Luxembourg-based steel pipe manufacturer Tenaris SA saw its share price on the New York Stock Exchange drop to its lowest point in 52 weeks as the company struggles amid low demand for its product in the U.S.
Tenaris shares closed at $20.15 on the NYSE on Oct. 2, marking a loss of 2.6% from the prior day's trade and suggesting investors may be losing confidence in the company as it struggles to compete in the low-demand U.S. market. The stock was valued at $34.53 per share on Oct. 3, 2018.
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Luca Zanotti, president of Tenaris' U.S. business line, acknowledged the company's U.S. challenges in an Oct. 2 article in the Houston Business Journal. He said imports of competing products and a move by operators in oil and gas space to more cost-conscious models are negatively impacting Tenaris' U.S. business opportunities. Zanotti said he sees little opportunity to grow in the space.
In addition to the pipe products Tenaris sells directly and predominantly to the oil and gas industry, the company offers services through RigDirect.
Zanotti said the company has no plans to revise its direct sales and services strategy, which drove a strong second quarter for the company. Net income for the quarter of $240 million was up 44% from $166 million a year earlier, and net sales of $1.92 billion were up 7% from $1.79 billion in the same period in 2018.
CEO Paolo Rocca said during an Aug. 1 earnings call, however, that in the U.S. in the first half, market demand for pipes declined with the rig count, which cut into pricing leverage.
Should the rig count continue to fall, the trend could continue into the second half, Rocca said, although an increased focus on oil and gas majors could improve the U.S. drilling and pricing outlook, he said.
The oil majors are become increasingly involved in the U.S. land market, leading consolidation initiatives, increasing investments and accounting for larger shares of the drilling activity, Rocca said Aug. 1. About 17% of Tenaris' U.S. business at the close of the second quarter was from RigDirect, which provides customers services to support well design, construction, completion and workover operations.
Amidst the persistent struggles to gain market share in the U.S., Tenaris recently restarted select areas of its mill in Conroe, Texas, following a three-year suspension of operations. The facility produces sucker rods, which are important for work later in an oil and gas well's lifecycle.
"We are prepared to respond to the increased demand for the domestic supply of pipe," Zanotti said in June 2018 when announcing plans for the restart. He said reviving areas of the plant allows Tenaris to maximize production from its $1.8 billion pipe mill in Bay City, Texas.

