Dear Valued Customers,
The first quarter of 2022 was a wild ride, and we can expect a fair amount of chaos through the rest of the year. Between existing market conditions, like port congestion and disruptive world events like the Russian invasion of Ukraine, forecasting promises to be difficult. Below, I lay out a few current and upcoming events along with some analysis about how they are likely to affect the pipe supply and pricing.
In January, I predicted that prices would hold high through at least June, but now I expect that to extend through the end of the year. The common theme for the next six to nine months will be persistent shortages and rising prices. I recommend securing your import material early and offering short timelines on your quotes. Domestic suppliers are unlikely to be able to scale up fast enough to offset import shortages. I advise against using placeholder numbers on quotes unless you know where and when you can get the pipe. Pricing is moving quickly and numbers from last month are likely to be too low today.
It takes effect on May 25, 2022. I expect that in the short term, there will be a push to get permits in ahead of the regulation, potentially putting a strain on supplies of well casing pipe in California. After that, I expect this to reduce demand for well casing for as long as this regulation remains. The extent of the effect on pipe demand will be driven by how strictly this order is enforced. County officials who support the Governor may immediately stop issuing permits, while officials in counties that are hostile to the Governor may issue as many permits ahead of the deadline as possible. Without wading too deeply into politics, I question the Governor’s decision to handicap food production across most of the Central Valley and Southern Coast. Given that California is the world’s 5th largest producer of food and President Biden has predicted serious global food shortages, one could argue that residential consumption in large cities would be a better place to address the current drought problem.
Given these market conditions, expect weak supply versus slightly higher than average demand, resulting in intermittent shortages. The shortages are likely to be worse in early summer and improve after that. Overseas orders are likely to ship late, take longer to arrive and unload, and have higher freight costs than expected, leading to higher prices. Toward the end of the year, demand for well casing may taper off, but other pipe demand will remain strong. This may result in lower pricing as we move into 2023, depending on what the oil industry does and how well the economy performs.
Cal Sierra Pipe, LLC