Tenaris sees difficult path for oil industry steel products

Steelmaker with Latin American operations predicts reduced activity in the near term.

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Luxembourg-based Tenaris S.A., which produces much of its oil industry tubular steel in North, Central and South America, says its second quarter 2020 sales were down 35 percent compared with the same quarter in 2019.

The company cites a “rapid decline in economic activity, oil consumption and drilling activity as a result of the measures to contain the COVID-19 pandemic around the world.” Adds Tenaris, “Sales in North and South America were particularly affected, but some areas, like the Middle East and offshore, showed more resilience.”

In addition to the 35 percent drop in sales, Tenaris experienced a $91 million operating loss and a $50 million net loss in the second quarter of 2020,

In the notes accompanying its results, the company says it expects COVID-19 and its after-effects “will have a profound and extended impact on our sector, and [with] the severe reduction in our revenues, we have implemented actions to adjust the level of our operations around the world, reset our fixed cost structure, reduce working capital and bolster our financial condition.”

The company adds, “The collapse in global oil consumption as a result of the measures taken to contain the spread of the COVID-19 pandemic has resulted in a steep build-up of inventories around the world. In this environment, investments in exploration and production of oil and gas have been severely curtailed and are not expected to recover any time soon.”

Thus, the firm says, “Demand for tubular products from the oil and gas industry has fallen significantly during the second quarter, following the reduction in rigs, and we expect it will fall further in the second half as a result of lower drilling activity and high inventory levels, particularly in North America. Sales will be further affected by realized pricing declines.”

In its sustainability report for 2019, Tenaris says it uses scrap steel as 70 percent of the content in the five electric arc furnace (EAF) melt shops it operates at its tube and pipe mills.