Vitaly GNATUSH, expert with DerzhZovnishInform

UKRAINE

Production

In the first half of 2000, production of and trade in steel tubes and pipes in Ukraine finally featured an upward behavior, thus outstripping the 1999 performance.

According to Metallurgprom Association, the leading Ukrainian manufacturers produced 97,000 tonnes of steel tubes in June 2000 (see table 1). Altogether in the first 6 months of 2000, overall tube output made up 110% against the respective period of 1999. However, this figure is some 21% below the tube output figures of May 2000.

As for the first 6 months of 2000, only 4 enterprises, namely Nizhnedneprovsk Tube Rolling Works, Novomoskovsk Tube Works, Ilyich Iron and Steel Works of Mariupol, and Cominmet, successfully outdid the 1999 average monthly figures. During that period, the rest of companies (save for Khartsyzsk Tube Works) gradually augmented tube outputs reaching up to 90% of the 1999 production levels.

Analyzing the available information, one can realize that the unstable 2000 performance of Khartsyzsk Tube Works can be explained with coincidence of the following disadvantageous factors:

Russia’s policy aimed at greater import-substitution, in particular as regards large-diameter corrosion-resistant welded tubes;

failure to meet a number of work orders due to the fact that Ukrainian metallurgic mills managed to provide the enterprise with meager 3.7% of strips, which had been scheduled for supply in the first half of 2000;

smaller electric power supplies due to volatility of the Ukrainian power market.

At the same time, Khartsyzsk Tube Works has launched a program of manufacturing tubes made of X70 (Cr70) steel, which will allow this enterprise enter new markets.

Table 1. Output of steel tubes in Ukraine

Source: Metallurgprom assn.

Exports

According to the latest data with the State Customs Service, steel tube export from Ukraine amounted to some 427,400 tonnes worth the total of US$164.2 million in the first 6 months of 2000. In other words, physical export increased 27% against the respective period of 1999. However, this figure is 11% down compared to tube exports in the 4th quarter of 1999 (see the figure below). At the same time, due to general recovery of the global market for steel tubes, favorable trends are expected as regards Ukrainian steel tubes as well.

During this report period, greater export of seamless tubes (+41%) and other welded tubes (+9%) contributed the most to the increase in total tube exports against the respective period of 1999. At the same time, export of large-diameter welded tubes featured a 3% reduction.

In 2000 the pattern of steel tube export has changed significantly. The share of seamless tubes hit a high of 69.9% against 61.9% in 1999, while the share of welded tubes drifted downwards. In particular, the portion of large-diameter welded tubes lowered from 16.9% in 1999 to 12.6% now, and the share of other welded tubes dropped from 21.1% in 1999 to 17.5%.

In January-June 2000 Ukrainian steel tubes were supplied to 46 countries worldwide, which is somewhat lower than in 1999, when Ukraine sold tubes and pipes to 62 countries.

The largest shipments of Ukrainian tubes were purchased by CIS member-states (i.e. 77.6%). The EU consumed 6.9%, Asian countries had 5.6% of Ukrainian tube exports, East European countries 4.5%, the Baltic States 2.1%, and North and Central American countries 1.5% (see table 2).

Table 2. Ukrainian exports of steel tubes in 1999-2000 (‘000 tonnes)

Thus, in the first half of 2000 regional distribution pattern of tube export underwent noteworthy changes compared to 1999. Portions of CIS member-states and East European countries grew 1.1 times and 1.4 times correspondingly, while share of Asian countries reduced twofold and share of EU countries dropped 1.4 times. In our opinion, introduction of an import duty on Ukrainian seamless tubes in the EU and growing demand on the Russian market became the key factors that produced redistribution of export flows.

Russia holds an indisputable leadership in imports of Ukrainian steel tubes consuming 273,000 tonnes of this commodity or 63.9% of the total Ukrainian tube export during the report period. Seamless tubes accounted for 72.0% of the total Russia-bound tubes, other welded tubes 12.6%, and large-diameter welded tubes 15.4%.

