Core Insights - Canada's implementation of the tariff rate quota (TRQ) system is reshaping the market for oil country tubular goods (OCTG) and linepipe, leading to tighter import channels and higher costs [1] - Rystad Energy anticipates mild upward pressure on Canadian OCTG and linepipe prices in the medium term due to increasing demand from pipeline projects and competition for limited import quotas [1] TRQ System Overview - The TRQ system was implemented in two stages: on June 27 for non-Free Trade Agreement (FTA) countries and on August 1 for FTA exporters, excluding the US and Mexico [2] - The policy aims to protect domestic producers from diverted steel flows due to US tariffs and prioritize Canadian-made materials for government projects [2] - Quarterly quota volumes are modest, with 7,816 tonnes for OCTG from non-FTA origins and 5,086 tonnes for large-diameter linepipe, alongside punitive 50% surtaxes on overages [2] Market Dynamics - The TRQ structure creates significant risks for suppliers and buyers, as import permits are allocated in real time without clear visibility, complicating shipment control [3] - Suppliers are now issuing dual-price offers to manage uncertainty, reflecting standard costs and potential surcharges if shipments exceed quotas [3] - The TRQ regime applies to products not manufactured in Canada, leading to higher costs and reduced flexibility for domestic buyers [4] Price Stability and Future Outlook - Despite challenges, OCTG and linepipe prices in Canada have remained stable, supported by controlled inventory levels and disciplined pricing [5] - Volatility is expected to increase as quotas near exhaustion, particularly during high-demand quarters, with qualification requirements making substitution difficult for OCTG [5] - Large-diameter project tenders could quickly deplete linepipe quotas, pushing buyers towards domestic mills or incurring surcharges, thereby establishing a firmer domestic price floor [5]