Production of the EU steel tube industry rose by 3.6% YoY in the Q2 of 2014. Strongly diverging trends in output could be observed at the country level. Production in Germany, France, Spain and Sweden contracted substantially. Meanwhile, healthy gains in output were registered in Italy, the UK and in most of the Central European countries.

Highlights;

1. Further rise in output in Q2-2014

2. Large country differentials

3. Line pipe business reviving thanks to Southstream and other projects

4. Concerns about OCTG ban imposed on exports to Russia

5. Tube output rising in 2014 to 2015.

The different trends in output can be largely explained by product mix characteristics, main end user segments and geographical destinations as well as the exposure to foreign competition.

First estimates and indications for the third quarter of 2014 signal stagnation in growth. To a large extent, growth in the steel tube industry in the EU will be driven from the Q3 of 2014 by booked orders for the supply of tubes for the 1st stretch of the Southstream pipeline project coming into full production. Some tonnages were already manufactured in the second quarter of this year. In particular steel tube producers in Germany will benefit from this project, which will support output until mid 2015.

The outlook for 2015 is rather favourable. Prospects for the line pipe sector are healthy, not only owing to the Southstream project but also because of new projects in North America and the Middle East projects coming on stream, thereby reducing competitive pressures between line pipe manufacturers.

The outlook for oil country tubular goods (OCTG) is less transparent. The EU has imposed restrictions on exports of certain OCTG segments to Russia. At this stage it is still difficult to quantify the impact on demand and supply. Prospects for the key user sectors of small welded and seamless steel tubes such as the construction, automotive and metal goods industry are mildly positive and should result in a rise in demand in the EU.

However, competition will remain fierce, especially in the commodity segments. EU production of steel tubes is expected to rise by almost 4% in 2015.