how long does this growth trend take place? It is difficult to make any forecast. It feels like this tube “fever” will soon be over. Many contractors have their senses of insecurity of the future; therefore they provide themselves with products for stocking.
Like, if a new wave of COVID-19 will take place, followed by quarantine restrictions. It is clear that everyone is calmer when a warehouse is full and tubes are available for a new project at any time. But there are no tangible reasons for long-term growth yet.
Secondly, a partial redistribution of the manufacturers’ market
As China cancelled seamless tube export benefits from the 1-st of May, Chinese companies will have to free some space in the seamless tube market. Their product cost increased by 15%-17%, and this is already has a meaningful effect on the market.
In addition, one of the world’s players, Tubacex (Spain), is down because of its employees’ strike action.
The manufacturer market has partially changed, and this caused another important trend, which is detailed below.
Thirdly, today we have a seller’s market, but not a buyer’s one.
As demand is higher than production, prices for seamless tubes and pipes have increased by an average of 3-5%.
Manufacturers have some advantages today. Customers have to accept both new prices and extension of delivery periods.
But this is no reason for euphoria. Our Company has no reason for euphoria, in any case.
We are very careful about recruiting and we are not going to increase our personnel artificially. The main thing is not the number of employees, but their performance. Therefore, Centravis strengthens the team selectively and keeps on improving production processes, including through lean techniques.
We also value our customers. The previous year crisis proved that long-term partners’ relationships are much more important than any benefits here and now.
2021 is a breathing period, but not a wishful thinking one. It is a key conclusion based on the today’s situation. These are very curious and lean times.
