Avoid US Steel Pipe Makers

US steel tube and pipe manufacturing remains one of the weakest products across QMG's coverage universe: volumes (down -53% yoy), pricing (down -13% yoy) weak, costs increasing at +13% yoy, pressure on both revenue and margins....most highly correlated equity that we have mapped to this product group is Tenaris (North America represents c50% of group sales)...given this difficult operating backdrop, we are surprised that the Tenaris’ share prices is only -10% ytd... Tenaris held an investor day in London last week – demand very weak across oil services and expected into 2016...QMG data has been negative so no surprise to see downgrades to consensus for both 2015 and 2016 although the magnitude of forecast changes may not be enough...QMG highlights risk that future earnings disappoints...We continue to avoid steel stocks with the preference being energy related sectors - eg refiners where margin performance is stronger and in this area, stocks like Tesoro (TSO US) and Valero (VLO US) map well to our data in the US and Total (FP FP) maps strongly to our data across Europe. (VIEW LINK)


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