Raw Steels Index Flat; Nucor, US Steel Not Seeing Sales From Shale Oil Drilling

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Many steelmakers are not seeing the expected results from shale oil drilling that they’d like.

Nucor (which doesn’t directly produce OCTG) got into the natural gas game, partnering with energy company Encana, in November 2012. In December, it said it would temporarily halt drilling new wells, citing, a “weak natural gas pricing environment.” Nucor called the natural gas venture a “small but increasing amount of our revenues,” in its annual report to the SEC.

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On the IndX, the cash price of steel billet saw little price change on Thursday on the LME at $390.00 per metric ton. After a couple of days of improving prices on the LME, the steel billet 3-month price held steady at $400.00.

The gas glut that caused Nucor to put a hold on its drilling dreams is perhaps even worse news for US Steel Corp., which says it’s the largest tubular steel producer in North America. According to the company’s website, its annual capacity for tubular products is 2.8 million net tons.

“Our tubular business is heavily dependent upon the level of oil and natural gas drilling activity in the United States,” the Pittsburgh-based company said in its 10-K filing. “Lower natural gas prices in 2012 and 2013 led to reduced drilling for natural gas. Since our flat-rolled segment supplies the majority of the substrate used by our tubular segment, any decrease in tubular demand also adversely affects our flat-rolled segment. Our operating levels and prices may remain at depressed levels until demand increases.”

In China, steel prices closed flat for the day. The price of iron ore 58% fines from India fluctuated in a short range before closing flat. The price of Chinese HRC showed little movement yesterday as well. The price of Chinese coking coal saw no movement.

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The US HRC futures contract 3-month price showed little movement on Thursday, hovering around $623.00 per short ton. The US HRC futures contract spot price remained essentially flat at $626.00 per short ton.