In the three quarters of 2001 situation on the Ukrainian market for
steel tubes was quite complicated. In the nine months of the current year, output of steel
tubes in Ukraine increased by 11% as compared to the respective period of 2000. However,
according to estimates by Metallurgprom association, steel tube production schedule for
2001 is completed only by 85%. In 2001 average monthly output of steel tubes accounts for
100.1% of the last year’s respective figure. Thus, production rates are clearly going
down (see table 1).

According to preliminary data, average monthly exports of steel tubes
from Ukraine in the nine months of 2001 equals 101.4% of the 2000’ respective volume.
Along with that, both average monthly supply of Ukrainian-made tubes to the domestic
market and domestic consumption are lower than last year’s respective figures.

However, in the three quarters of 2001, import of steel tubes in
Ukraine increased by 28.0%. This witnesses about more intensive expansion of foreign
produce on the Ukrainian market.

On the whole, the aforementioned data show that Ukraine’s domestic
market acquired a downward tendency, which, taking into account seasonal factor, may
strengthen in the fourth quarter of 2001.

Let’s now review steel tube manufacture in Ukraine. According to the
data with Metallurgprom, in the nine months of 2001, major Ukrainian steel tube
manufacturers produced 1,250,000 tonnes of the commodity.

In the period under review, only four tube works (out of the eight
biggest ones) exceeded average monthly output of the year 2000. These are Lugansk Tube
Works (150,0%), Nikopol Pivdennotrubny Works (121.2%), Khartsyzsk Tube Works (107.9%) and
Novomoskovsk Tube Works (105.6%). The rest of the plants, despite all their efforts, did
not manage to overdo a 66-96%-level of 2000. In the three quarters of 2001, the following
tube works contributed the most to steel tube output in Ukraine: Nizhnedneprovsk Tube
Rolling Works (35.3%), Nikopol Pivdennotrubny Works (18.5%) and Khartsyzsk Tube Works
(17.8%). These plants altogether account for some 72% of steel tube output in Ukraine.

According to preliminary data, in the three quarters of 2001, Ukraine
exported 961,700 tonnes of steel tubes worth some US$ 423.4 million. Compared to the
respective period of the last year, exports expanded approximately by 15.5%. Maximum
export was registered in August 2001 (138,700 tonnes), and minimum export – in September
(83,800 tonnes) (see figure 1). Average monthly exports from Ukraine increased by 1.4% as
compared to the year 2000. Of course, this is much less as compared to 1999 – 57.9%.
However, one should keep in mind that in 2001, besides to limitations imposed on exports
of Ukrainian-made tubes to the EU member states, limiting measures were enacted by Russia
as well.

Pattern of Ukraine’s exports of steel tubes in 2001 is the following:
seamless tubes – 60.4% against 61.8% in 2000, large-diameter welded tubes –
respectively 24.1% and 20.8%, and other welded tubes – 15.5% and 17.4%.

As a result of antidumping inquiries launched in the EU and Russian
Federation against Ukrainian tubes, and due to more active sales promotion of the
commodity on the markets of other countries, geographical distribution of Ukraine’s tube
exports has changed. Thus, as compared to the year 2000, the portion of export supplies to
the CIS shrank from 81.9% to 76.5%, and to Russia – from 61.3% to 56.3%. However, in the
current year Ukraine raised exports to Asian region from 4.4% to 5.6%, to the Eastern
Europe – from 3.7% to 4.7%, and to the countries of North and Central America – from
1.3% to 2.2%.

In the nine months of 2001, the major volume of Ukraine’s steel tube
exports (76.5%) was bound to the CIS countries and totaled 735,200 tonnes. The portion of
seamless tubes in total exports to the CIS made up 55.4%, large-diameter welded tubes –
29.9%, and other welded tubes – 14.7%. Russia is the leading consumer of Ukrainian-made
tubes and accounts for 56.3% of supplies, or some 541,400 tonnes. The portion of seamless
tubes in Russia-bound exports made up 61.0%, that of large-diameter welded tubes –
27.8%, and other welded tubes – 11.2%.

EU member states rank the second in the geographical pattern of Ukraine’s
exports (69,300 tonnes). Their share in Ukrainian steel tube exports accounts for 7.2%.
Supplies of seamless tubes to the region made up 69.7%, other welded tubes – 21.4%, and
large-diameter welded tubes – 8.9%. The major buyers of Ukrainian-made tubes in this
region were Germany (31,400 tonnes) and Italy (22,900 tonnes). The share of these
countries in total EU-bound Ukrainian export of steel tubes accounts for 78.4%.