Russian mass media and Russian politicians go on discussing whether it is necessary to protect Russia’s domestic market via application of customs duty on Ukraine-made tubes and pipes.

Seamless tubes

Russia was the primary consumer of Ukrainian seamless tubes in the first half of 2000 importing approximately 196,400 tonnes or 65.7% of the total seamless tube export from Ukraine. Besides to Russia, seamless tubes were also bound to Turkmenistan (at the quantity of 11,000 tonnes), Belarus (10,500 tonnes), Turkey (8,200 tonnes), Bulgaria (7,700 tonnes), Egypt (7,400 tonnes), Italy (6,200 tonnes), Israel (4,700 tonnes), Mexico (4,200 tonnes), Iran (4,100 tonnes), and some other countries. Generally, Ukrainian seamless tubes were supplied to 41 countries worldwide. The regions importing the largest quantities of Ukrainian seamless tubes were the CIS with 77.8% of the total, Asia with 7.5%, the EU with 4.9%, and East Europe with 4.3%. In the first 6 months of 2000, EU countries consumed some 14,600 tonnes of Ukrainian seamless tubes, i.e. 43.1% of the tubes supplied in the respective period of 1999. This brightly illustrates the fact that introduction of a duty on Ukrainian seamless tubes resulted in considerable curtailment of tube supplies to the EU countries. It should be noted that such factors as recovery on the oil market, growing prices for seamless tubes on the global market, and lowering quantity of Ukrainian tubes available on the EU market allowed western traders to snatch a large sum of money.

Large-diameter welded tubes

Ukraine’s position on the market for large-diameter welded tubes remains rather intricate, despite the fact that at the end of the report period Ukrainian exports finally reached the level of 1999. In the first half of 2000 Ukrainian tubes were supplied to 13 countries compared to 14 countries in the first half of 1999. At the same time, the 2000 export has made up 97% of large-diameter welded tubes exported in 1999. CIS countries with 92.0% of the total, including Russia with 78.1%, are the leading importers of Ukrainian-made large-diameter welded tubes this year.

Other welded tubes

In the first half of 2000, exports of other welded tubes witnessed a 9% recovery against the respective period of 1999. CIS countries imported some 66.7% of this commodity, including some 46.2% imported by Russia. Speaking about the other consumers of Ukrainian welded tubes, such regions as the EU with 16.4% and East European countries with 8.0% should be mentioned as well. In 2000 some 28 countries of the world, with the only exception for Africa and South America, acquired Ukrainian-made other welded tubes.

Imports

In the first half of 2000, Ukraine imported approximately 13,000 tonnes of steel tubes and pipes paying the total of US$14.9 million. Physical imports of hot-rolled seamless tubes accounted for 80.0% of the total, other welded tubes had 14.2%, and large-diameter welded tubes 5.8%. Austria (4,200 tonnes), Russia (5,000 tonnes), and Japan (800 tonnes) were the primary suppliers of seamless tubes to Ukraine, while the largest quantities of other welded tubes came from Russia (1,200 tonnes) and Poland (400 tonnes). At the same time, Russia was the only exporter of 700 tonnes of large-diameter welded tubes to Ukraine. Regional distribution of Ukrainian imports gradually expanded in the course of 5 months and now embraces 26 countries that supply Ukraine with seamless tubes and 20 countries that supply other welded tubes.

Summarizing the data on output, export and import of steel tubes and pipes in January-June 2000 and comparing these figures to the 1999 performance (see table 3), one can notice that the Ukrainian market has changed for the better.

Table 3. The Ukrainian market for steel tubes (‘000 tonnes)

The summary data and average monthly figures clearly show that the once-strong lag in steel tube output against 1999 has been surmounted this year and output even grew 7.2% in the first 6 months of 2000. However, no one is completely sure that Ukrainian tube mills would manage to retain such high growth rates in manufacturing output. Besides to the marketing problems, Ukrainian tube manufacturers have to cope with a rather ambiguous situation on the Ukrainian power market and troublesome supply of skelp and hollow sections made by domestic metallurgical mills. Should Ukrainian producers settle down all these problems, further tube production recovery would be possible.

