This is the first joint attempt of the Metal monthly (Kiev, Ukraine) and Metal Supplies and Sales (Moscow, Russia) to hold a round table dedicated to the tube sector, i.e. manufacturing, sales and development.
TO BOTH ENDS OF THE TUBE
TO BOTH ENDS OF THE TUBE
This is the first joint attempt of the Metal monthly
(Kiev, Ukraine) and Metal Supplies and Sales (Moscow, Russia) to hold a round table
dedicated to the tube sector, i.e. manufacturing, sales and development.
This project is to give tube producers, traders and
consumers a chance to share their opinion on burning issues of the tube business.
The round table was attended by:
Ukraine: A. Kachur, head of the department for
co-ordination and effective work of tube and metal product enterprises with the Ministry
for Industrial Policy of Ukraine; A. Velichko, economic director of Khartsyzsk Tube Works;
representatives of Interpipe Corporation; N. Soloshenko, director of Novomoskovsk Tube
Works; N. Podeiko, director general of state-owned RodakovoResursy Association; V.
Grinyov, managing director of Stalpromtrest (wholesaler of flat rolled products); and E.
Kuznetsov, Magnesite Concern.
Russia: V. Anisimov, director general of Vyksa
Metallurgical Works; A. Shmelev, director general of Pervouralsky Novotrubny Works; A.
Tokarev, director general of Almetyevsk Tube Works; and A. Brovko, executive director of
Volzhsky Tube Works.
To open the debate at the round table, the editorial office
approached Anatoly Kachur, deputy head of department for metal industry and head of the
department for co-ordination and effective work of tube and metal product enterprises with
the Ministry for Industrial Policy of Ukraine.
For over 20 years I have been directly involved in
development of production optimisation plans, operative planning of tube supplies for the
natural gas industry of the former USSR, execution of technical and economic feasibility
studies with respect to the functioning tube-making facilities in Ukraine, Russia and
Azerbaijan, construction of new plant and machinery, optimisation of long-term projects
for the tube sector’s development until 2010.
Directly taking part in compilation of annual production
plans for major types of tubes (e.g. electric-welded (thin-walled, oil conveyance, large
diameter) and cold and hot shaped seamless tubes (conventional, bearing, for the use in
high-pressure boilers, casing, tubing, drilling, stainless)), I keep close contacts with
the leading specialists of tube mills and employees of the planning, supplies and sales
agencies of the former Soviet Union. Having acquired significant information on the
engineered capacities of tube mills in Ukraine and Russia, I have a selection of unique
data on potential tube outputs back in 1993 and at the moment.
Having spent 22 years at the State Tube Institute (former
VNITI), I have been employed with the Ministry of Industrial Policy of Ukraine since 1993
and appointed to head a department of tube and metal product manufacture in 1995.
Above all, it is worth mentioning that many issues among
the Russians and the Ukrainians today relate to the Soviet heritage.
The former USSR had two large tube-making regions, namely
Ukraine and the Ural. In 1989 (the year of the highest tube outputs and consumption in the
USSR), the Ural region made 6,347,100 tonnes of steel tubes, while Ukraine manufactured
6,882,800 tonnes (see table 1). Even back then, at the favourable time for domestic
consumption, Ukraine exported 48.7% of its tube outputs, while consuming 3,532,000 tonnes
domestically (to compare, 500,000 tonnes in 2000). As a number of new electrical welding
machinery were phased in throughout Ukraine in 1989 through 1999, the country’s
capacities now exceed domestic demand 12 to 13 times. I understand why the flood of
tubular goods made in Ukraine, including electric welded thin-walled tubes and water and
natural gas pipes, alarms the Russians. However, I am nothing but amazed that certain
Russian companies prefer purchasing high-tech products from non-CIS countries instead of
from Ukraine. Well, Ukraine-based tube mills were built mainly to meet the demands of
Russian consumers. Perhaps, regular commodities may be subjects to quotas, however,
Russian consumers should be asked as regards the other tubular goods (not to mention the
terms of delivery and proximity to manufacturing capacities).
Consumption of steel tubes by Ukraine’s sectors in
1989
Nomenclature code | Type of tube | Output in Ukraine (tonnes) | Consumption in Ukraine (tonnes) | Including exports to (tonnes) | Imported (tonnes) | |||
Ukraine | Russia | Transcaucasia | ||||||
1311 | Hot rolled, for the use in high-pressure boilers | 98,857 | 11,741 | 9,991 | 1,750 | - | - | |
1314 | Rolled, bearing | 91,611 | 57,601 | 43,739 | 13,862 | - | - | |
1315 | Rolled, stainless | 39,911 | 20,320 | 13,370 | 4,426 | - | 2,524 | |
1317 | Seamless, for the use in petroleum conveyance | 435,593 | 166,233 | 71,575 | 36,407 | 5,887 | 52,364 | |
1319 | Rolled, conventional, round | 1,200,297 | 640,125 | 395,139 | 97,362 | 60,377 | 87,247 | |
1319 | Rolled, conventional, shaped | 60,000 | 33,216 | 7,944 | 792 | 5,640 | 18,840 | |
1321 | Casing | 645,118 | 136,140 | 61,908 | 35,236 | 15,207 | 23,789 | |
1324 | Drilling pipe | 6,803 | 24,809 | 388 | 15,425 | 5,964 | 3,032 | |
1327 | Tubing | 38,066 | 20,947 | 2,288 | 2,002 | 10,223 | 6,434 | |
1341 | Drawn, for the use in high-pressure boilers | 41,583 | 7,647 | 6,666 | 981 | |||
1342 | Drawn, bearing | 59,019 | 25,783 | 23,215 | 21 | - | 2,547 | |
1344 | Drawn, conventional | 202,393 | 163,905 | 116,357 | 21,531 | 1,077 | 24,940 | |
1351 | Thin-walled, seamless | 26,767 | 63,299 | 25,705 | 5,243 | - | 32,351 | |
1367 | Thin-walled, seamless, stainless | 31,646 | 18,648 | 12,632 | 4,269 | 1,567 | ||
1371 | Thin-walled, electric welded, stainless | 9,796 | 12,025 | 9,831 | 1,460 | 734 | ||
1373 | Thin-walled, electric welded | 284,938 | 395,007 | 233,404 | 136,365 | 25,238 | ||
1381 | Electric welded, large diameter | 2,119,736 | 862,192 | 392,705 | 364,712 | 104,775 | ||
1383 | Electric welded, for the use in petroleum conveyance | 1,274,813 | 458,239 | 282,154 | 135,530 | 40,555 | ||
1385 | For the use in water and natural gas conveyance | 275,912 | 411,286 | 205,284 | 206,002 | - | - | |
TOTAL | 6,882,819 | 3,531,984 | 1,921,438 | 1,083,377 | 104,375 | 422,794 | ||
1461 | Tubes of cast iron | 407,200 | 220,645 | 174,291 | 46,354 | - | - |
