Bulletin 98-7

Piping & Equipment, Inc.

PIPING & EQUIPMENT— A Member of AD July * August * September 1998July * August * September 1998

STAINLESS STEEL PIPE PRICING

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The cost of nickel typically constitutes about 30 - 45% of the cost of austinentic stainless steel, and nickel prices have fallen 42% since March 1997. You can see how the cost of nickel has affected the price of stainless steel pipe. In 1997, the apparent consumption of stainless in the U.S. was 7% higher than in 1996, which was 5% over 1995. The long-term demand trends for stainless is still positive as mill capacity seems to be leveling off and demand continues to climb.

Market Condition and Activity Bulletin 7/98 Page 2

STAINLESS STEEL PIPE

Pricing İ ß Manufacturers are sending mixed signals on price changes during this quarter. No change reported from several manufacturers; however, one manufacturer reports a decrease of 3 - 5%, and another reports an increase of 3 - 5%. As you can see, it can go either way. Decreases are due to slow demand and excess supply, and probable increases are a result of raw material costs and the cold-rolled trade case. Producers claim they have been operating with pricing that cannot be sustained. All manufacturers reported decreases during the prior quarter from 2 - 7%. The decreases were partly pushed by competition, both foreign and domestic.

Lead Times - Forecasted lead times for commodity items are reported to be shorter or about the same as the prior quarter of 4 to 12 weeks. Manufacturers of both pipe and flat rolled

are currently with low backlogs, which enable greater responsiveness. One manufacturer reports pipe shipments down 13% year to date. Deliveries are shipping from stock on 70 - 90% of shipments. Exotic items of non-standard stainless and high nickel alloys are running from 8 - 16 weeks.

Comments - Final review is not concluded on the Ta Chen Stainless Dumping Suit. Raw material suppliers of flat rolled stainless have filed two suits. If they succeed, it may lead to increased pipe pricing. Imports continue to increase, especially from Korea, Taiwan, and Malaysia. One manufacturer reports import penetration increasing from 13.7% to 22.25% for the first quarter of 1998 as compared to the same period ’97. Raw material pricing for Nickel, Molybdenum, and Chrome appears to be fairly stable over the past quarter.

STAINLESS STEEL WELD FITTINGS

Pricing ß The market pricing is reported to be dropping from 3 - 6% industry wide. Supply of stainless fittings continue to increase both domestic and import, with demand shrinking. Low numbers will probably appear on project buys. The previous quarter prices dropped from 3 to 7-1/2% due to foreign pressure, competition, and demand. Manufacturers appear to be willing to meet numbers to get the order.

Lead Times - Delivery from stock on commodity items is 80 - 90%. Lead times are 2 - 3 weeks, with some out to 4 weeks. Distributors can get their requirements

on 12 inch and under. Exotic lead times are approximately 4 - 6 weeks. However, with premium charges almost any delivery can be maintained.

Comments - Imports will be increasing, especially from the Philippines, Taiwan, China and Malaysia. As they increase, the discount factor will probably continue to decline. The industry continues to await the final dumping duties on Ta Chen. Industry experts are hopeful for a strong fourth quarter, after the second quarter proved to be a disappointment.

STAINLESS 150 AND HI-PRESSURE FITTINGS

Pricing Ş Forecasted pricing is reported to be level for the time being. The prior quarter drop of 1 - 2 1 /2% was attributed to foreign pressure and competition. The paper industry along with other big users of stainless put projects on hold or cancelled them entirely during the past several months reports one manufacturer. Business continues to be flat and prices are holding.

Lead Times - Reports indicate commodity lead times at

1 - 2 weeks with 80 - 90% shipping from stock. Manufacturers report they are keeping lower inventory levels. Exotic items are shipping in 2 - 6 weeks.

Comments - Foreign competition is increasing from the Pacific Rim countries, who are gaining market share. Lower prices are the primary reason for their gain. Raw material costs continue to be at low levels.

STAINLESS STEEL FLANGES

Pricing--Manufacturers are reporting price changes from a 3-5% reduction or no change for this quarter. The flange market may have hit bottom according to one manufacturer. Hopefully, increased levels on projects in the 3rd quarter will allow some stabilization. Commodity flange pricing seems to be holding; however, it will take some large projects to test the water. The previous quarter produced 2 - 4% reductions. One manufacturer mentioned the age old mentality of cutting price to maintain market share!

Lead Times - Forecasted lead times for stock are 2 - 4 weeks with fill rates of 70 - 90% from stock. One manufacturer notes their orders are shipping in 3 - 4 days. Exotic items are running 2 - 6 week deliveries. With project business down, specials are shipping with shorter lead times.

Comments - One manufacturer reported a very good year until May, when someone pulled the plug! Project inquiries all but disappeared and distributor inventory purchases were minimal. It appears that the fear of further declining prices has distributors being extremely cautious in their inventory buys. Foreign competition continues from Korea, Italy, Mexico, and the Philippines. Huge inventories of imported flanges and fittings are on the ground in the U.S., because of the economic turmoil in Asia. Political upheaval in Indonesia has caused many projects to be cancelled. The price of nickel has bottomed out at $1.98 per lb. Also, oil prices may have bottomed out with some predictions that $20 bbl. will be stable by year end. Reports indicate a long hot summer, but September promises a better business climate according to an industry source!