Asian countries rank the third in Ukraine’s steel tube exports. These
countries imported 53,800 tonnes of tubes (5.6% of the total export volume). In the I-III
quarters of 2001, the following commodities were supplied to this region: seamless tubes
(97.0%), large-diameter welded tubes (1.7%) and other welded tubes (1.3%). The leading
buyers of Ukrainian tubes in the region were Turkey (13,200 tonnes), Iran (10,600 tonnes)
and Israel (10,000 tonnes), which altogether account for 62.8% of exports to this region.

In the three quarters of 2001, exports of steel seamless tubes from
Ukraine increased by 8.6% as compared to the respective period of 2000. This growth became
possible not only due to expansion of supplies, but also due to widening of geographical
pattern of exports. In the nine months of 2001, seamless tubes from Ukraine were exported
to 66 countries. This number exceeds the respective number of 2000 (57 countries). The
leading consumers of Ukrainian-made seamless tubes are the following: Russia
(approximately 330,100 tonnes or 56.9% of the total export), Kazakhstan (33,600 tonnes),
Italy (22,300 tonnes), Germany (21,600 tonnes), and Turkmenistan (14,500 tonnes). These
countries account for about 72.7% of the total Ukrainian export of seamless tubes. In
terms of regions, the biggest buyers of the commodity are the CIS countries (70.2% of
seamless tube exports), Asia (9.0%) and the EU (8.3%).

In the nine months of 2001, Ukrainian exporters of large-diameter
welded tubes raised volume of supplies by some 49% as compared to the respective period of
the last year. In the period under review, these tubes were exported to 14 countries
against 18 countries in the year 2000. Russia is the leading consumer of Ukrainian
large-diameter welded tubes (150,600 tonnes or 65.1% of total export of the commodity).
Uzbekistan and Belarus rank respectively the second and the third in the list of the main
consumers. These countries exported 62,800 tonnes and 4,900 tonnes of Ukrainian
large-diameter welded tubes. In total, the three aforementioned CIS countries account for
94.3% of Ukraine’s exports of the commodity.

In the nine months of the current year, exports of other steel welded
tubes from Ukraine increased by 5.1% as compared to the respective period of the year
2000. In the period under review, 107,800 tonnes of other welded tubes were exported to
the CIS countries (71.9%), including 60,700 tonnes, or 40.5% imported by Russia. Among
other regions consuming Ukrainian welded tubes, the following should be mentioned: Eastern
Europe – 10.3%, and the EU – 9.9%. In total, in 2001 31 countries imported Ukrainian
other welded tubes. This is fewer as compared to the last year, when these tubes were
supplied to 37 countries. The first five countries, which account for 66.2% of the total
export of other welded tubes, besides to Russia, include Uzbekistan (11,300 tonnes),
Germany (9,800 tonnes), Belarus (9,500 tonnes), and Turkmenistan (8,000 tonnes).

In the nine months of 2001 Ukraine imported some 28,900 tonnes of steel
tubes worth US$ 30.9 million from 38 countries. The leading suppliers were the Russian
Federation (15,000 tonnes, or 51.9% of the total import), Austria (5,000 tonnes, or
17.5%), Germany (3,900 tonnes, or 13.4%), and Poland (2,400 tonnes, or 8.3%). Thus, the
share of these four countries in total Ukrainian import of steel tubes makes up 91.9%.

The portion of seamless hot-rolled tubes in total imports in terms of
physical volume accounts for 77.4%, that of other welded tubes – 20.3%, and
large-diameter welded tubes – 2.3%.

Seamless tubes Ukraine imported from 31 countries. The major volume of
these tubes was supplied from Russia (12,900 tonnes, or 57.9%), Austria (4,800 tonnes, or
21.7%), and Poland (2,100 tonnes, or 9.3%). The share of these countries totaled 89% of
total import of the commodity.

For the most part, other welded tubes were imported from Germany (3,100
tonnes, or 53.1%) and Russia (1,500 tonnes, or 26.2%), which accounts for about 80% of the
total volume of these tubes’ supply. The list of suppliers of other welded tubes to
Ukraine includes 33 countries.

Large-diameter welded tubes were imported in Ukraine from seven
countries (Belarus, Germany, Italy, the Netherlands, Russia, Poland and the Czech
republic). The leading supplier of large-diameter welded tubes to Ukraine is the Russian
Federation, which exported to Ukraine 78.1% of Ukraine’s import of the commodity, or 500
tonnes of these tubes.RUSSIA

In the three quarters of 2001, Russian manufacturers of steel tubes
preserved a positive tendency in production.