Outputs and consumption of steel tubes in the USSR
and Ukraine in 1989
Nomenclature code | Type of tube | USSR | Ukraine’s share of | ||||
consumption | outputs | ||||||
Consumption (‘000 tonnes) | Outputs (‘000 tonnes) | % | ‘000 tonnes | % | ‘000 tonnes | ||
1311 | Hot rolled, for the use in high-pressure boilers | 177.73 | 163.73 | 6.61 | 11.74 | 60.38 | 98.86 |
1314 | Rolled, bearing | 299.38 | 299.38 | 19.24 | 57.60 | 30.6 | 91.61 |
1315 | Rolled, stainless | 85.27 | 78.45 | 23.83 | 20.32 | 50.87 | 39.91 |
1317 | Seamless, for the use in petroleum conveyance | 1,549.24 | 1,077.49 | 10.73 | 166.23 | 40.43 | 435.59 |
1319 | Rolled, conventional, round | 3,161.11 | 2,709.57 | 20.25 | 640.13 | 41.38 | 1,121.25 |
1319 | Rolled, conventional, shaped | 240.0 | 140.0 | 13.84 | 33.22 | 56.46 | 79.05 |
1321 | Casing | 2,866.11 | 2,145.57 | 4.75 | 136.14 | 30.07 | 645.12 |
1324 | Drilling pipe | 248.53 | 219.65 | 9.98 | 24.81 | 3.1 | 6.8 |
1327 | Tubing | 714.92 | 376.48 | 2.93 | 20.95 | 10.11 | 38.07 |
1341 | Drawn, for the use in high-pressure boilers | 134.39 | 105.13 | 5.69 | 7.65 | 39.55 | 41.58 |
1342 | Drawn, bearing | 107.03 | 93.79 | 24.09 | 25.78 | 62.93 | 59.02 |
1344 | Drawn, conventional | 897.13 | 660.65 | 18.27 | 163.91 | 30.63 | 202.39 |
1351 | Thin-walled, seamless | 268.9 | 171.94 | 23.54 | 63.30 | 15.55 | 26.73 |
1367 | Thin-walled, seamless, stainless | 97.92 | 82.64 | 18.86 | 18.47 | 38.3 | 31.65 |
1371 | Thin-walled, electric welded, stainless | 21.99 | 18.89 | 54.69 | 12.03 | 51.88 | 9.8 |
1373 | Thin-walled, electric welded | 1,956.45 | 1,805.61 | 20.19 | 395.01 | 15.78 | 284.94 |
1381 | Electric welded, large diameter | 7,998.07 | 4,915.37 | 10.78 | 862.19 | 43.12 | 2,119.74 |
1383 | Electric welded, for the use in petroleum conveyance | 3,466.26 | 3,114.09 | 13.22 | 458.24 | 40.94 | 1,274.81 |
1385 | For the use in water and natural gas conveyance | 2,389.8 | 2,382.6 | 17.2 | 411.29 | 11.55 | 275.91 |
TOTAL | 26,710.05 | 20,567.35 | 13.22 | 3,531.98 | - | - | |
Including domestic outputs | 20,567.35 | 20,567.35 | 7.19 | 1,921.44 | 33.46 | 6,882.82 | |
Imported from other parts of the USSR | - | - | 4.45 | 1,187.75 | - | - | |
Imported from abroad | 6,142.70 | - | 1.58 | 422.79 | 6.88 | 422.79 | |
1461 | Tubes of cast iron | 1,324.4 | 16.66 | 220.65 | 30.75 | 407.2 |
What was the dynamics of tube and pipe outputs at your
company in 1999 through 2001 as regards types of tubes, consumers and regional sales?
Interpipe Corporation
Interpipe Corp. unites the largest tube mills of Ukraine,
namely Niko Tube (Nikopol Seamless Tube Works), Nizhnedneprovsk Tube Rolling Works and
Novomoskovsk Tube Works. Throughout 2000 the Corporation constantly boosted outputs at
those mills and invested in facilities upgrade. As a result, tube mills that are part of
Interpipe increased their outputs by an average of over 1.5 times in 2000 against 1999.
For instance, Nizhnedneprovsk Tube Works manufactured 609,700 tonnes of tubes in 2000,
Novomoskovsk Tube Works made 153,000 tonnes and Niko Tube 77,000 tonnes. Around 70% of
that output were sold to consumers in Eastern Europe and the CIS with the remaining 30%
exported to Western Europe, America and Asia. Oil country tubular goods made 60% of the
total outputs.
Notable as it is, tubular good outputs were rising in both
Ukraine and Russia in 2000 owing to high prices for petroleum and natural gas in the
world. The grown prices warmed up the demands of oil & gas companies for metal.
Perhaps, the Fund for Tube Sector of Russia initiated a special inquiry against Ukrainian
tube imports as an alternative to competition for clients (previously, tube manufacturers
from both countries got along in peace). Similar steps would make the Fund monopolise
Russia’s tube market and dictate the market prices subsequently.
N. Soloshenko, director of Novomoskovsk Tube Works
We have done well in terms of outputs in 2000 and we are
striving to keep up the progress this year (see information below).
Tube outputs (tonnes)
Type | Period | ||
1999 | 2000 | 5 months of 2001 | |
1020 | 6,985 | 51,938 | 6,761 |
159-530 | 39,750 | 78,193 | 34,756 |
21.3-114 | 25,114 | 32,056 | 15,455 |
Total | 71,849 | 162,187 | 56,972 |
N. Podeiko, director general of RodakovoResursy
The past couple of years saw a considerable growth of tube
outputs. For instance, outputs almost doubled in the first quarter of 2001 against the 1st
quarter of 2000.
However, the main point is that Ukraine can make much more
than that.
A. Fyodorov, director general of Chelyabinsk Tube
Rolling Works
Our sales are growing with respect to all tubular products,
except for pipes for the use in water and natural gas conveyance in 2000 and thin-walled
tubes in 2001, namely:
Type of tubes | 1999 (‘000 tonnes) | 2000 (‘000 tonnes) | 2000/1999 (%) | 1st quarter of 2000 (‘000 tonnes) | 1st quarter of 2001 (‘000 tonnes) | 2001/2000 (%) |
Seamless, hot-shaped | 18,055 | 157,891 | 33.7 | 37,698 | 39,262 | 4.1 |
Seamless, hot-rolled | 33,948 | 74,297 | 118.9 | 19,653 | 19,946 | 1.5 |
Seamless, cold-shaped | 12,007 | 13,388 | 11.5 | 2,787 | 3,420 | 22.7 |
Electric welded, large diameter | 214,038 | 281,513 | 31.5 | 86,723 | 102,211 | 17.9 |
For the use in water and natural gas conveyance | 70,601 | 68,394 | -3.1 | 12,686 | 13,464 | 6.1 |
Electric welded, thin-walled | 4,064 | 7,180 | 76.7 | 1,681 | 1,605 | -4.5 |
TOTAL | 452,713 | 602,663 | 33.1 | 161,228 | 179,908 | 11.6 |
NAME="_1051518988">Growing demands of oil companies are the major cause of increased
sales. Respectively, sales in Tyumen region – the main petroleum exploration part of
Russia – are on the rise, e.g. sales amounted to 136,000 tonnes in 2000, 40,000 tonnes
greater than in 1999.
Over that period, sales gained 16,000 t in Tatarstan, 8,500
t in Bashkiria and 6,000 t in Moscow, St. Petersburg, Krasnoyarsk region and Irkutsk
region.
Some 90,000 t of tubes were exported in 2000, 60,000 t more
than in 1999.
V. Anisimov, director general of Vyksa
Metallurgical Works
The year 1999 was a turning point for the works. Though
outputs reached only 347,800 tonnes (just some 7,700 tonnes above 1998), the key point was
the growth in monthly outputs, from 17,500 t in January to 45,400 t in December. That
trend continued in 2000 (monthly output stabilised at around 70,000 t since May 2000, with
total tube output of 762,000 t made that year). The Works produced 265,800 t of tubes in
the first 4 months of 2001. Therefore, the company has been running stable for over a year
now.
