Detailed Overview of Tenaris' 2024 Performance
Tenaris, a key player in the production of seamless and welded steel pipes, saw its overall sales decline by 5% in 2024, moving from 4.14 million metric tons in 2023 to 3.93 million metric tons. This significant drop in shipments reflected broader shifts in market demand, which was affected by factors such as fluctuating oil and gas prices, energy sector adjustments, and global geopolitical factors. Several of these factors played a role in reducing demand for Tenaris' tubular products in specific regions while sparking growth in others.
Seamless Pipe Shipments Decline by 4%
Seamless pipes, used primarily in industries such as oil and gas, energy, and construction, saw a 4% decline in shipments, totaling 3.08 million metric tons. This reduction was largely driven by slowed production activity in key regions such as Mexico, Colombia, and Argentina, where drill pipe demand fell due to lower investment in oil exploration and extraction activities. Additionally, the US market experienced reduced demand for seamless pipes, especially in light of lower prices for drilling equipment and the overall slowdown in energy sector exploration activities.
This dip in seamless pipe sales reflects a broader trend of reduced production activity across North America and Latin America, where Tenaris traditionally sees significant demand for drill pipes, a critical product in the exploration of oil and gas resources.
Welded Pipe Shipments Drop 11%
The company’s welded pipe shipments faced an even steeper drop, falling 11% to 852 thousand metric tons. Welded pipes, which are primarily used for transporting liquids and gases across long distances through pipelines, saw reduced demand, particularly in Argentina and Europe, where pipeline construction projects slowed considerably. The slowdown in the oil and gas sector in these regions contributed to the lack of major infrastructure development, leading to lower purchases of welded pipes.
In Europe, the reduction in mechanical pipe demand further exacerbated the challenges for Tenaris. Mechanical pipes are often used in industries like automotive manufacturing and construction, and the decline in these sectors reflected broader trends in industrial activity and energy transition projects, which were less dependent on traditional steel pipes.
Financial Performance: 16% Drop in Net Sales
One of the most significant factors in Tenaris' disappointing 2024 performance was its 16% drop in net sales, which fell to $11.91 billion from $14.18 billion in 2023. This decline was tied not only to the decrease in tonnage but also to the lower average selling prices across key product categories, including drill pipes in the US market. The reduced demand for drill pipes, which are used in oil and gas extraction, impacted both Tenaris' ability to sell at previous price points and the overall profitability of its operations.
The price decline was particularly evident in North America, where drill pipe prices faced significant pressure from market competition and lower oil prices, which led to less demand for oil exploration equipment. The combination of lower volumes and pricing pressures eroded the company’s overall revenue.
Operating Income Plummets by 45%
In line with the drop in sales, Tenaris' operating income fell by an alarming 45%, down to $2.3 billion. This dramatic decrease in income was directly attributed to the lower prices for drill pipes and other tubular products, especially in markets like the US and Mexico, where Tenaris saw declining margins. As the average selling prices for key products decreased, the company's margins tightened, leading to lower profitability even as Tenaris worked to maintain its global market position.
The price decline in drill pipes combined with increased operational costs and lower demand from key sectors in Latin America and Europe significantly affected the company’s ability to maintain profitability. These factors ultimately contributed to a sharp drop in operating income for the year.
Regional Demand Shifts: Middle East as a Key Growth Market
Despite the challenges faced in traditional markets, Tenaris experienced record demand from the Middle East in 2024. In particular, Saudi Aramco significantly increased its orders for OCTG products as part of its expanded gas production efforts. This demand surge came as Saudi Arabia focused on increasing its production of natural gas, driving the need for steel pipes in the region.
Similarly, Turkey boosted its demand for seamless and welded pipes for offshore and onshore projects. Turkey’s energy sector saw growth, particularly in the offshore gas exploration segment, which relied heavily on Tenaris’ products. As a result, the Middle East and Turkey emerged as crucial growth markets for Tenaris, helping to offset losses in other regions.
Impact of US Tariffs and Global Trade Uncertainty
One of the most significant challenges facing Tenaris in 2024 was the uncertainty surrounding US tariffs on steel imports. Changes in US trade policies and the imposition of tariffs on imported steel products created an unstable environment for global trade flows. These tariffs created difficulties for Tenaris, particularly in the US market, where the company relies heavily on drill pipe sales.
The changes in tariffs not only increased costs but also prompted shifts in trade dynamics, affecting Tenaris’ ability to compete in the US and other key markets. The uncertainties created by US trade policies have left the company cautious about its future prospects in the North American market.
Outlook for Q1 and Q2 2025
Looking ahead to the next quarters, Tenaris expects the Q1 2025 results to be relatively stable, aligning with the performance seen in the previous quarter. The company is cautiously optimistic about a moderate recovery in Q2 2025, driven by expected stability in key regions like the Middle East and Turkey. However, Tenaris remains concerned about the long-term impact of US tariffs, global energy price fluctuations, and market volatility on its sales performance.
Key Takeaways
• 5% Reduction in Pipe Sales: Tenaris saw a 5% decline in overall pipe sales in 2024, falling from 4.14 million metric tons in 2023 to 3.93 million metric tons.
• Seamless Pipe Shipments Decline by 4%: Shipments of seamless pipes dropped by 4%, totaling 3.08 million metric tons, as drill pipe demand fell in Mexico, Colombia, and Argentina.
• Welded Pipe Shipments Down 11%: Welded pipe shipments decreased by 11%, totaling 852 thousand metric tons, driven by a slowdown in pipeline projects in Argentina and Europe.
• Net Sales Fall by 16%: Net sales for Tenaris declined by 16%, dropping to $11.91 billion as a result of reduced tonnage and falling drill pipe prices in the US.
• Operating Income Decreases by 45%: Operating income for the pipes segment plunged by 45%, falling to $2.3 billion, primarily due to lower prices and tightening margins.
• Middle East Demand Grows: Saudi Aramco and Turkey drove significant demand for Tenaris’ OCTG products, benefiting the company amidst broader market challenges.
• US Tariffs and Trade Uncertainty: The company faces growing uncertainty due to US tariffs on steel, which have impacted trade flows and pricing in the US market.
• Stable Outlook for Q1 2025: Tenaris expects stable Q1 2025 results, with hopes for moderate growth in Q2 2025, largely dependent on Middle Eastern markets and global demand trends.
Despite a tough year in 2024, Tenaris is navigating challenges with a strategic focus on the Middle East and Turkey, where demand continues to rise for key products. The ongoing volatility in US tariffs and global energy prices will remain crucial factors in determining the company’s performance in 2025.
