Wednesday, July 07, 2010

On the steel beat

Just to fill in for our low profile steel beat folks.  From the WSJ: Industry Cuts Back as Steel Prices Fall

There may be other issues.  There was once a time when the local steel industry was buoyed by the demand for steel pipe in the oil industry 30 years ago.  There is similar talk about the pipe demand that could be generated by the great Marcellus Mania.  Like the Great Recession I think that deserves being named a proper noun at this point. Someone please send a memo to the AP editors. but there is news from Texas that they need to replace all their steel pipes for natural gas with plastic. Again from the WSJ:  Texas Railroad Commission considers replacing steel gas lines.

Speaking of Marcellus, there is news that local production is indeed increasing. For the severance tax, can't we just have some of this local gas delivered right to our gas companies as payment in lieu of taxes and have our gas bills lowered.  All I know that if there is this big tsunami of natural gas underneath us then my gas bills in the winter better be lower in the future.

More steel: Some may have noticed the little bit of news of brewing trade war with China over steel. Things like that used to be front page stuff here. What I didn't get was that part of this was over the technology embedded in making steel rebar?  I honestly can't quite tell if this item on Forbes is being completely facetious or not... it says rebar had technology developed by DARPA?   Rebar? A fun read nonetheless.  See: The Curious Case Of Anshan Steel And The Space-Age Rebar Technology.


Anonymous BrianTH said...

Sounds like they are finding ways to increase production per well, which presumably means Marcellus drilling is economic at even lower gas prices. Generally, I've gotten the impression that Marcellus gas could end up having a substantially lower breakeven price than pretty much any other gas supply located in the U.S., which would imply that low gas prices would actually be good for Marcellus volumes.

So I hope they take that into account when determining the final terms of the severance tax. You can tax in ways such that the revenue is more dependent on pure volume, or more dependent on price/margins/revenues, and I hope they at least make it somewhat dependent on pure volume.

Incidentally, I wouldn't count on western PA natural gas prices being lower than Northeast Coast natural gas prices, perhaps minus transportation costs. That could still be reasonably low (particularly if the theory I sketched above is correct). But it would probably take a deliberate state intervention to create a wider spread, and my map of PA suggests that might be a tough sell.

Thursday, July 08, 2010 9:56:00 AM  

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