Outputs of water and natural gas pipe and thin-walled tubes
have remained at 13,000 tonnes since August 1999, tubes for oil conveyance at over 15,000
t since May 2000, large-diameter tubes at over 20,000 t since February 2000 and casing at
over 20,000 t since October 2000.
Sales to all consuming sectors rose as well. Sales to oil
companies saw the most impressive increase from 84,800 t in 1999 to 336,400 t in 2000.
Metal traders received 54,700 t, while subsidiaries of Transneft and Gazprom purchased
22,400 t and 15,600 t respectively. Besides, sales in all regions, predominantly in
Western Siberia, Central Russia and the Volga area, have experienced growth.
A. Brovko, executive director of Volzhsky Tube
Works
Main types of tubes | 1999 (‘000 tonnes) | 2000 (‘000 tonnes) | 2001, forecast (‘000 tonnes) |
Large-diameter tubes | 165.5 | 100.2 | 234.4 |
Conventional tubes | 173.3 | 236.8 | 310.8 |
Casing | 29.6 | 45.6 | 74.5 |
Stainless | 0.158 | 0.282 | 1.5 |
Tubing | 0.108 | 1.2 | 16.7 |
Tubes for the use in high-pressure boilers | 4.7 | 6.4 | 7.2 |
Bearing tubes | 14.6 | 17.5 | 17.9 |
Total | 388 | 408 | 663 |
Oil & gas companies, machinery manufacturers, energy
companies, transport and public utilities are the principal clients of Volzhsky Tube
Works. Owing to rapid development of Russia’s fuel and energy sectors, the Works has
established lasting business contacts with Gazprom, Transneft, LUKoil, Surgutneftegaz,
Tyumen Oil Company, Sibneft, Sidanko and Slavneft. About 80% of the tube outputs were sold
domestically in 2000. I believe that this trend will press on. Our company makes the bulk
of sales in Western Siberia, Southern Russia and the Volga regions.
A. Shmelev, director general of Pervouralsky
Novotrubny Works
Pervouralsky Novotrubny Works has been experiencing the
growth of outputs, namely, by 5% in 1999 against 1998 and by as much as 34.4% in 2000
against 1999. Physical outputs equalled 448,000 tonnes in 1998, 464,000 t in 1999 and
623,500 t in 2000. Throughout the 1st quarter of 2001, the company made 141,354 t of
tubes, 102.8% more than in the respective period of prior year. The growth rates with
respect to output of hot-rolled tubes are 103.2% and electric welded tubes 112.4%. Though
output of cold-rolled tubes reduced to 97.7% against the 1st quarter of 2001, we will have
a chance to catch up in the summertime.
Traditional consumers still purchase our tubes and even
place greater orders. Our permanent clients acquire almost all the extra outputs we have
been making recently.
A. Tokarev, director general of Almetyevsk Tube
Works
In 2001 we plan to manufacture 150,000 tonnes of tubes,
including 50,000 t of anticorrosion insulated tubes.
Outputs by types of tubes in 1999-2001
Technical standards of tubes and coatings applied | 1999 | 2000 | 4 months of 2001 |
1. Tubes, GOST 20295-85 | 9,111 | 13,997 | 5,431 |
2. Tubes, GOST 8696-74 | 2,590 | 4,729 | 1,594 |
3. Tubes, GOST 10705-80 | 80,672 | 98,459 | 35,181 |
4. Tubes, GOST 3262-75 | 5,580 | 15,131 | 4,053 |
5. Other tubes | 2,290 | - | - |
TOTAL | 100,243 | 135,059 | 46,259 |
Including tubes with polyethylene face coating, TU 1390-002-01284695-97 |
28,173 | 40,153 | 13,175 |
Tube sales by economic sectors
Sectors’ shares (%) | 1999 | 2000 | 4 months of 2001 |
Natural gas | 62.1 | 37.7 | 49.6 |
Petroleum | 27.1 | 32.7 | 34.3 |
Construction | 6.3 | 11.9 | 9.2 |
Public utilities | 3.5 | 7.5 | 2.8 |
Machinery | 1.2 | 10.4 | 13.7 |
Tube sales by geographical regions
Region | Tube sales per annum (tonnes) | ||
1999 | 2000 | 4 months of 2001 | |
Tatarstan, Bashkiria | 47,593 | 70,997 | 22,492 |
Volga region | 9,625 | 13,246 | 5,608 |
Moscow | 12,294 | 13,938 | 4,327 |
Western Russia | 6,436 | 5,712 | 669 |
Southern Russia | 2,531 | 4,690 | 1,334 |
Caucasus | 415 | 1,394 | 1,959 |
Siberia | 1,848 | 7,882 | 2,304 |
Eastern Russia | 683 | 4,203 | 2,487 |
Others | 3,399 | 7,396 | 1,216 |
CIS | 1,216 | 5,369 | 1,636 |
TOTAL | 86,041 | 134,827 | 44,032 |
Which problems currently hamper higher profitability in the
tube business and, correspondingly, hold back the upgrade and expansion of your
manufacturing facilities?
A. Kachur, Ministry for Industrial Policy of
Ukraine
It is a deadlock of problems. Most tube mills and their
clients desperately lack current assets and have to beg the suppliers to set acceptable
prices, while marking up the smallest profitability into the price of their tubular goods.
In a number of instances, tube mills have to run the tolling schemes that lower
profitability rate and expel upgrade projects. Well, the expansion is dependent on the
number of orders placed. Meanwhile, the tube sector utilised 31.2% of its engineered
capacity in 2000.
A. Velichko, economic director of Khartsyzsk Tube
Works
The problem is in the cost of metal supplies in case of
exports and sales to domestic consumers, together with current prices for tubular goods.
As an outcome, metallurgical mills enjoy profitability rates of up to 50%, while tube
mills barely get 12 to 15%. Naturally, this money is not enough to modernise or expand
production, especially under the condition of scarce floating assets.
Interpipe Corporation
We believe that the main impediments to higher
profitability in the tube business now are the growing prices for energy and the related
increase in prices for raw materials, as well as rising railway freightage fares both in
Ukraine and abroad. Besides, the State’s reluctance to reimburse the amounts of value
added tax applicable to exports has become a major hindrance to development of the tube
making. Attempts of the importing countries to artificially limit the market for Ukrainian
tubular goods are also inauspicious. At the same time, Interpipe Corp. has no intention to
curtail the previously developed long-term modernisation projects because the Corporation
believes that investment in that sector is needed to enhance competitiveness of
Ukraine’s tubular goods regardless of the forceful efforts of the ones who oppose the
market approach to business.
N. Soloshenko, director of Novomoskovsk Tube Works
The decade of insufficient financing for equipment
purchases at tube mills has led to the company’s being behind the proper quality of
tubes, especially as regards compliance with the Western standards. Naturally, a
fundamental enhancement of quality needs much funding. At the moment, we have to make up
for the lag via short-term investments, though this is not always possible in such a
limited timing.
Owing to suspended financing of scientific efforts that the
Works used to be engaged in together with scientific institutions, previous contacts with
science have been lost and the sector’s scientific arm has virtually fallen apart.
Scientific and technical projects that involved improvement of tube quality have been left
unimplemented. Much time is needed to restore the science’s influence over
manufacturing.
