Russian Market

As before, the Russian pipe market remains the largest for TMK with more than 60% of products sold being shipped to customers in Russia.

Throughout 2011 demand for pipe products in Russia increased by 12%, which was mainly due to growth in the industrial pipe segment — welded and seamless.

OCTG

TMK’s main operational priority is the production and sale of high-tech products with high added value, which to a large extent are represented by seamless OCTG.

In 2011, the market for threaded OCTG surpassed the pre-crisis level 2008 for the first time. Throughout 2011, TMK’s sales of seamless OCTG in Russia increased by 8.5% compared with 2010, which allowed the company to maintain its market share in this segment at 61%. The main customers are the largest oil companies, including: Rosneft, Surgutneftegaz, TNK-BP Holding, Lukoil and Gazprom Neft.

In order to ensure the stability of pipe supplies to customers and a balanced load in utilizing production capacities, the Company is working to concluded long-term contracts (one year or longer) with its primary customers: TNK-BP, Surgutneftegaz and Lukoil. Thus, in December 2011, TMK and Lukoil signed an agreement for 2012 under which TMK guarantees to supply 100% of pipe products required by Lukoil.

Line Pipe

Due to the favorable conditions in the oil and gas market in 2011, sales of TMK line pipe increased by 6% compared to 2010. The volume of orders for pipe with internal anticorrosion coating also increased. TMK is the only supplier among large pipe manufacturers in Russia with its own capacities in this regard.

Large Diameter Pipe (LDP)

In terms of LDP production, 2011 turned out to be less successful for Russian producers than 2010: increased demand in the first half of 2011 stimulated growth in imports from Ukrainian pipe manufacturers, resulting in a decrease in TMK’s market share for the year from 19.2% to 16.8%. Nevertheless, 443,000 tonnes of longitudinally welded large diameter pipe were sold to Gazprom, some of which have been used in the construction of an underwater pipeline for the Kirinskoye gas condensate field on the Sakhalin shelf, which, in 2014, will be a source of gas for the Sakhalin-Khabarovsk-Vladivostok pipeline.

Insofar as Gazprom completed several large investment projects in 2011, including the first branch of Nord Stream gas pipeline, the Gryazovets-Vyborg pipeline, the Pochinki- Gryazovets pipeline and the SRTO–Torzhok pipeline, orders declined in the second half of the year, a fact that also served as one of the causes of decline in production of large diameter pipe.

In 2011, following an agreement between Gazprom and producers of large diameter pipe, a price formula was developed and approved, went into force in January 2012 and is reflected in contracts for the supply of large diameter pipe for the needs of Gazprom. This agreement on the use of a single approach in the formation of prices dependent on price quotations for the metallurgical raw materials (iron ore, coking coal and scrap steel), sheet steel, and the price change index of industrial producers will make pricing of the company’s products more transparent.

The company also sells large diameter pipe to markets in the CIS. The total volume of TMK shipments to this region was 17 thousand tonnes. Among the most significant pipeline projects that began to be implemented in 2011 were the South Iolotan, construction of a potash plant in Turkmenistan and the Beineu-Shymkent pipeline in Kazakhstan.

Industrial Pipe

Growth in sales of seamless industrial pipe is associated with the revival of demand on the part of:

  • the machine-building sector, including automotive companies
  • oil refineries continuing construction and reconstruction of oil refining capacities in connection with the government program to adopt the EURO III environmental standard.

Significant growth in imports of welded industrial pipe was noted. Moreover, Russian manufacturers are strengthening their positions in other segments. The volume general purpose welded pipe and shaped pipe sales fell by 1% in comparison with 2010.

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