Shutdowns in response to the global Covid-19 pandemic
affected energy demand and oil and gas prices through much of
2020, weighing on drilling rates and OCTG demand in most
regions. These effects are most likely to continue their impact
well into 2021 and potentially longer. Globally, OCTG
consumption declined nearly 25% year on year in 2020 from 2019.
For 2021, the recovery will not be fully realized, but
significant gains are expected, with year-on-year growth
forecast to be 13% this year.
Long climb for North America
The North American markets were the hardest hit in 2020 as
drilling activity quickly responded to energy price cuts.
Demand dropped by 3.2 Mt in one year – a 59% decline
that came on the heels of a tough 2019 where investment cuts
trimmed consumption for the year by more than 850 kt from 2018,
culminating in an aggregated 4 Mt decline in demand in two
The recovery has already slowly started to take place as
market participants noted that buyer inquiries started to pick
up in the fourth quarter of 2020, following the low-point in
sales in the third quarter of the year. North American OCTG
consumption is predicted to increase by about 1.4 Mt in 2021
The US, which lost the most tonnage in consumption in the
2020 downturn, is on target to recover by 1.2 Mt over last
year. US rig counts, which hit a low of 244 units in August
2020 after falling more than 69% since the start of the year,
have incrementally recovered since that time to near 400 in
February. Canada and Mexico, which normally consume far less
OCTG tonnage per year that the US, will post more modest gains
this year. After setting optimistic drilling goals at the start
of 2020, the Mexican government has scaled back drilling plans
for 2021. Canada’s oil and gas development has
been hampered by bottlenecks in transportation capacity and the
higher costs of extraction.
There is muted optimism in the US market, however, with new
capacity investment moving ahead in the region. US Steel
completed the replacement of its Fairfield BF/BOF with a new
EAF; the first heats were completed in the fourth quarter of
2020. Tex-Isle, a service center and distributor in the
US shale region, announced in early 2021 their plans to build
a new ERW OCTG and energy tubulars facility in Texas.
This optimism hinges on the support of higher energy prices
from recovering demand. As long as WTI crude oil prices remain
above break-even levels for most drillers in the shale basins,
drilling rates will continue to grow and boost OCTG
consumption. Nevertheless, Fastmarkets does not expect North
American OCTG consumption to exceed 2019 tonnage until
Other markets hit too
The regions outside of North America – China
excluded – also experienced a steep decline in OCTG
consumption in 2020, according to available data, as major
projects were cancelled or delayed.
South America struggles
OCTG demand from the main South American consuming countries
was robust in 2019 from aggressive investment in offshore and
onshore development projects. With the reduction in global
energy demand and prices, many of these projects were delayed
or cancelled altogether. Argentina’s shale gas
development was the hardest hit and will take time to recover
fully. A number of pipeline projects were also delayed or
cancelled, which crimps the development potential of the
natural gas reserves in the short term.
Brazil and Guyana displayed the strongest potential to return
to previous production and drilling plans with mainly
offshore developments. Nevertheless, we expect a slow start
for South American consumption in 2021, as the effects of the
pandemic continue to shut down activities on the continent.
As a result, we expect a modest decline in OCTG consumption
this year and then a return to positive growth in the
following years of the forecast. Average annual growth from a
strong 2019 to 2025 will be under 0.7%.
Middle East and African delays
Demand in the Middle East was slower to react to the
pandemic than in North America, but it did eventually. While
the number of active drilling rigs collapsed in spring last
year in North America – and it did the same in Africa
– it fell somewhat modestly in the Middle East. But
towards the end of 2020, with North America already on a path
to recovery, the rig count was still falling in the Middle East
as old projects were completed and planned new projects had
been delayed several times.
It was the presence of giant National Oil Companies (NOCs) in
the Middle East that made a difference. They are slower to
react to market signals and can better absorb short-term
losses if these fit with their long-term strategy.
By the end of 2020, apparent OCTG consumption had fallen by
22% on the year to around 1.6 Mt in the Middle East and Africa.
Demand in Saudi Arabia fell by 8% to around 240 kt, and much
sharper declines were seen in Algeria, down by 45% to around
130 kt, and Egypt, down 39% to around 100 kt despite strong
This year of 2021 will be a year of two halves. While we
have seen further delays recently, pipe tenders and deliveries
for a number of large projects – such as
Qatargas’ North Field Expansion,
Adnoc’s Hail & Ghasha, and
Aramco’s Marjan – will finally
materialize later in the year.
We believe the net effect will be a modest 6% growth in OCTG
demand, while a faster recovery to pre-pandemic levels is
expected for 2022, and on average a growth of 8% per year is
expected through 2025 as NOCs in the region are all planning to
stick to their long-term plans.
Asian growth ex-China
For the Asia region outside China, the pandemic heavily
impacted OCTG supply, demand and logistics, leading to a large
decline in OCTG consumption in 2020 of more than 102 kt, from a
total of 933 kt in 2019. Many countries like Japan, Malaysia,
South Korea, Indonesia and India have been shut down for
frequent and long periods, which affected international trade.