N. Podeiko, director general of RodakovoResursy
Just as Ukraine has started increasing its tube outputs,
Russia imposed a quota against tube imports from Ukraine. This is the cornerstone problem
at this point of time. Ukraine’s domestic market has become over-supplied with tubes and
prices began to fall. In order to survive, tube mills have to cut costs; however, prices
for strips and hollow sections are not reducing, while revenues of the tube mills plummet.
A. Brovko, executive director of Volzhsky Tube
Works
There are plenty of problems. Let’s spotlight the key
ones. The first one is related to the situation on the market. The price depends on market
supply. The greater the supply, the lower the price, while each manufacturer wants to sell
for more. That is why Russian producers have started a fight against tube imports from
Ukraine as those used to be much cheaper owing to a number of tax incentives. Having got
rid of dumping competitors, Russia’s tube mills got a chance to sell at good price and
to raise profitability. This provides money for modernisation and expansion. One can
develop an enterprise in a separate way, e.g. using banking loans and borrowings. However,
it is a company with high profitability that is attractive to investors. There is no other
choice but this one in the market economy.
Supplies are the second problem. Here, the situation is
completely different. Tube mills profit from wider selection of Russian suppliers of raw
materials. The fewer materials they export, the better it is for tube mills.
Perhaps, pricing policy of the energy suppliers is the
third problem. By the way, energy contributes almost 30% to costs in the tube making.
Consequently, any rise in energy tariffs drives up the cost of tubular goods. That is why
I am sure that the ones who regulate prices for energy and natural gas and the
manufacturers should do everything possible to keep the balance of domestic prices and to
develop the industrial potential. After all, tube consumption has reduced three to
fourfold over the past decade.
A. Fyodorov, director general of Chelyabinsk Tube
Rolling Works
I split the factors that hamper profitability of
Chelyabinsk Tube Rolling Works into external and internal ones. The external factors that
effect cost are the ever-increasing prices for products of natural monopolies, high prices
for conversion metal, terms of payment asked for by supplies and inflation rates. Internal
factors embrace poor effectiveness of the Works’ divisions as regards saving of energy,
fuel, metal, spare parts, etc., as well as the need to constantly increase wages and
salaries in response to the growing cost of living in the country.
Relationships among manufacturing companies and natural
monopolies have become a nation-wide problem long ago, a problem that has to be dealt with
by the highest authorities.
Despite unfavourable factors, we manage to find financing
to equipment improvements. Significant investment will be needs to implement a strategic
plan of the Works’ upgrade in the coming years. Thus, the Works might become part of the
United Metallurgical Company in order to consolidate efforts and money on machinery
purchase and improvements.
V. Anisimov, director general of Vyksa
Metallurgical Works
Two major problems are out there. The first is the growth
tempos in tube costs (related to higher prices for energy, metal, materials, etc.) that
largely reflect the rise in prices for finished tubes.
Low paying power of domestic consumers is the second. To
make it clear, Western consumers are the ones who pay for the bulk of sales to the oil
& natural gas sector (60% of the total). Research reveals that communications of the
public utility services are extremely deteriorated, while those consumers barely have
enough money to run maintenance. Even in the relatively well-to-do city of Vyksa, the
mayor laments over no financing for replacement of the water supply system.
Fluctuations on the petroleum market also exert
considerable influence on profitability. This hits our company especially heavily because
the cost of welded tubes for oil conveyance and casing is higher than that of similar
seamless tubes at the moment and competitiveness is going downwards.
A. Shmelev, director general of Pervouralsky
Novotrubny Works
Growing cost is the main and the most important problem.
This is the cause of low profitability. Well, costs are increasing owing to constant (and
frequently groundless) growth of energy prices, higher prices for strips and hollow
sections, and regular payroll increases. These are the three main components of cost that
are all tending to move up now, leading to a drop in profitability.
A. Tokarev, director general of Almetyevsk Tube Works
The following problems hold up the increase in
profitability of the Works:
permanent rise in tariffs and prices for energy, main materials and
maintenance services;
the need to increase wages that leads to greater payroll taxes payable;
prior year losses and taxes payable that do not allow the company to
complete the current projects and to launch new projects involving expansion of the
product mix, enhancement of quality and reduction of costs;
the market is not ready to considerably increase consumption of tubes in
order to build new and maintain the existing pipelines, although there is a feel of such a
demand now;
low utilisation of capacities;
dumped tube imports from Ukraine.
What is your attitude towards vertical integration of your
enterprise with suppliers of strips and hollow sections and with your clients? Does your
enterprise make any steps in that direction?
A. Kachur, Ministry for Industrial Policy of
Ukraine
I think that integration will be widespread after all. Here
is an example: the yet unimplemented opportunity to set up a multinational corporation
Trubtrans. Together with a mighty financial leader, the corporation should have included
suppliers of strips (metallurgical mills), producers of large-diameter tubes for
maintenance of the existing and construction of new petroleum and natural gas pipelines, a
number of machinery enterprises and construction companies, Gazprom, Ukrprom, several
other domestic and foreign companies and Russia’s tube mills (like Vyksa, Chelyabinsk
and Volzhsky Tube Works). Delays in passing of the Bill on Special Levying of Taxes and
Charges on Businesses that Implement Investment Project in Priority Sectors of Ukraine’s
Economy have obstructed establishment of Trubtrans. Currently, the financial institution
that should have led Trubtrans settles other issues that have nothing to do with this
multinational. Therefore, a new leader is required to create this corporation.
A. Velichko, economic director of Khartsyzsk Tube Works
We feel positive towards internal integration with
suppliers of strips, with consumers and banking institutions. However, owing to a number
of reasons, none of the projects in this area has been implemented.
Interpipe Corporation
Interpipe has established close business contacts with
suppliers who provide uninterrupted material supplies to the tube mills that are part of
the Corporation. In particular, the largest suppliers are Zaporozhstal, Oskolsk
Electro-Metallurgical Works, Donetsk Metallurgical Works, Dneprovsky Iron & Steel
Works, Alchevsk Iron & Steel Works and Petrovsky Metallurgical Works of
Dnepropetrovsk.
N. Soloshenko, director of Novomoskovsk Tube Works
Without any doubt, a vertical integration of suppliers,
tube makers and consumers is expedient for specialisation and reduction in cost of sales
and delivery expenditures. However, the severe competition among tube mills on the market
and corporate interests of producers of strips and tube mills almost completely eliminate
the possibility of thorough integration. We currently make certain steps as regards
definition of common technical standards with metallurgical mills, main tube mills and key
clients.
N. Podeiko, director general of RodakovoResursy
Vertical integration is a pretty good thing. Currently, we
do business with only one supplier of strips, while permanent clients are much more
difficult to find. There are enough tubes on our regional market, while Nikopol and
Dnepropetrovsk-based tube mills are closer to Western consumers; thus they incur lower
delivery costs. So, even if our price is lower, consumers may save more on delivery. Of
course, we undertake measures to find stable customers for ourselves, however the luck is
not always on our side
A. Fyodorov, director general of Chelyabinsk Tube
Rolling Works
The Board of Directors constantly controls the issues of
vertical integration and strategic partnership with suppliers of conversion metal.
The United Metallurgical Company that includes our Works
has signed an agreement on strategic partnership with Severstal. Within the framework of
regional co-operation program, the Works does keeps close business contacts with
Magnitogorsk Iron & Steel Works and Mechel. Certainly, when business partners unite
their efforts, it works well for the quality of products, delivery terms and quick
response to market needs.
