Jeff Hanley Vice President Sales Energy Tubulars

Transcription

1 Welded Tube of Canada Welded Tube USA Jeff Hanley Vice President Sales Energy Tubulars

2 Welded Tube History: Founded in ERW Mechanical tubing. In Concord, Ontario [North of Toronto], also Welded Tube Headquarters. Four manufacturing facilities - close to 1 million square feet. After 45 years -- Welded Tube remains privately held. History in Energy tubular products began in 1981 producing Limited Service Casing for the Appalachian Region for the North East USA API License for Concord, Ontario facility Acquired a Carbon Threading Facility in Port Colborne, Ontario. Following the Chinese Dumping Case Finding in 2009 decision to Expand into the OCTG market.

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4 Heat Treat and Finishing Facility Welland Ontario. Announced at AMM Houston Feb $75 million greenfield Site on 120 acres started in 2H Initial capacity 150,000 tons per year with additional 20,000 tons per year coming online in April 2015 to bring us to 170,000 tons. OCTG casing from Concord Ontario plant. Threading Operations in Line at Facility. Customer Shipments direct from site to our markets in USA and Canada by rail and truck. Emergence of Heat Treat Capacity with one pipe mill Welded Tube had more finishing capacity in both heat treated and carbon grades than we had the ability to produce OCTG pipe. Strong forecasts for consumption in Energy Tubulars need for more OCTG pipe production.

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6 Welded Tube USA Lackawanna NY. Announced in Feb 2012 AMM Houston. 4-1/2 9-5/8 OD Mill is rated for 350,000 tons. Start up September 2013, with production volumes starting in Q Feb 2014, moved to a 2-shift operation. New mill overlaps the size ranges of our Concord mill but with enhanced capabilities with heavier wall thickness. Close proximity to our other operations in Canada as all facilities are integrated with one another as opposed to stand alone.

7 Operational Foot Print - Four plant locations are within 90 miles or less rimming Lake Ontario and Lake Erie. Canada Concord, Welland & Port Colborne, Ontario. USA Lackawanna, New York Maksteel Mississauga [Sister Company] slitter.

8 Two OCTG Mills Growing Energy Concord Mill historically ran at 100% of its capacity yet downstream OCTG heat treatment and carbon finishing remained pipe short. Lackawanna growth ramped up after the 2 nd shift added in February 2014 volumes off the mill improved dramatically month over month throughout The combined output of both pipe mills increased our volume by over 85% - 100% on a monthly basis by the start of Flexibility to move pipe to down stream finishing operations from either mill to enhance service and responsiveness to changes in the market. Concord mill added volumes for HSS as well as OCTG products. Jan Dec Nov Oct Sept August July June May April March Feb Jan Dec Nov Oct Sept Concord Lackawanna

9 Production History Welded Tube 2014 Industrial Carbon Alloy 2005

10 Industrial Products Group Concord plant as a distinct Operating Unit. Focused on Mechanical, A53 and HSS Markets. 4 ERW mills / finishing. One mill has combination of both OCTG and HSS capability. Opportunity to grow HSS as well as provide OCTG supply. Present capacity > 350,000 tons Energy Products Group Lackawanna and Welland as a distinct Operating Unit. Market mill focus on Energy Tubulars for North America. 2 ERW Mills - USA and Canada used to balance supply of pipe to downstream units. Heat Treat and Threading Capacity expansions in place to service the market. Present capacity at > 350,000 tons.

11 Post Oil / Gas Collapse: USA market 2014 at 7.0 million tons total with Import Share at ~ 4.0 million tons. Rig Count decline ~ 30% => Expected to fall further before bottoming out at 1,150? USA market down 35% or new total 4.55 million tons? Distributors reporting 4 to 6 months of pipe months on the ground. Canadian market < 1.0 million tons facing a similar or worse situation as rig count is down 49% YOY and distributors will sit on inventories for additional 3 months during break up before inventory burn off. US Import volumes in January ,000 tons! Obviously no room for both domestic supply and imports at recent levels coming into USA = massive oversupply. Domestic Capacity reductions up to 50% in near term or worse. Supply chain is under severe pressure as E&P s look to cut costs to break even to justify continuance of operation or re-start potential.

12 Emerging Capacity in a Post Oil Collapse: Extended Period of Oversupply => downward pressure on prices. Import Prices and volumes continued threat on market share, selling prices and margins loss of steel demand and jobs in North America is the ultimate sacrifice. Spectre of some older facilities not surviving. Investments in new facilities bank credit likely uncertain delay or decide not to enter all together. Environment requires a low cost facility / footprint. Welded Tube has achieved a 30% decline in processing costs over last three years related to new equipment and investments. Continued focus on cost reductions and inventory management. Supply vs Demand picture for 2015 is clouded focus production levels to meet 2H 2015 demand.

13 Lackawanna Expansion Phases Recap: Phase 1 OCTG Casing Production: o Completed September Phase 2 Added Processing: o Carbon Casing Finishing / Threading. o Coil Slitting. Phase 3 Future Heat Treat Facility: o Second facility to Welland Ontario. Phase 4 Line Pipe Expansion at Lackawanna: o Addition of Line Pipe capabilities over and above OCTG present capabilities. o Double and Triple Lengths. On Hold until we see a recovery in Energy Tubular markets.

14 Welded Tube Growing to Serve You Better Thank you for your time! Jeff Hanley Vice President Sales Energy Tubulars