According to the data with Interfax (State Statistics Committee of the
Russian Federation), in January-September 2001 Russian tube works manufactured 4,100,000
tonnes of steel tubes, which is 10.5% up from the respective 2000’ figure (see table 2).
Output of seamless tubes totaled 1,817,800 tonnes (up 3.0%), and that of electric welded
tubes – 2,206,000 tonnes (up 17.9%).

Average monthly output of steel tubes in Russia came to 456,900 tonnes,
which is 3.3 times higher than the average monthly production of steel tubes in Ukraine in
2001.

According to the data with Interfax (State Statistics Committee of the
Russian Federation), practically all Russian steel tube manufacturers raised output of the
commodity. In particular, Chelyabinsk Tube Rolling Works managed to increase its steel
tube output by 14.5%, Sinarsk Tube Works – by 12.8%, Taganrog Metallurgic Works – by
10.7%, Vyksa Metallurgic Works – by 10.0%, Seversk Tube Rolling Works – by 2.9%, and
Pervouralsk Tube Works – by 0.2%.

Therefore, one can say that, judging by performance of Russian tube
works, there is no reason to talk about slowdown in production. At the same time, the
Ministry of Economic Development of the Russian Federation does not intend to loosen
limitations imposed on Ukrainian tube exports to the Russian market. It is interesting to
review this situation with regard to competitive ability of Russian-made tubes. It is well
known that no technical progress is possible without competition. If to consider that
Russian tube manufacturers are more active than their Ukrainian counterparts in
re-equipping and modernizing their production capacities, and, moreover, one of the
biggest tube works – Volzhsk Tube Works – since August 2001 does not give any
information on its actual output, one can come to a conclusion that Russian steel tube
manufacturers are anxious about competition from Ukrainian manufacturers.

There are some interesting results regarding peculiarities of
competition on the Russian market stated in research work of the Institute for the Economy
in Transition (IET). As it was written in the article by O. Milyukov “Whom to be afraid
of in your own country?” (The Industrial Newspaper, 01 November 2001), according to the
data of analytical work by S.V. Tsuhlo “Analysis of factors determining actual financial
& economic state of Russian industrial enterprises”, researches were performed since
October 1995 till April 2001, and opinions of 10 to 12 thousand managers of Russian
enterprises were taken into consideration. Over a year, the managers sent their replies to
questions about competition from all over Russia: from Kaliningrad to Kamchatka.

The results were somewhat unexpected. According to O. Milyukov, Russian
enterprises experience the strongest competition from their colleagues, i.e. from domestic
producers. This was said by 81% of the respondents. Competition with foreign producers is
much weaker than competition on the Russian domestic market: 25% of directors stated that
they do not feel any competition with imports at all. Only 54% of respondents can “feel”
the presence of foreign competitors on their sales markets. Competition with commodities
from the CIS countries ranks the last. As O. Milyukov states, it is almost absent.

There is no reason to not trust this information. According to S.V.
Tsuhlo, 35% of replies have been signed by directors of enterprises, 35% more – by
deputy directors, and the rest – by heads of economic departments of the enterprises.

Taking into consideration the aforementioned, the following conclusion
can be made: antidumping inquiries launched against Ukrainian commodities on the Russian
market are clearly called forth by protectionism and anxiety about competition.

In the II and III quarters of 2001, American market for oil tubes
reported a downward tendency. Oil tube price dynamics shows that maximum price for the
year has already been passed, and recession in prices for oil after September terrorist
attacks does not indicate that any improvement of the situation is likely to happen in the
IV quarter.

Moreover, according to the Bulletin of Foreign Commercial Information
of 25 October 2001, UN experts reconsidered their previous forecast of the world economy
development and lowered the figures. According to the new forecast, the rates of GDP
growth in the world in 2001 will come to 1.4% against 2.4% stated in the previous
forecast.

As regards oil tubes, average monthly prices for electric resistance
welded casing tubes of grade 80 demonstrated the most significant growth (by 1.2%),
whereas respective prices for service seamless tubes of grade 80 reported the most
considerable decrease – 3.6% (see table 3).

On the whole, in April-September 2001, average monthly prices for
casing tubes plunged by 1.3%, and for service tubing – by 2.0%.

Table 1. Ukrainian market for steel tubes, �000 tonnes

Table 2. Output of steel tubes in Russia in 1998-2001, �000 tonnes

Sources: RF State Statistics Committee, Interfax. * – data for 10 months, ** – data
for 7 months.

Table 3. Average monthly prices for oil tubes on the US domestic market
(Houston area) in 2001, US$/tonne

Source: PbJSC CherMetInformatsiya Bulletin