As a positive aspect, it should be noted that supply of steel tubes and pipes on the domestic market increased 12.2%. However, along with this, average growth rate of steel tube import rose 1.8 times against 1999.

Russian Federation

According to Russia’s State Statistics Committee, major Russian tube-making enterprises manufactured 1.87 times more tubes in January-May 2000 than they did in the respective period of 1999. Output of seamless tubes increased 82.3%, while output of electric-welded tubes gained 99.1% compared to the respective period of 1999.

It is worth mentioning that all the 11 major Russian tube mills have managed to outstrip the January-May 1999 performance 1.3 to 3.0 times. The growing number of orders made by Russian oil & gas companies (the primary tube consumers) contributed the most to activation of the Russian tube-manufacturing activity.

According to Interfax news agency, in the first half of 2000 Chelyabinsk Tube Rolling Works boosted tube output 60% against figures of the respective period of 1999. Total tube output amounted to 316,340 tonnes, including 150,000 tonnes of electric-welded seamless tubes, 530 to 1,220 mm in diameter, and 80,000 tonnes of hot-rolled seamless oil-pipeline tubes.

By the beginning of August 2000, Chelyabinsk Tube Rolling Works plans to obtain an official license and pass the certification procedure to manufacture tubes with multi-layer polymeric coating. This would allow this enterprise to utilize its full engineered capacity of 150,000 tpy of three-layer-polymeric-coated tubes, 530 to 1,220 mm in diameter. In 2001 the company plans to amplify productive capacity of the coating workshop up to 300,000 tonnes per year and launch coating of 1,420-mm tubes.

It is rather favorable that more than 210 million Russian rubles have been invested in development and modernization of Chelyabinsk Tube Rolling Works since the beginning of 2000 and some 40 to 60 million rubles are scheduled for investment by the end of the year.

In 2000, Chelyabinsk Tube Rolling Works will also supply tubes, 720 mm in diameter, to construction of the unified Baltic Pipeline System, which would convey exportable Russian oil to the North European countries. The total length of the Baltic Pipeline system will be 2,718 km, of which 833 km still have to be built.

Volzhsk Tube Works is also a notable dynamic player on the tube market. According to Interfax, this enterprise promoted further cooperation with large clients and sealed new contracts with Transneft, Gazprom, ITERA, and US oil corporation Chevron. In the first half of 2000, Volzhsk Tube Works manufactured 195,610 tonnes of tubes, 28.7% more than in the respective period of 1999.

Table 4. Output of steel tubes in Russia (‘000 tonnes)

Sources: State Statistics Committee of the Russian Federation, Interfax

Taganrog Metallurgical Works, which sells 80% of its products on Russia’s domestic market, runs intensive manufacturing reconstruction. This enterprise installs a special ladle furnace made by Italy’s Danieli, has signed a purchase contract for a new reducing-stretching mill with SMS Schloemann Siemag (a division of Mannesman), and holds a tender for supplier of an electric-arc furnace in 2000.

USA

Like in September-December 1999, in January-June 2000 the US market for oil tubing goods featured a prominent upward behavior. During January-June, prices for oil well tubing increased 7.5% on the average, while prices for casing tubes grew 10.0% (see table 5).

Average monthly prices for seamless casing, grade 80, underwent the most significant upswing (+11.6%), while prices for oil well tubing, grade 80, and electric resistance welded tubes made of carbon steel were notable for the lowest augmentation (+5.7% and +7.1% correspondingly).

Table 5. Average monthly prices for oil country tubular goods on the US domestic market (Houston area) in 1999-2000 (US$/tonne)

Source: Chermetinformatsiya Bulletin (Vesnik OAO Chermetinformatsiya)