Some large drilling plans in Australia have been postponed for
In order to stimulate this industry and OCTG demand, the
Indian and Australian governments each released more oil and
gas exploration investments for the next 5 to 10
Also, while Japan is not a significant consumer of OCTG, but
a producer for the main consuming markets, the country is
looking to support its export economy. Indeed, the Japanese
government announced several economic stimulus plans and its
lockdown measures avoid affecting industrial output –
including OCTG production – as well as transportation
logistics as much as possible.
Considering the current pandemic situation and the energy
market outlook, Fastmarkets consequently expects that OCTG
consumption in the region will return to the level of 2019 in
2023, and then gradually move up until 2025 with annual growth
of 3.1% from 2019.
Surprising gains for China
China surprisingly posted small pick-ups in 2020 consumption
relative to 2019 due to a large infrastructure stimulus from
the government. After steep shutdowns early in the year due to
the coronavirus, the country was able to return to near-normal
activity and resumed strong energy demand growth. This helped
offset the decline in OCTG export demand through the year and
In September 2020, the establishment of PipeChina compelled
CNPC and Sinopec to focus more on offshore drilling activities
and international drilling tenders. The companies’
primary oilfield and pipeline sources on the mainland were
transferred to PipeChina, thus opening opportunities to expand
their energy reach.
Also, the Chinese government has planned more exploration of
shale gas and natural gas as part of its 14th Five-year Plan
(2021-25). CNPC announced that the 2025 target for natural gas
production in the southwest oil field, for example, will
increase from 30 billion cubic meters in 2020 to 50 billion
cubic meters in 2025, with an expected growth of 18% in 2021.
This concentration on domestic oil and gas production is to
support surging natural gas demand in the country, which is
targeted to grow 11.1% annually during that time. As a result,
Fastmarkets holds a bullish attitude towards future OCTG demand
with 1.16% annual growth through 2025.
Norway to drive growth?
As the pandemic hit the global oil and gas markets, Norway
responded with large tax breaks for oil and gas projects
approved by the end of 2022. The outcome was quite impressive
as oil and gas companies started prioritizing their Norwegian
drilling assets within their portfolios. By the end of 2020, a
total of 211 wells had been spud in oil and gas fields, down by
17% from 2019, which was a very good year, but largely in line
with the 2016-18 average, according to data from the Norwegian
By contrast, preliminary data from the UK’s Oil
& Gas Authority suggest that the numbers of wells spud
there fell by 53% to 74, which was the lowest figure since the
The UK and Norway are by far the largest consumers of OCTG
in Europe, and we expect the long wave of the tax breaks to
lift Norwegian consumption through 2023-24. Counterintuitively,
we expect OCTG apparent consumption, which does not keep
inventory changes into account, to fall by 24% to around 265 kt
in 2021 as there was a massive stock build in Norway last year,
which inflated 2020 figures to a record high. Annual
consumption will be upheld through 2025, with the exception of
a small surge in 2022, as the end of the tax breaks in Norway
will be offset by more drilling in the rest of the region as
the global outlook for oil and gas improves.
Will demand pass past peaks?
Fastmarkets forecasts that, globally, 2020 will be the
bottom of the downturn, with 2021 consumption expectations
rising over 2020 as delayed projects begin to resume
activities. From 2022, we expect modest annual growth through
the forecast period of just under 1.8% through 2025 from 2019
levels. Consumption tonnage will not exceed 2019 levels until
2023, and global OCTG consumption is expected to reach over
17.7 Mt in 2025. This 2025 total global forecast may challenge
the total from the peak year of 2014.
In order to reach that peak again, growth will come from the
usual sources like North America and Middle East, in terms of
tonnage. China and CIS will also be significant
Africa will contribute the largest annual growth, although
these gains come from a low starting point. Other top gainers
in terms of growth are predicted to be CIS, China and the rest
of Asia. Europe and South America may be hit hardest
through the forecast period. Indeed, European consumption,
despite the tax support from Norway, is expected to decline
from 2019 in the long term as high costs and aging reserves
weigh on drilling rates in other parts of the region. South
America is expected to post only modest gains annually as
optimistic plans for development will likely reach delays.
Market participants here still hold high expectations for
energy development growth and OCTG consumption, but this will
probably be realized beyond the current five-year
Some of the largest OCTG consumers in the Middle East and
North America are still predicted to post positive gains in the
latter part of the forecast, assuming oil prices and energy
demand recover. Current crude oil price forecasts suggest that
Brent and WTI crude prices will remain above average break-even
levels through the period, barring any further unforeseen
In terms of pricing, the steep downturn in demand in 2020
did not result in steep drops in prices during the year. Prices
corrected lower during the year, but then reversed course late
in the fourth quarter in response to rising raw materials and
steel prices. At the start of 2021, OCTG prices were already
rising quickly with increases of more than $200/tonne in some
Fastmarkets expects OCTG prices to rise into the second
quarter of 2020 and moderate through mid-year as costs correct
lower. We expect prices will post gains late in the year as
demand rebounds. Beyond 2021, prices are expected to rise more
quickly in 2022 and then stabilize in the later years.
*Kim Leppold, Paolo Frediani and Una Yin