Global pipe demand set to double this year

Global demand for pipes is expected to double to 100,000 miles this year from 50,000 miles in 2005 due to rapid expansion in the oil and gas sector, a recent report by a domestic brokerage house said.

The size of the global market for pipes is estimated at $67 billion, assuming pipe consumption of 250 tonnes a kilometer and average realisation of $1100 a tonne.

Domestic players such as PSL, Man Industries, Welspun-Gujarat Stahl and JSW appear well positioned to take advantage of the global opportunities in the pipes sector. JSW had recently acquired three US-based entities from Jindal Saw, which have a focus on the oil and gas sector.

Almost 65 per cent of the expansion in global pipe capacity is taking place in USA, Asia and West Asia.

Meanwhile, the pipeline infrastructure in the country is currently estimated at 15,000 km and is expected to increase by another 18,000 kms over the next five years, as players such as Gail India and Reliance Industries are expanding their pipeline network to transport increased natural gas supplies.

PSL is setting up two-step pipe mill with an installed capacity of 300,000 tonnes along with its coating facility. This project is expected to be fully operational in Q1 FY09. Meanwhile, Welspun-Gujarat Stahl's 1.5 million tonne plate mill project for backward integration is on schedule for commissioning in December.

In the June 2007 quarter, Man Industries operating profit margin improved 50 basis points y-o-y to 11.9 per cent, while Welspun-Gujarat Stahl's operating profit margin grew 390 basis points y-o-y to 16.5 per cent in the last quarter.