Blog Post

I've recently become interested in Tenaris, a global supplier and manufacturer of specialty steel pipe for the energy industry. Right now the stock price seems ok, although I think we've yet to see the effects of the drop in oil prices run through Tenaris's financial statements. A drop off in revenue will likely send the share price lower in the near term.

My other concern is input prices. Tenaris's manufacturing process is not only highly dependent on steel, but also energy. Although prices for both have recently declined a lot, once Tenaris's products are in high demand again, I assume steel and energy prices will have risen substantially. Over the last couple of years, Tenaris seemed to have only suffered a slight shrinkage in gross margin, despite the rapid rise in commodities. I have yet to figure out if that was due to pricing power or long-term contracts that gave them raw materials at relatively low prices.

I eagerly await the next quarterly report to see how much business has fallen off, but in the meantime, if anyone has an answer to the question of how Tenaris manages their input prices, let me know.