Oil & Gas
№ 2 (February 2008)
Russia’s LDP Production is Likely to Fall
In recent years, growth in the pipe industry has been driven by the production of large diameter pipes (LDP). However, after a successful year in 2007, some experts expect LDP production to fall in 2008
By Dmitry Lyakhovsky
Dmitry Lyakhovsky: Alexander Gennadyevich, first of all, which events in the pipe industry in 2007 do you consider the most significant for the industry as a whole?
Alexander Romanov: There were a few. In one way or another, all of them reflected a trend that is quite important in the pipe segment: pipe producers’ self-supply of metal and penetration into new markets, especially LDP markets.
Thus, the United Metallurgical Company continued constructing pipe metallurgical units near Vyksa. This was the site of the second TESA-1420 mill for producing large diameter pipes and the “5000” mill for producing large-format massive plate, which Russian plants did not manufacture before, and a cast and roll facility to provide the company with metal for small- and medium-diameter piples. The same trend led to the reconstruction of a steel melting facility at the Chusovskoy Metallurgical Plant. This project will help improve the quality of pipe metal.
TMK has finished constructing continued casting machines at the Seversky Pipe Metallurgical Plant and the Taganrog Metallurgical Plant; the company also started constructing continuous rolling mills for pipe production for oil and gas mix. The company’s projected investments in the overall development of its facilities in 2005–2010 exceed $1.5 billion. It is possible that if all projects are successfully realized, the company will become the leading pipe producer in the world.
Finally, another industry leader, the ChTPZ Group, started constructing a steel melting facility at the Pervouralsky New Pipe Plant and a facility for manufacturing large diameter products (up to 1,420 mm) based on the Chelyabinsk Pipe Rolling Plant (ChTPZ). The latter project is closely connected with the MMK’s (Magnitogorsk Iron and Steel Works) decision to construct a 5000 mill at Magnitka.
These projects signify a certain completion of the “catch-up phase” of the Russian pipe industry compared to that of developed countries. The certification of Russian products according to such strict standards as DNV confirms this. Next in line is the innovation stage.
Additionally, the appearance of a new big player in the Russian pipe market, the Izhorsky Pipe Plant, is among last year’s important events.
Lyakhovsky: What is your forecast for the industry’s development in 2008?
Romanov: For objective reasons, we are expecting a fall in LDP pipe production this year, down to about 1.7-1.8 million tons (compared with 2.4-2.5 million tons last year). This could entail a fall in the steel pipe market in general, from 8.7 million tons in 2007 down to 8.3-8.4 million tons. However, other main segments – OCTG, cold-shaped pipes, stainless steel pipes, boiler pipes, bearing pipes, electric welded pipes of small and medium diameter, etc. – are likely to grow.
Important tasks on the agenda for 2008 are protection of the domestic market and providing access to foreign markets for Russian producers.