The Logistics of Steel Pipes

Transportation via pipeline is by far the cheapest mode of transport, and for oil, gas and other chemicals the safest method too. For this reason the application of pipes are numerous in the transportation of liquids, gas and capsules with other cargoes. Steel pipes are also used in the construction of buildings, bridges, cranes and even lampposts.

Traditional high quality pipes and tubes were manufactured mainly in Europe, USA and Japan, whereas today you see a clear shift where China is the largest manufacturer of steel pipes in the world (an estimated 65% of the market). However, overcapacity in China forced the closure of several steel plants.

For most industries there are stringent regulations on the quality of steel pipes to ensure safe applications in the industry. As a result the pipe business comes with a lot of certificates and tests, where the weight of documentation could almost equal the weight of the pipe itself!

As steel pipes are heavy their main mode of transport is by sea. In order to avoid damages, there is a preference for sea containers instead of break bulk. Interesting to note is that steel pipes are traded in their standard size of 6 meters or 20 foot. This is just 10 centimetres longer than the internal length of a 20-foot sea container, forcing the entire industry to transport them in 40-foot containers instead! You can imagine that this cost the industry a lot of money in transport inefficiencies.

Most steel pipes are made of either carbon or stainless steel and its price is directly related to the commodity price of steel. As the steel price is volatile, holding stock is risky. For example in 2015 the price for seamless pipes went down by around 40%, making this industry a high-risk business if you are involved in this trade.

The practice

According to Mr. Ruud Langeveld, General Manager Van Leeuwen Pipe & Tube Malaysia, it is important to hold stock locally in Malaysia in order to deliver fast to the industry. Regional stocking is difficult due to stringent import and testing regulations that take time. Although the purchase price of the steel pipe might be relatively small in comparison to the total costs, a pipe can be a critical component for an industrial production plant. Companies can lose millions (in Ringgit Malaysia) every day when production is on halt because of a missing pipe. Therefore urgent deliveries require sometimes even transport of a steel pipe by air, just to avoid very costly production disruptions.

In the opinion of Mr. Langeveld the steel pipe trade is a global business, forcing steel pipe suppliers to have a global footprint. Only in this way you are able to meet high performance service level agreements from the industry. The future of the steel pipe trade is in integrated supply chains, where value adding and service will determine success in the industry.

The future

Cargo volumes via pipeline transport will soar by extended applications of capsule pipelines. Pipeline transport could be more cost effective in supplying goods to and waste from metropolitan areas as compared to trucks and vans that are increasingly clogging up the cities with the introduction of e-commerce. Other expected applications are cargo movements between high-tech industrial parks and airports.