Currently, our relationship with strategic business
partners in the oil and natural gas sector has progressed to a new level. Joint
co-operation programs with Gazprom and Transneft let us clearly define our future steps
towards the growing demands of clients.
V. Anisimov, director general of Vyksa
Metallurgical Works
We appreciate integration, as it is beneficial to both
parties involved. We still remember 1994-1998, when shortage of strips made tube mills
stand idle in the summertime peak of tube demand. The experience shows that it is much
easier to lose the market than to get it back. Suppliers of strips have understood that as
well, and now the United Metallurgical Company and Severstal have signed a strategic
agreement on supplies.
We mainly work together with consumers as regards
enhancement of tube quality. Since tubes are made of metal, co-operation with suppliers
turns out be yet another good point.
A. Brovko, executive director of Volzhsky Tube
Works
We tailor our relationship with clients and suppliers on
the grounds of partnership and common benefit. Together, we work out co-operation programs
for a long term. This is the basis that we use in business contacts with Gazprom,
Transneft, Magnitogorsk Iron & Steel Works and other companies. Using this principle,
our suppliers dispatch the materials of appropriate quality, whereas we make exactly the
kind of products that our clients need. Owing to this co-operation we manage to give
timely response to the growing requirements of the modern market. Obviously, we can make
no good tubes of bad strips and materials. Hence, it is important for us to work together
with suppliers, to jointly set and implement the quality enhancement tasks; thus brining
progress to the manufacturing sector.
A. Shmelev, director general of Pervouralsky
Novotrubny Works
I am against vertical integration as see no benefits it can
yield today. The more effective approach is to set clear partnership agreements, control
supplies and due payments.
So far, I see no room for vertical integration because all
the largest metallurgical mills have their owners now (owners, who have made significant
investment) and hardly anyone is ready to re-distribute or merge their property.
A. Tokarev, director general of Almetyevsk Tube
Works
Vertical integration with suppliers of strips and consumers
of tubes is necessary. Since 1995 the Works has been practising this approach in business
with Tatneft and Natural Gas Fund of the Republic of Tatarstan (the consumers of tubular
goods) and since 1999 with Novolipetsk Iron & Steel Works (the supplier of strips).
What do think about the relationships between Russia and
Ukraine in view of Ukraine’s tube exports to the Russian market?
A. Velichko, economic director of Khartsyzsk Tube
Works
Naturally enough, I have a negative attitude because by
signing that agreement we deprive Russian clients of our commodities, even if those
clients can afford paying a 40% duty (such clients have already visited the Works).
Besides, it also covers certain products that are not manufactured in the Russian
Federation, like all inch tubes, 920-mm-diameter tubes and tubes with corrosion resistant
coating for the use in the Far North.
Interpipe Corporation
We think that supplies of Ukrainian tubes to Russia are not
the only aspect of relationships between the two neighbouring countries. Nevertheless, one
has to keep in mind that business relations among Ukrainian tube mills and Russian
consumers, particularly the oil & gas companies, have been taking shape for dozens of
years. Tube mills were built in Ukraine mainly to provide tubular goods to petroleum and
natural gas companies in the other parts of the former Soviet Union. Therefore, the
widespread opinion that Ukrainian tube exports damage Russia’s tube mills is far from
being correct. Using the same logic, Ukraine may well accuse Russia of economic expansion
and initiate some sort of an investigation. However, these relationships can hardly be
called civilised. In addition, the Corporation frequently purchases materials from Russia,
while many types of unique products have been designed jointly with Russia-based
scientific institutions to meet the demands of Russia’s oil & gas businesses. So,
our exports are unlikely to cause any damage to the Russian economy. It is more a matter
of normal integration processes.
N. Soloshenko, director of Novomoskovsk Tube Works
In due time, Novomoskovsk Tube Works was built to back the
development of Russia’s energy sector, and it supplied an enormous quantity of tubes to
construction of pipelines in the country in the 1970s through 1990s. At the moment, that
sector is recovering, building new and repairing the existing pipelines. Therefore, there
is enough place on that market for everybody provided civilised distribution of market
shares and healthy competition.
N. Podeiko, director general of RodakovoResursy
Mr. Putin gave Russia’s tube mills a present, while the
Ukrainian authorities should learn how to protect the interests of local manufacturers.
Of course, we are against imposition of quotas. No one
likes being trapped within some limitations. Everyone acknowledges that Russia is the key
market for tubes and metal products made in Ukraine.
V. Grinyov, managing director of Stalpromtrest
We do not like imposition of quotas. We believe that
imposition of duties would be more acceptable because economic methods are always better
than political and administrative regulatory efforts.
V. Anisimov, director general of Vyksa
Metallurgical Works
We support fair competition and treat the latest steps
taken by the authorities from precisely this point of view.
A. Shmelev, director general of Pervouralsky
Novotrubny Works
I see the mild decisions on quotas against tube imports
from Ukraine as a step towards protection of the local tube sector from growing imports.
We have sufficient potential (with respect to both capacities and types of products) to
meet domestic demand on our own.
A. Tokarev, director general of Almetyevsk Tube
Works
The issue of Russian-Ukrainian relationships as regards
Ukraine’s tube exports to Russia has matured and calls for solution. We have to
eliminate the opportunity of dumped tube imports from Ukraine due to VAT exemptions, and
place Ukrainian and Russian tube mills in equal position. It is worth limiting the imports
in order to encourage the trade of Russia-based tube mills.
A. Fyodorov, director general of Chelyabinsk Tube
Rolling Works
What can one think about Russian authorities that act in
favour of domestic manufacturers? Russian tube mills initiated an antidumping inquiry
against Ukrainian tube imports to nourish equal conditions on the market rather than to
ban tube imports from that country. We support a civilised market without barriers. It is
wonderful that the authorities have understood that correctly.
A. Brovko, executive director of Volzhsky Tube
Works
Should the rules of trade have been equal for everyone,
there would have been no problem with Ukrainian tube imports whatsoever. I am sure that
all tube mills should have equal opportunities. Quality should become the distinguishing
feature in competition. We cannot afford to let dumped imports from Ukraine hamper
development of Russia’s tube sector. Russia-based mills utilise only 30% of their
capacities and need the orders that Ukraine gets owing to extremely low prices for its
products. To protect our interests, we have united our efforts and succeeded. By the way,
the situation has changed in Volzhky Tube Works as soon as the government limited tube
imports from Ukraine. Our company and Gazprom signed an agreement to manufacture a pilot
batch of tubes, 1,420 mm in diameter. Well, just a short while ago Ukraine insisted that
Russia simply could not make such tubes at all.
Can Ukrainian tube mills co-operate with Russian tube
makers, e.g. set up holding companies, joint ventures, or integrate with oil & gas
companies?
A. Kachur, Ministry for Industrial Policy of
Ukraine
Establishment of corporations backed with powerful
financial leaders is the only way to provide for modernisation of metallurgical and tube
mills, to certify tube materials and ensure direct sales without help any commercial
intermediaries. That would give an opportunity for more efficient business and channel
investment into improvements and new products.
Besides to co-operation of Ukraine’s tube mills within
the framework of the mentioned Trubtrans multinational corporation (that will be founded
sooner or later), I think that it is time to establish a corporation that would make
special purpose tubes. The Ukrainian part of that corporation would embrace Nikopol
Stainless Tube Works, Nikopol Steel Tube Works, Nikopol Seamless Tube Works, Nikopol
Pivdennotrubny Works, the State Tube Institute and Ukrtrubprom Association, while the
Russian participants would be Pervouralsky Novotrubny Works, Sinary Tube Works, Seversk
Tube Works and other companies. That corporation would provide the necessary quality and
types of products for energy sectors of CIS member-states and for Russia’s energy
machinery enterprises. Therefore, the corporation would only appear when all the required
conditions are in place.
