NEW YORK (AP) – American steel pipe and tubing maker AEI, which has faced years of losses, is preparing for bankruptcy and will shut down, its chief executive said Thursday.
AEI CEO John R. Tisch said the company’s stock plunged $1.45 in morning trading after the Wall Street Journal reported the company had lost $1 billion on the steel-pipe business.
The company’s chief financial officer, Paul K. Ojeda, said in a statement that the company is expected to file for Chapter 11 bankruptcy protection, which would strip the company of its assets and leave it to pay creditors.
AEIs collapse is unprecedented, Ojeta said.
He said the losses were related to its failure to obtain required federal permits for construction of its new pipe and fittings.
AEAs loss comes as the industry faces a steep decline in the price of pipe, a critical component of steel production.
The price of steel fell 11 percent in the last three months, to $4.15 a metric ton in early February.
The decline in prices has fueled concerns that the industry could face a prolonged slump in demand as new production comes online, especially in Asia.
AEInventories of steel pipes have shrunk nearly 10 percent in recent years.
The drop is partly due to a glut of new pipes, which have been more expensive to manufacture than the pipes needed to keep up with demand, OJeda said.
The pipe industry is also struggling to fill a growing demand for new steel for high-speed train rolling stock.
Steel is also an essential component in the production of some of the world’s biggest factories.
A majority of the $4 trillion in U.S. steel production in 2020 will be produced in the United States, according to the American Steel Association.
But the industry has been grappling with a severe drop in the cost of steel to meet increasing demand.
The average price of a metric tons of steel has fallen to $2.28 from $2,854 in 2016, according a report released this month by the steel industry trade group.
AEInsights, an industry trade publication, reported last month that the steel market is expected “to fall as low as $2 a metric-ton by 2021.”
It said the drop could be as low a 10 percent drop as much as 20 percent in 2021.
The collapse of AEI and other U.N. trade groups will also have a significant impact on the global supply chain.
The world’s top supplier of pipe and pipes, China, is the world leader in pipe production, and it is likely to continue to be a top buyer of steel in the coming years.
AEi also has operations in Europe, Asia and Latin America.
The United States was one of the main suppliers of steel pipe in the world for decades.
The industry is largely self-supporting.
It relies on government subsidies to pay suppliers, which means that the federal government has been unable to meet demand in many industries.
AEIf, as expected, the United Kingdom’s government and the European Union decide to leave the EU, which is an alliance of 28 countries and which has imposed restrictions on imports, the steel supply chain will be even more uncertain, Ojseda said in his statement.