Global Large Diameter Linepipe Presentation

8/3/2019 Global Large Diameter Linepipe Presentation

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Hatch Beddows

The Global large diameter linepipe marketsMarket outlook to 2010

4th June 2007

James Ley - Consultant


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2 Hatch Associates Limited, 2006

THE GLOBAL LARGE-DIAMETER LINEPIPE MARKETS

Contents

Hatch, Hatch Consulting and Hatch Beddows

Current global API plate supply

Current global large-diameter pipe demand

Forecast global API plate new mills & expansions

Forecasts global linepipe production in 2010

Forecast large-diameter linepipe demand Summary


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Contents








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Our organisation

Hatch supplies business, process and technology consulting, design and engineering

and construction, operations and project management to the mining and metals, energyand infrastructure industries worldwide

Established 1955 and employee owned

7300 highly skilled people serving clients worldwide

US$16BN of projects now under management in 60 countries

Our values

Safety

Quality

Innovation

Sustainable development

Effective risk management

We deliver unprecedented and sustained results for our clients


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HATCH

Global reach and resources

Canada Calgary, Alberta Hamilton, Ontario Montreal, Quebec Sorel-Tracy, Quebec Sudbury, Ontario Toronto, Ontario Vancouver, British Columbia

USA Boston, Massachusetts

Buffalo, New York Millburn, New Jersey Monroeville, Pennsylvania New York, New York Pittsburgh, Pennsylvania Pleasanton, California San Francisco, California Seattle, Washington

3400

South America Antofagasta, Chile Santiago, Chile Lima, Peru

So Paulo, Brazil Vitoria, Brazil

700

Europe London, England Moscow, Russia

170

South Africa Johannesburg Richards Bay

600

India

Delhi

China Beijing Shanghai

120

Australia

Brisbane Gladstone Mackay Melbourne Newcastle

Perth Sydney Townsville Whyalla Wollongong

2300(Yellow indicates regional hub)

7300 people Oct. 2006

Hatch Associates Limited, 2006 5


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Hatch Consulting is the worlds leading management consultancy specialising in themining and metals industries and provides high level support services, ranging from

corporate and business strategy development through strategic market studies toimplementation of new technologies, management and operating practices

Hatch Consulting is organised into specialised practices by industry and service,combining to provide precise solutions, expertly delivered to the exact needs of eachindividual client

Hatch Beddows is the strategy and market development practice, specialising in steel andraw materials, and providing strategy development and implementation services

Investment and Business Planning (IBP) provides economic, environmental and

technical evaluations of minerals properties and processing facilities, due diligence, pre-feasibility and feasibility studies and related investment planning and appraisal services

HB Advisors (HBA), a FSA-regulated joint venture company, provides corporatefinancial advisory and transaction execution services

HATCH CONSULTING

Hatch Consulting is the leading management consultancy dedicated

to the mining and metals industries


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Contents








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Total global API plate production for 2006 isestimated at = 10.6m tonnes

CURRENT GLOBAL API PLATE PRODUCTION

API plate production has historically been dominated by Western Europe and

Japan. China has recently emerged as a global producer

1.5-2.0m tonnes

1.0-1.5m tonnes

0.5-1.0m tonnes

0.0-0.5m tonnes

Major trade route

Minor trade route

Source: Hatch Beddows

Production


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CURRENT GLOBAL API PLATE PRODUCTION

Some Western European and CIS heavy plate mills are heavily focused

towards API plate production

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%100%

Japa

nJapa

nKo

reaChina

China

China US

A

Ukraine

Wester

nEuro

pe

Wester

nEuro

pe

Wester

nEuro

pe

Wester

nEuro

pe

Wester

nEuro

pe

Wester

nEuro

pe

API production Remaining plate capacity

Selection of heavy plate mills around the world, with% of production dedicated to API plate

Some heavy plate mills inWestern Europe are almost100% dedicated to API plateproduction

Japanese, Korean and

Chinese plate mills are morefocused towards othermarkets such as shipbuilding


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Contents








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CURRENT GLOBAL LSAW LINEPIPE PRODUCTION

With increasing LSAW pipe production in Russia, India and the Middle East,

pressure has been placed on API plate supplies

2-3m tonnes

1.5-2m tonnes

1-1.5m tonnes

0.5-1m tonnes

< 0.5m tonnes

Rest of Asia

EU 27

Iran

Rest ofMiddleEast

USA &Canada

Latin &South

America

Russia &Ukraine

Japan

Estimated Total LSAW global production in2006 = 10.8 m tonnes


Production

Global LSAW production in 2006 by region


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CURRENT GLOBAL HSAW LINEPIPE PRODUCTION