CARBON STEEL PIPE (CONTINUOUS WELD)

Pricing Ş Manufacturers indicate no forecasted price change this quarter.

Lead Times - The lead times are running 1 - 2 weeks with 90 to 100% fill rates. Business picked up in June causing some minor stock outs. Lead times for specials is 2 - 3 weeks.

Comments - Foreign competition continues to increase from Korea, Japan, and China. Almost all continents have countries shipping standard pipe into the U.S. One manufacturer reports that scrap remains stable, while conversion mills that buy coil for welded pipe production could be buying Russian or Korean coil for $250 / net ton (about $50-$60 / ton) below domestic coil.

Please note that arrows inserted after pricing is only a "Best Guess" of pricing direction after compiling information from select suppliers. It does not reflect input from all mgfs. nor does it include study of national economic indicators.

Market Condition and Activity Bulletin 7/98 Page 3

CARBON STEEL PIPE (ERW & SEAMLESS)

Pricing Ş The market is expected to have no significant change during this quarter with over supply still in existence at the distributor and mill level. Demand remains good for ERW and seamless.

Lead Times - Forecasted lead times continue at 4 - 8 weeks with fill rates of 60 - 80% from stock.

Comments - Foreign competition remains strong on this commodity.

CARBON STEEL WELD FITTINGS AND FLANGES

Pricing -- Two manufacturers report a 1 to 2-1/2% decrease, and several manufacturers report no change for this quarter. The decrease or lack of change is due to raw material costs, demand, and competition.

Lead Times - The lead times are running 3 - 6 weeks, with fill rates running 70 - 80%. Demand is

reported to be weak with foreign materials increasing, allowing for depressed price levels. Exotic items are shipping in 6 - 10 weeks. Manufacturers have the capacity to handle quick turn business.

Comments - It is reported that foreign competition continues to increase, especially with Mexico, Thailand, and England.

FORGED STEEL FITTINGS

Pricing İ The forged steel pricing forecast indicates an increase of 3 - 5% due to raw material costs and competition. This slight increase is a result of manufacturers adjusting to production costs.

Lead Times - Manufacturers report 2 - 3 weeks shipments for material out of stock, with fill rates of

80 to 90%. Manufacturers, like distributors, are trying tomaintain sufficient inventory to service distributor needs and maintain inventory turns as well.

Comments - Exotic items are shipping in 4 - 6 weeks. Foreign competition is about the same as carbon steel fittings.

STAINLESS GATES, GLOBES, CHECKS

Pricing Ş Manufacturers report no forecasted change during this quarter.

Lead Times - Reports indicate shipments of 6 - 8 weeks, and fill rates of 90 - 100% from stock.

Exotic lead times are reported to be from 6 - 8 weeks with one manufacturer to as long as 16 - 20 weeks from another.

Comments - No change in foreign competition levels.

FORGED STEEL GATES, GLOBES, CHECKS

Pricing Ş No price change indicated for this quarter.

Lead Times - Deliveries are holding at 3 - 6 weeks. Only 10 - 20% of commodity items are

shipping from stock. Lead times for non-stock special items are running approximately 8 - 12 weeks.

Comments - Forged steel demand is up as compared to the prior quarter.

BRONZE AND IRON GATES, GLOBES, CHECKS

Pricing Ş Forecast predicts no change for bronze and iron this quarter.

Lead Times - Deliveries are 3 - 4 weeks, and fill rates are 90 to 100%.

Comments - Bronze valve shipments have been relatively flat; however, iron valve shipments have been up slightly. Prices increased recently on the average of 5%.

CAST STEEL GATES, GLOBES, CHECKS

Pricing Ş Manufacturers report no change for cast steel valves this quarter. Pricing remains level due to foreign pressure, supply & demand, and competition.

Lead Times - Cast Steel valve deliveries are quoted from 6 - 8 weeks out to 12 - 16 weeks.

Approximately 80 - 90% of commodity items may be shipped from stock. Non-stock specials are shipping anywhere from 10 to 18 weeks.

Comments - Foreign competition shows some increase from 3rd World Countries. Material costs remain stable.

QUARTER TURN VALVES — BALL AND WAFER

Pricing -- Several manufacturers report no change for ball valves; however, another indicates a forecasted increase of 3 - 5% due to demand and raw material costs.

Lead Times - Commodity item deliveries are shipping in 2 - 3 weeks. Increased focus on performance has resulted in lead time reductions.

One manufacturer reports quick-on-time projects yielding some results. One manufacturer reports their butterfly valve shipments running 97% on-time, with greatly reduced lead times.

Comments - Nickel continues to come down, currently at about $2.30/lb. Moly steady at $4.00 /lb., and chrome steady at $.48/lb. over the last 3 months.

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