Environment and Energy
Biden Kills Keystone XL; What Does that Mean for Steel?
Written by Tim Triplett
January 24, 2021
Cancellation of the Keystone XL pipeline project by the Biden administration will have some impact on the steel market in North America, specifically supply and demand for line pipe, but the effect is difficult to assess, say the experts.
On his first day in office Wednesday, President Biden followed through on his green-energy campaign promise and revoked the permit for the controversial pipeline, angering officials in Canada. The project, which was designed to transport oil extracted from Canadian tar sands to refineries on the U.S. Gulf Coast, has been in the works, on and off, for more than a decade. The Obama administration refused to grant a permit for construction of the pipeline in 2015, citing the fossil fuel’s contribution to global warming and concerns among Native Americans and other citizens of the potential for oils spills to harm the environment and pollute drinking water. In 2017, the Trump administration revived the $8 billion project, pointing to the jobs it would create.
Calgary-based TC Energy, which was constructing the pipeline, said activity will stop as it “will review the decision, assess its implications, and consider its options.” A spokesperson for the company told Steel Market Update that at this time it has no information on steel—how much has already been purchased or how much will no longer be needed—as a result of the president’s decision.
In a press conference prior to Biden’s executive order, Alberta Premier Jason Kenney was quoted as saying: “If the project ends, there would be assets that could be sold, such as enormous quantities of pipe. That would offset construction costs.” Thus the secondary market for large-diameter pipe is likely to see a spike in supply.
“Pipe was still on the ground from the original go around with KXL. Some of this will compete against new pipe somewhere,” said energy analyst Rick Preckel, a principal with Preston Pipe. “In August last year, both Welspun and Berg announced they had received orders for more pipe (Welspun said over a million feet, Berg just said a ‘large order’) related to the project. It wasn’t clear when manufacturing for that pipe would start, but both said it would keep them busy into early 2021. We don’t expect the large-diameter line pipe market segment to be much of a contributor to steel demand,” added Preckel.
Reacting to President Biden’s executive order pulling the plug on the pipeline, Canadian Prime Minister Justin Trudeau said: “We are disappointed, but acknowledge the president’s decision to fulfill his election campaign promise on Keystone XL. Despite President Biden’s decision on the project, we would like to welcome other executive orders made today, including the decisions to rejoin the Paris Agreement and the World Health Organization, to place a temporary moratorium on all oil and natural gas leasing activities in the Arctic National Wildlife Refuge, and to reverse the travel ban on several Muslim-majority countries.”
Some experts believe the Keystone XL decision spells the end of an era for major pipeline projects in the United States–which if true has longer-term implications for energy steel demand.
By Tim Triplett, tim@steelmarketupdate.com
Tim Triplett
Read more from Tim TriplettLatest in Environment and Energy
AISI cheers passage of water resources bill in Congress
The American Iron and Steel Institute (AISI) lauded the recent passage of a water resources bill in Congress.
Solar power to supply Hybar’s Arkansas rebar mill
Green & Clean Power will supply electricity to Hybar’s mill that is due to begin operations next summer.
SMA sends pro-steel policy plan to Trump administration
“We are under constant threat from nonmarket economies who evade our trade laws," SMA said.
November energy market update
In this Premium analysis we cover North American oil and natural gas prices, drilling rig activity, and crude oil stock levels. Trends in energy prices and rig counts are an advance indicator of demand for oil country tubular goods (OCTG), line pipe and other steel products.
SMU Spotlight: CRU’s Paul Butterworth talks EAFs, CBAM, and decarbonization
Last month I traveled to Sweden to the CRU Steel Decarbonisation Summit in Stockholm. I wanted to see if the European take on decarbonization was broadly different from what we are talking about here in the US.