Spiral pipe production is increasingly being accepted as an onshore application

for oil and gas projects, and is not reliant on the API heavy plate mills

1-1.5m tonnes

0.5-1m tonnes

< 0.5m tonnes

CIS

Canada& USA

TurkeyIran

Rest of

Middle East

SouthAmerica

EU 27

OtherAsia

Total global spiral pipe production in 2006 is estimated at = 6.3M tonnes


Production

Global HSAW production in 2006 by region


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Contents


Current global API plate demand

Current global large-diameter pipe supply





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FORECAST GLOBAL LSAW PIPE POTENTIAL PRODUCTION IN 2010

LSAW pipe production is expanding, especially in Russia, but planned (API)

plate mills should be able to meet this demand

EU - 27CIS

With TMK planning to enter the LSAWmarket, and OMK and ChTPZ expected toincrease capacity. CIS LSAW pipe

production will likely rise above 3m tonnesby 2010

Japan

With Welspun adding500kt into the marketIndian LSAWproduction could

reach up to 2mtonnes

6 LSAW millsplanned in China.Production toapproach 3m tonnes.1.6m tonnes ofadditional API platerequired

2-3m tonnes

1.5-2m tonnes

1-1.5m tonnes

0.5-1m tonnes

< 0.5m tonnes

Latin &South

America

Europipe &Vallourec to enterthe Brazilian LSAWmarket with a JV

USA &Canada

Iran

3 new mills inthe MiddleEast & Iranwill increase

production

3-4m tonnes


Production

Forecast LSAW production by region in 2010


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FORECAST GLOBAL HSAW LINEPIPE PRODUCTION IN 2010

The North American market is pushing ahead with a number of planned HSAW

pipe mills as onshore oil and gas pipeline demand rises

5 planned spiral mills inNorth America will addan additional 1m tonnesof capacity

Welspun/Lonestar (?)

Posco/SeAH/US Steel

Berg

Ipsco expansion

PSL

EU - 27

Borusannew mill inSpain

Man Industries expansion ofHSAW facilities will take Indianproduction over 1m tonnes

CIS

SouthAmerica

Turkey

1-1.5m tonnes

0.5-1m tonnes

< 0.5m tonnes


Forecast HSAW production by region in 2010


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Contents








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FORECAST LARGE DIAMETER LINEPIPE DEMAND

Energy prices are unlikely to crash in the next couple of years making large-

diameter linepipe projects still financially viable

50

55

60

65

70

75

Q1 2006 Q2 2006 Q3 2006 Q4 2006 Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008

5

5.5

6

6.5

7

7.5

8

8.5

9

9.5

(LHS) Crude oil prices ($/barrel) Natural gas ($/mcf)

US energy prices: Base case scenario

Oil prices are forecast to remain above$60/barrel out through to 2008

Source: EIA, Hatch Beddows


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North America is set to lead the charge for large-diameter linepipe through the

next couple of years, but Russia and Asia will also be close behind

By 2010 Indiaspipelineinfrastructure is

forecast to havedoubled to32,000km

North America forecastfor the largest share of

global pipeline additions:-USA will need to replaceand refurbish obsoletefacilities

- Greenfield project will berequired such asMackenzie pipeline (?)

and expanding capacityfrom the Rocky mountainsto relieve systembottlenecks


Transnefts East-Siberian pipelineis helping to keep domesticproducers busy.

Nordstream is also likely to create

opportunities (pos. not just inRussia)

New pipelines will be needed after2010 as regions other than WesternSiberia are explored

The Middle East offershuge potential for newpipelines to Europe,Pakistan, India etc. butgeopolitical tensions causeproblems

As well as latterstages of the West-East pipeline, potentialpipelines from Russia,

Central Asia and theCaspian could keepChinese LSAW/HSAWproducers busy


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The large diameter linepipe markets are set to see a tight supply/demand

balance remain until 2009

Average of just under 19m tonnes of large-diameter pipe required between 2007 2009

2006 supply of large diameter linepipe = 17.1mtonnes

However, some large-diameter ERW pipe couldbe used in some of these projects

Based on current mill start dates just under2.5M tonnes of further large-diameter linepipewill come on stream by the end of 2008

Note:

There are limitations with linepipe demandforecasts: Rapidly rising input costs could seeprojects shelved:

E.g. Mackenzie in just two years the cost ofthe proposed pipeline has risen from $7.5bn to$16.2bn. Investors such as Conoco, Imperialand Shell are now looking at ways of letting theCanadian government take ownership of thepipeline to prevent it from not being built

1

2

3

4

5

6

7

8

9

10

North

America

Latin America Europe Africa Middle East

and Asia

Australasia

2007 2008 2009

Forecast demand for linepipe (>20 OD) based onknown projects

Source: Simdex, Hatch Beddows

M tonnes


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THE GLOBAL LARGE DIAMETER LINEPIPE MARKET

Summary

Forecast API LSAW and HSAW pipe production capacity expected to rise by around 5.2mtonnes by 2010

Based on planned API plate mills, there should not be a bottleneck in API plate supplies While the supply/demand balance is set to remain tight for LSAW and HSAW pipe in the

next couple of years, new pipe mills coming on stream will help to prevent supply shortages

Pipe demand growth beyond 2008 will have to keep consistent with current growth in orderto prevent an over-surplus of linepipe capacity

New plate mills capable of producing API plate will open in regions very short of supply e.g.Russia and India, helping to reduce pipe mill input costs making them more competitive onthe international market

China, which has seen linepipe imports drop from around 295,000 tonnes (2003) down to12,000 tonnes (2006) could have an increasing presence on the LSAW export market oncethe West-East pipeline development is complete

Western European and Japanese producers will have to increasingly compete againstthese emerging producers in regions such as the Middle East and Southeast Asia


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THE GLOBAL LARGE DIAMETER LINEPIPE MARKETS

Thank you for your attention

For further information please contact:

James LeyConsultantHatch Beddows9th Floor, Portland House, Bressenden PlaceLondon. SW1E 5BHUK

Tel: +44 20 7906 5127

Fax: +44 20 7963 0972

[email protected]

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Global Large Diameter Linepipe Presentation

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