A. Velichko, economic director of Khartsyzsk Tube
Works
Perhaps it is impossible today due to the current situation
and the policy pursued by Russia’s Fund for Tube Sector Development.
Interpipe Corporation
Interpipe is always open to efficient business contacts.
The Corporation acts on an international scale. We supply tubes to over 30 countries
worldwide and see no reasons that could stop our business with Russian companies. The most
promising opportunity today is to launch co-operation with oil & gas companies. As a
consequence, oil companies would obtain stable supplies of tubular goods; while
Ukraine’s tube mills would have reliable business partners that place regular orders.
N. Soloshenko, director of Novomoskovsk Tube Works
Co-operation of Ukrainian and Russian tube mills is rather
troublesome now. At the same time, Russia could have profited from a less severe attitude
towards imports of tubes and strips from Ukraine. For instance, considering the current
situation with Ukraine’s output of wide sheets and tubes, 1,420 mm in diameter, one
could have saved huge money on construction of similar manufacturing facilities in Russia.
If a tube mill is capable of offering tubes of improved
quality, then integration with oil & natural gas companies is possible. We already
have such an experience.
A. Brovko, executive director of Volzhsky Tube
Works
Co-operation is quite possible, though not among the rival
tube mills. For instance, Volzhsky Tube Mill and Azovstal Iron & Steel Works of
Mariupol are commencing a joint project of making tubes, 1,420 mm in diameter and 18.7 mm
in wall thickness. This June Volzhsky Tube Works will make tubes of 24-m-long sheets with
no transverse seams, thus meeting one of the principal requirements of Gazprom.
Co-operation between Volzhsky Tube Works and Azovstal is mutually beneficial and necessary
as Russia has no manufacturers of such products. If other companies have similar
interests, why not making them come true?
N. Podeiko, director general of RodakovoResursy
There is nothing impossible out there. Should a Russian
company propose beneficial co-operation, we would accept this proposal.
V. Anisimov, director general of Vyksa
Metallurgical Works
There is a need in co-operation, however, I think that it
will come only in the future. Most importantly, it should be advantageous for both parties
involved and for the whole State. Currently, it is a problem because Russia’s tube mills
do not utilise their full capacity, while their outputs are enough to basically cover the
domestic demand. On the other hand, Gazprom may well acquire Khartsyzsk Tube Works.
A. Shmelev, director general of Pervouralsky
Novotrubny Works
I think it is impossible to launch co-operation with
Ukraine’s tube mills no matter what kind of joint work is chosen. Laws are different,
economies vary and so on. At first, the governments of both countries should reach
understanding and define the common rules.
A. Tokarev, director general of Almetyevsk Tube
Works
Currently, there is no place for integration of Ukraine’s
tube mills with Russian enterprises or with oil & gas companies due to poor quality of
Ukrainian tubes and availability of under-utilised tube making capacities in Russia.
Unstable relationships between Russia and Ukraine and red tape customs procedures are the
main seasons.
Will the enforcement of the new Tax Code in Russia
(imposition of 20% tax on imports) and charging of higher railway freightage fare
influence trade relations?
A. Kachur, Ministry for Industrial Policy of
Ukraine
Imposition of the VAT and greater railway fares would
separate the Russian market from Ukrainian suppliers of hot-shaped conventional tubes,
thin-walled electric welded tubes, water pipes and perhaps some other kinds of products.
Supplies of high-tech and labour-intensive tubular goods made in Ukraine should stay the
same.
A. Velichko, economic director of Khartsyzsk Tube
Works
It is a difficult issue. Mainly, it was done to provide
revenues to the state budget. Time shall show what it will be like because less than a
month remains till imposition of the duty.
N. Podeiko, director general of RodakovoResursy
Trade with Russia is not based on tubes alone. Of course,
consumers would have to pay more owing to higher railway freightage costs and more taxes.
We have already experienced that in Ukraine. Trade relations will continue despite any
regulations, quotas or duties introduced by the authorities.
V. Grinyov, managing director of Stalpromtrest
We greet the mentioned changes in the Russian law, as we
believe that economic relationships should rest on equal opportunities for all export and
import businesses. Be it a resident entity of Ukraine, the USA or any other country, it
should enjoy equal rights and opportunities because any incentives do nothing but bad.
What new types of products, quality improvements,
delivery terms or else is your company intending to offer as regards oil country tubular
goods in the coming future?
A. Kachur, Ministry for Industrial Policy of
Ukraine
Owing to the petroleum boom, oil country tubular goods,
e.g. tubing, casing and drill pipe, are the most wanted commodities on world markets.
Especially, this relates to oil well tubing as the decades of conservation of oil wells in
Russia eliminate the opportunity for replacement of such tubes due to financial
difficulties. Energy machinery sector of Russia has recovered. To meet its demands,
Ukraine-based tube mills reached almost full utilisation of capacities that make hot
rolled and cold rolled shaped tubes for the use in high-pressure boilers. Efforts to
repair the existing and built new natural gas pipelines in CIS countries are growing,
consequently leading to more orders for oil conveyance tubes and large-diameter welded
tubes in Ukraine. However, Russia’s imposition of quotas against tube imports from
Ukraine will slash outputs and make the Ukrainians search for new customers.
A. Velichko, economic director of Khartsyzsk Tube Works
We analyse the incoming orders and monitor the development
of demand for tubes (including the projects of new pipelines). Every company has its
speciality products and its own market niche.
Currently, our enterprise implements a project of
manufacture of tubes, 32, 36, 48 and 56 inches in diameter, made of one sheet with a
12-m-long longitudinal seam and with wide range of wall thickness. In addition, we are
ready to offer our clients the tubes with corrosion resistant coating on the inside.
Interpipe Corporation
We have already mentioned that oil country tubular goods
are the priority products for tube mills that constitute the Corporation.
Interpipe has contributed much money and effort to launch
production of new types of tubular goods, including OCTG, that were designed jointly with
certain Ukrainian and Russian scientific institutions. Currently, the Corporation,
together with Samara-based Scientific Research Institute for Design and Operation of Oil
Tubes and the leading petroleum exploraiton companies of Russia, conducts scientific
research with respect to manufacture of the following kinds of tubular goods:
hot-shaped seamless tubes, for the use in oil and natural gas conveyance,
of enhanced cold resistance, hydrogen sulphide and carbonic acid resistant;
casing of enhanced corrosion and cold resistance, contortion resistant;
oil well tubing of enhanced cold resistance, hydrogen sulphide and
carbonic acid resistant;
cold-shaped tubes for the use in hulls of submersible pumps of enhanced
reliance and corrosion resistance.
Many of those products have no analogues in the CIS and
have been designed upon orders of Russian oil & gas companies.
N. Soloshenko, director of Novomoskovsk Tube Works
We believe that we are now ahead of competitors as regards
the inch series tubes, 168 to 406.4 mm in diameter, that comply with API and DIN
standards. We have launched manufacture of those internally-polished tubes that meet local
technical requirements. We offer products that are absent on the market, like
high-frequency welded tubes, 530 mm in diameter, that excel the tubes that are arc welded
under flux. We have wide opportunities to manufacture welded stainless tubes (made using
the plasma torch welding) for the use in automotive, sugar, foodstuffs and chemical
sectors.
