Part of MST’s five-year, $50 million expansion was an improvement in its pickling operations
Above: Part of MST’s five-year, $50 million expansion was an improvement in its pickling operations.
February 2019 - As a manufacturer of cold-drawn seamless tube and pipe, supplying boiler tube, mechanical tube, and carbon and alloy pressure pipe for 90-plus years, MST Seamless Tube & Pipe is in a position to comprehend and analyze the markets it serves.
MST’s sales leader expects that business conditions and supply-demand balance should remain strong and stable, respectively, through the first half of 2019.
Dean Daniels, general manager of tube and pipe sales at the South Lyon, Michigan-based producer, provides some context before plunging into forecasting.
“The tariffs that went into place during second quarter 2018 created some uncertainty where people would source material. During late spring, early summer this caused an acceleration in our business, and business was good to begin with. For four to five months, our lead times became exaggerated,” Daniels recalls.
SBQ bar exits the rotary hearth furnace at about 2,500 degrees Fahrenheit, en route to the piercing mill to become a tube or pipe shell.
“At this moment, the market is back in balance. Everyone is aware of the effect of tariffs and supply and demand are in balance. Business conditions are strong. Pricing is going to be stable through the first half of the year.”
Pipe and tube manufacturers that are part of the oil and gas industry supply chain, however, are feeling the “Permian pause.” A great deal of MST’s products are sold into the oil patch “and the majority of that work is on the well completion side. The number of wells that were drilled but uncompleted have grown in the past year. Companies drill them but aren’t fracking.”
Daniels explains that in the Permian basin, located across west Texas and southeast New Mexico, “What they are producing is over and above what the pipelines can remove. There’s a bottleneck in pipeline capacity.” New capacity is expected to open “toward the end of 2019, and significantly more in 2020.”
The sticking point was infrastructure rather than permitting and regulatory issues, Daniels says. “Supply grew faster than pipeline capacity. By the middle of this year, we believe that for oil and gas industrywide, completions are going to pick back up to normal levels.”
Game on
MST has been able to shrink lead times on new orders—“they are now at four to six weeks, and we can turn around orders faster than that,” says Daniels.
MST sources special-bar quality from domestic bar mills such as Steel Dynamics Inc. and Gerdau Special Steel. “When our well completion customers come in and say ‘game is back on,’ we have inventory on the ground to respond to that.”
He credits those long-term relationships with the SBQ mills. “All of our raw material is melted and manufactured in the U.S. That gives us a chance to respond to customers’ change in needs.”
MST’s trademarked Blue Diamond coated material moves down the line.
Because of this domestic sourcing, MST did not have to worry about importing raw material laden with tariffs, although the Section 232 decree did “cause some pricing pressure” all along the chain, from the bar mill to pipe and tube drawing to the end users.
Domestic bar producers announced three price increases last year. “But now everyone knows about it, and if there was sourcing difficulty for some customers, that has since been worked out.” Daniels notes that due to the tariffs, there was more of a supply disruption and a lengthening of lead times on the welded DOM business compared with cold-drawn seamless.
Reshoring
The tariffs did prompt MST to develop the ability to produce a particular grade of seamless tubing that previously could only be imported from Brazil. “A large part of what we make is A106, API. The size range is 1⁄2-inch through 2-inch diameter. There is a niche product, supplied via Brazil, called HF ALKY; it’s defined in subsection S9 of A106, meant for hydrofluoric acid refinery applications.” According to Daniels, the HF product “has lower residuals than standard A106 and requires a special melt. We were able to find a domestic supplier to provide that chemistry for us. That is something where the material was available as an import product from Brazil but they hit their quotas.”
The grade may or may not become “a huge growth product, but what separates us from our competitors is we offer this so we can solve customers’ problems. We found good customers had this need and we fulfilled that need. We can also produce galvanized, threaded and coupled, and provide carbon equivalency requirements. So when a distributor approaches us, they can fill out a truckload with different requirements, all from our mill.
“This was just another product that customers needed and we figured out how to create a solution. That was directly due to the tariffs. And it can be delivered close to standard lead times. It’s another arrow in our quiver,” Daniels says.
Material is loaded via flatbed for shipment to one of MST’s customers, whether stateside or abroad. The producer ships worldwide.
Upgrade
MST is upgrading its ERP system this year. Daniels says it should help better track material flow in real time, which should push efficiencies in production. The company completed a five year, $50 million expansion in 2015, and this year is increasing capital expenditures on targeted upgrades, “like modernizing cranes and improving the infrastructure. No one is standing still. We always want to get rid of bottlenecks, and the new ERP system gives us ability to find the inefficiencies and evaluate cost structure.”
Since order rates are up, MST remains in hiring mode. All but a handful of positions have been filled but “with low unemployment rates, there is definitely a labor shortage, especially for skilled trades,” Daniels says.
Knowing the customer
Daniels says MST has a strong reputation for quality customer service.
“That is the feedback we get for our outside and inside sales, and communications from our shipping department. We employ a lot of [industry] veterans who know our customers well and for many years. That helps. And it’s down to lead times. Because of those great relationships with our suppliers, we maintain the correct inventory so when a customer needs material in four or six weeks, they will have it. In a refinery emergency, we can supply seamless pipe in a week or two.
“Our first instinct is not to shy away from a customer’s problem,” says Daniels. “We will instead try to meet the need and fix the problem.” MM
