Andrei Karunos
This November the Russian government lifted special duties on pipes/ tubes imported from Ukraine. This step may be followed by Ukraine’s refusal to prolong the agreement on establishing a quota on pipe/ tube export shipments to Russia. Getting readied for the worst Russian pipe- and tube-making plants are starting to revise their production programs
That is what analysts with the Foundation of Pipe Industry Development (FPID) are saying.
The situation on the Russian market seems complicated even without it. According to some data, in 2002 the consumption of pipe/tube products plummeted 30 %. In these conditions a significant increase in shipments of Ukrainian pipes/tubes may lead to repetition of the situation that existed in 1999 and 2000. During that period Russian enterprises under the pressure of climbing pipe/tube import shipments had to reduce production volumes, cut short investment programs and lay off some of their workers.
The essence of the decision, which leaders of FPID call "political", comes to the following.
The government of the Russian Federation revoked its own decision taken on May 21, 2001 to introduce a 20 % custom duty on importing Ukrainian large-diameter pipes and a 40 % custom duty on all other Ukrainian-produced pipes. The Russian-Ukrainian agreement "On regulating shipments of iron&steel pipes/tubes" will run out on January 1, 2003. Under this agreement its participants established quotas on bringing Ukrainian pipes/tubes to Russia: no more than 620,000 tons a year, of which 135,000 tons fell on pipes with the diameter of 1420 mm and 485,000 tons on all others. Shipments beyond this limit were subject to a special duty. This step was preceded by Russian dumping accusations of the Ukrainian side. The government’s decision to adopt protection measures with respect to the Ukrainian import of pipes/tubes was the result of a special investigation conducted by the Russian Ministry of Trade. Investigators discovered facts of unfair competition on the part of Ukrainian producers that could harm Russia’s pipe/tube industry.
The introduction of those special protection measures as well as the increased consumption of pipe/ tube products, which went up in 2001 due to the differed demand of the previous periods, allowed Russian enterprises to considerably ramp up production and secure funding investment programs. In 2001 the volume of investments in the industry exceeded $100M. The same level of investments was expected in 2002. One of the key factors in determining economic expediency of investments and the outlook for developing the Russian pipe/tube industry was enterprises’ confidence in maintaining the position of the government aimed at protecting national producers against unfair competition.
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The Foundation of pipe industry development, non-commercial organization, was established in 1999. Among its tasks are to promote development of Russia’s metallurgy, to represent interests of enterprises in state agencies, to provide information and consulting services aimed at solving problems of improving quality of products and to study sales markets.
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Today’s cancellation of the duty also affects the most ambitious projects, such as production of pipes with the diameter of 1420 mm, which are bought solely by Russia’s Gazprom.
Now pipe/tube makers are discussing missed opportunities. Having just started to operate in promising market niches they have to leave them under the pressure of unfair competition. The total volumes of pipe production rose in 1998 through 2001 from 2.8 million tons to 5.4 million tons but, according to preliminary estimates, in 2002 Russia will produce only 4.9 million tons of pipes/ tubes.
FPID’s director Alexander Samoilov believes that losses of Russian pipe- and tube-making plants because of lifting protection measures could amount to $350M in 2003 and the total reduction of pipe/tube production might exceed 500,000 tons. As A. Samoilov said, in these conditions a group of leading Russian enterprises, which are co-founders of FPID, has to start preparing again documents to initiate an anti-dumping investigation against Ukraine.
The Ukrainian Association of Pipe/ Tube makers considers the Russian criticism unfounded stressing that export shipments to Russia are on decline. If Ukraine exported to Russia about 800,000 tons of pipes in 2000 and only 600,000 tons in 2001, in 2002 its shipments will not exceed 400,000 to 500,000 tons.
It is noteworthy that Russia remains Ukraine’s largest customer while Ukraine is the largest supplier of steel pipes/tubes to Russia. 
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