A. Fyodorov, director general of Chelyabinsk Tube
Rolling Works
At the moment, within the framework of co-operation
programs with Gazprom and Transneft, Chelyabinsk Tube Rolling Works is tailoring its
products to the exacting demands of clients. So far, it is too early to summarise the
results of those efforts, however, quality of our products will definitely be enhanced and
product mix will broaden.
E. Kuznetsov, Magnesite Concern
Special property tubes made of high-alloy steels will be in
demand in the coming future and today.
Manufacture of special property tubes for the use in
high-pressure vessels, various power plants and aircraft sector has seen major change. For
this purpose, foreign metallurgical mills offer a wide product mix of tubes and other
metal products of carbon and low-alloy steels, austenite stainless steels, biphasic and
super-biphasic stainless steels, super-austenite stainless steels, alloys with high
contents of nickel, alloys based on titanium, zirconium, copper and aluminium.
Owing to greater offshore exploration of petroleum and
natural gas, there have been designed new grades of steels and alloys of enhanced
resistance to hydrogen sulphide and chlorine ions. Since 2000, ISO 13680: “Petroleum and
natural gas industries – corrosion resistant alloy seamless tubes for use as casing,
tubing and coupling stock – technical delivery conditions” has come into force with
respect to oil country tubular goods.
N. Podeiko, director general of RodakovoResursy
We make small-diameter tubes for the use in water and
natural gas conveyance complying with GOST 3262-75. This kind of tubes finds wide
application in industrial and civil construction; however, the construction industry is
doing badly now. It is very hard to determine what tubes are more important. Demand is the
main factor.
V. Anisimov, director general of Vyksa
Metallurgical Works
The Works is capable of making casing tubes, with both
buttress and OTTM thread.
Additionally, we offer oil tubes that have been plated from
the inside with stainless steel, 08×13. For first time in the country, we have launched
production of thick-walled tubes (19 to 22 mm) of K54 strength.
A. Brovko, executive director of Volzhsky Tube
Works
I have already mentioned that we getting ready to make
1,420-mm-diameter gas main tubes of Azovstal sheets. In June we are planning to phase in
new machinery that would cover tubes with heat insulating polyurethane coatings. We are
ready to meet any demands of our clients as we own the necessary technological and
economic capabilities, as well as creative potential.
A. Shmelev, director general of Pervouralsky
Novotrubny Works
We make a limited mix of oil country tubular goods that
account for around 10% of our total outputs. OCTG is not our speciality and we make about
10,000 tonnes per month. We are short of capacities to make more now; however, we will
retain our market niche for tubing further on.
Today, the Works aims to fundamentally enhance the
technical properties of those tubes. We offer modernised thread joints and we are
currently occupied with that issue.
After all, there is Sinary Tube Works that specialises in
oil country tubular goods and conducts considerable re-equipment of facilities. I think
there is no point in competing with that company. We will stick to our traditional
quantities and will make efforts to enhance quality and keep our positions.
A. Tokarev, director general of Almetyevsk Tube
Works
In 2001 we have started making volume heat-treated tubes,
159 to 219 mm in diameter, that meet GOST 20295-85 (type 1). In addition, we have
broadened the mix of 40×1.5 and 51×1.5 mm tubes complying with GOST 10705-91, whereas in
July 2001 we plan to launch production of 108×3.5-4.5 mm tubes.
In the second half of 2001 we plan to:
phase in the mill 42-114 and start production of shaped tubes;
introduce quality control system complying with ISO 9000:1994 and API 5L,
as well as certify tubular goods with API 5L;
expand the mix of tubes coated from the inside, 76.89 mm and 530 mm in
diameter;
launch manufacture of heat insulated tubes making use of modern
technologies.
Will the market situation and opportunities change as a
result of an alliance of the largest tube mills of Ukraine and Russia?
A. Kachur, Ministry for Industrial Policy of
Ukraine
The alliance of Ukraine’s and Russia’s tube mills will
strengthen their positions on the markets of Russia, Ukraine, other CIS countries and the
rest of the world. Those who are not part of such associations will have to specialise on
the kinds of tubes that are not manufactured by the powerful bilateral cartels or will
have to find themselves some customers in the overseas.
Interpipe Corporation
Competition for the new and the old markets is becoming
stronger in the modern world. Owing to that, tube mills have to set up holding companies
and industrial groups in order to keep and develop their markets. Those processes are
natural to Ukraine, Russia and the other countries. Establishment of such alliances is
advantageous for manufacturers and consumers because the new companies guarantee
comprehensive and timely delivery, provide flexible prices and better after sale services.
N. Soloshenko, director of Novomoskovsk Tube Works
Alliance of a number of tube mills in Ukraine and Russia
would improve the situation on the tube market owing to alleviation of the inauspicious
influence of the factors described in the third question.
N. Podeiko, director general of RodakovoResursy
The situation with small-sized tube mills may change for
the worse (clients may see the same in the long run), because the new gigantic entities
would dictate prices.
A. Fyodorov, director general of Chelyabinsk Tube
Rolling Works
The pending consolidation of Russia’s tube sector has
been brought forth by globalisation of the country’s iron & steel sector. The
consolidation strives to enhance competitiveness of tubular goods. Merger of tube mills
can be treated as an integral step in foundation of vertical industrial groups that do
versatile lines of business, while sharing a common management.
Certainly, a consolidation based on stable industrial
contacts and lengthy business history has a number of advantages for tube mills that back
the stability of any group and safeguard it from unfavourable external influences. For
instance, this relates to developed supplies and sales division, modern management and
integrated management system. This is a merger of financial resources and intellectual
skills. Sales become more effective due to centralisation of efforts, quality can be
enhanced stably, costs and prices reduced owing to deeper scientific and technical
co-operation with suppliers of strips and improvement of manufacturing technologies, while
large investment projects can be implemented.
V. Anisimov, director general of Vyksa
Metallurgical Works
Alliance of Russian tube mills would do well for consumer
qualities of tubular goods (owing to specialisation of manufacturing effort and
concentration of scientific work) and for lower transportation costs.
A. Shmelev, director general of Pervouralsky
Novotrubny Works
Perhaps, it will change as a result of that. Though I have
no idea how it may happen.
A. Brovko, executive director of Volzhsky Tube
Works
The true change of the situation will depend on maturity of
bilateral contacts among the heads of the two States and companies’ management. If we
manage to establish proper relations and find common objectives, we would yield more
profit for our countries and ourselves. Companies merge together to become stronger. Well,
strong companies are the backbone of any State. A short while ago, Russia and Ukraine
constituted parts of a single country with iron & steel and tube sectors being based
on materials, technologies and economies of both countries. That is why I think that
economic integration between the two States will dominate over internal integration
processes.
A. Tokarev, director general of Almetyevsk Tube
Works
The market for tubular goods gives quick response to all
the changes at tube mills. Associations rapidly seize and monopolise the segments of
speciality tubes and tubes with corrosion resistant coating.
What is your vision of the market for tubular goods in
Russia, CIS member-states and the rest of the world in the second half of 2001 and further
on?
