It may have taken a while for the impact to catch up, but extremely low oil prices are taking their toll not only on oil companies but on some of their suppliers.
Tenaris Hickman, an Arkansas steel company that produces steel and other types of products for the energy industry, announced layoffs for 500 employees recently. Television station KAIT said the company cited the combination of low oil prices and South Korean imports as the reason behind its decision.
It is not an isolated occurrence at a time when some economists are saying the current oil price falloff is one of the worst in history. Other companies that provide steel pipe (also referred to in the industry as tubes) for the oil and gas industry are tightening their belts too.
Earlier last week the largest steel company in the country, U.S. Steel, announced it would lay off more than 700 workers at steel tube plants in Houston and Cleveland with the layoffs to begin in March.
Just a few years ago, when oil prices were twice what they are now, the oil and gas industry was vibrant and ambitious investments were made. However, just as an oil oversupply has forced some companies to curtail further projects it has had the same effect on the steel companies that provide for them. When the oil fields were busy, steel companies were making money and cranking up new tubular mills to meet the industry’s growing demand.
Not all companies are following the leads of Tenaris Hickman and U.S. Steel. Others are continuing with their standard production rates, but are keeping a close eye on the markets.
Several economists and industry analysts have said they fully expect oil prices to remain low for some time.
Zhejiang Yaang Pipe Industry Co., Limited