A. Kachur, Ministry for Industrial Policy of
Ukraine
Despite the tube output increase in Ukraine by 141.5% or
723,000 tonnes in January through May 2001 against the respective period of prior year,
those growth tempos will not continue in the second half of the year. Firstly, it is
because Ukraine-based tube mills manufactured plenty of tubes in the second half of 2000
(over 1,060,000 t); secondly, because Russia has imposed quotas against tube imports from
Ukraine. The anticipated growth rates would not be material and Ukraine will make 850,000
to 870,000 tonnes of tubes regardless of any efforts to arrange for exports to other CIS
member-states and non-CIS countries. The overall tube outputs in 2001 would remain the
same as in 2000.
Back in 1989 Ukraine consumed 3,532,000 tonnes for tubes,
while in 2000 the domestic consumption scored only 440,000 t of tubes made that year and
55-60,000 t stocked from prior periods. One can hardly anticipate a rapid growth in tube
consumption in Ukraine; however, I estimate the domestic demand in the short run at 1.4 to
1.5 million tonnes of tubes per annum in the view of repairs of gas mains, petroleum
pipelines and water supply systems, and development of the machinery sector.
Owing to efforts undertaken by metallurgical mills and tube
mills to enhance quality of tube metal and tubes themselves and to certify their products
in compliance with Western standards, Ukraine will be able to export 1.5 to 1.6 million
tonnes of tubes per annum. In the coming 5 years, outputs shall reach 3 million tonnes per
year.
CIS and especially Russia will feature greater demand for
tubes in 2001; thus facilitating the growth in Ukrainian outputs. However, in 2001
Ukraine’s tube exports to Russia will definitely not exceed the 2000 level due to quotas
imposed.
Overall, Ukraine will continue making exports to non-CIS
countries in the coming years provided due enhancement of the quality of tubes and,
what’s more important, of tube metal.
A. Velichko, economic director of Khartsyzsk Tube
Works
Considering all the projects we plan to implement in the
second half-year, we feel optimistic about the future. Demand for tubes are not heading
downwards, while there is enough room on the market even in the severe competition.
N. Podeiko, director general of RodakovoResursy
Ukraine will start curtailing outputs and workers will be
losing their jobs, while Russian consumers will see a growth in prices for tubes.
If the new government of Ukraine makes the economy
function, potential customers would get some money and there would be an urgent need to
replace pipelines (everyone knows that water and heat supply systems have not been
repaired for a decade). So, tube mills would get a chance to utilise full capacities. The
tube sector does not function for itself and its welfare depends on the welfare of the
whole country.
A. Brovko, executive director of Volzhsky Tube
Works
Two to three large players that will control the whole tube
sector would remain in Russia in 5 to 10 years. Small-sized businesses are becoming less
profitable now because they are unable to make significant investment in new machinery and
improvements. Sooner or later they will have to leave the market. Today, they are being
replaced by contemporary industrial giants capable of ensuring the international standard
of production management.
A. Fyodorov, director general of Chelyabinsk Tube
Rolling Works
The Russian tube sector has the biggest engineered
capacities for steel and iron tubes in the world. Owing to recession in many sectors,
reduced construction of new pipelines and less repair efforts on the old pipelines, lower
drilling activity and low paying capacity, the domestic market for tubular goods has
shrunk over the past decade hitting back on Russia’s tube mills. Utilisation of
capacities lowered to 30%. Tube outputs were reducing until 1996, then they stabilised and
the year 1998 even saw some sort of a recovery. However, the August 1998 crisis terminated
that process. Recovery came back in 1999 and became a stable feature in 2000 and in the
first half of 2001.
Russia’s tube sector is just starting to move out of the
recession. Outputs are not declining anymore. Domestic clients place more orders, while
export contracts are signed as well. Being spurred by the need to repair the functioning
and build new pipelines and by competition on domestic and foreign markets, the tube
sector develops further on, modernises the manufacturing plant and machinery, reconstructs
and builds tube making workshops for higher quality tubes. The fact that tube mills have
retained skilled staff is very important for development of the whole sector as it gives
solution to technological, economic and financial problems of Russia’s tube sector.
We see the following prospects on the key markets for
tubular goods.
In compliance with the planned growth of GDP by 2005,
consumption of water and natural gas pipe and thin-walled tubes may reach 1.8 million
tonnes per annum, thus opening nice opportunities for manufacturers. In fact, outputs of
those tubes have been rising since the second half of 1998 to meet the deferred demands.
Consumption of tubes for the use in oil conveyance has also
seen recovery since 1999. Since those tubes are consumed by the oil & natural gas
sector and public utilities, demands depend on drilling activities (that require
development of infrastructure) and end consumption that is based on the rate of change in
the GDP. Both factors will tend to increase in the coming future and outputs are estimated
at over 2 million tonnes per annum by 2005.
The market for large-diameter tubes also poses greater
demand owing to construction of new petroleum and natural gas pipelines and greater repair
and maintenance of the existing pipelines. Lately, Gazprom has slashed reconstruction of
the functioning pipelines acquiring only 40,000 tonnes of tubes for that purpose instead
of the required 200,000 t. So, this deferred demand for several hundreds of thousands
tonnes shall come back in the near future. Russia’s consumption of large-diameter tubes
will see a major growth as regards tubes, 1,020 mm, 1,220 mm and 1,420 mm in diameter. By
2005, consumption of large-diameter tubes may surpass 1.8 million tonnes.
The year 2000 with lower drilling activity and reduced
petroleum exploration became the turning point for the market for casing. Considering that
greater exploration will rest on recovery of the available deposits and gradual growth of
drilling activity, demands for casing may come to 750,000 tonnes by 2005.
In the short run, domestic market will remain the major
consumer of our tubular goods. However, we plan to undertake measures to boost tube
exports.
N. Soloshenko, director of Novomoskovsk Tube Works
We think that the market for tubular goods will see no
major change in 2001 and in the coming year.
V. Grinyov, managing director of Stalpromtrest
We anticipate the market for traditional steel tubes to
narrow and the market for metal products and tubes made of composite materials to expand.
Oil country tubular goods meet the hottest demand now. In
the long run, tube mills should start making new kinds of tubes, including the ones with
various coatings.
Interpipe Corporation
The world market for flat rolled steel and tubular goods is
hardly predictable now. Since the market laws are frequently replaced with executive
regulation on that market, any long-term forecasts are doomed to be incorrect.
Unfortunately, as competition intensifies, authorities of many countries more often decide
to limit free competition, impose restrictive duties, quotas, etc.
In the coming future, the biggest growth in demand for
tubular goods is expected in Central Asia, where large oilfields and natural gas deposits
have been found.
Despite the stronger competition, Interpipe Corporation is
confident of its future because it holds a significant scientific and management
potential, as well as a unique experience of operations on markets worlwide.
V. Anisimov, director general of Vyksa
Metallurgical Works
Russia’s market for tubular goods will expand, though
maybe not as fast as it should. The promising areas in the outer world are China and the
Middle East that execute large-scale construction of pipelines.
A. Shmelev, director general of Pervouralsky
Novotrubny Works
I believe that the current year and the near future will
see no considerable increase in tube outputs. The growth rates will be around 5 to 7%.
That is what the market says, and that is how I appraise the demands of our consumers. I
think that it is a favourable development dynamics.
A. Tokarev, director general of Almetyevsk Tube
Works
The market depends on the financial health of Russia.
Currently, the country has no money. Due to lack of funds, regional authorities are unable
to built and maintain pipelines although impairment reaches 80% now.
Rural areas in many regions receive no natural gas or water
supply, while land improvement projects have been frozen completely.
There will be more competition among manufacturers and the
ones who make the best quality products will once again ride the market.