Andrei Karunos

A

long with the United Metallurgical Company (UMC) and Pipe Metallurgical Company (TMK) one more holding, the ChTPZ Group, has emerged on Russia’s pipe market. Its base enterprise is the Chelyabinsk Tube Rolling Plant (ChTPZ), one of the country’s seven strongest plants, which accounts for 14 % of the total volume of pipes produced in Russia and over 40 % of making large-diameter pipes. Products of ChTPZ are being used at more than 70 % existing Russian pipelines. Its customers include oil-producing companies, power engineering enterprises, machine-building and construction industries, public utilities and farming.
A year ago ChTPZ withdrew from UMC, which it joined to participate in implementing the project of producing pipes with the diameter of 1,420 mm. But the alliance, which also included Severstal, did not really come about and now its every former participant is trying to act independently.

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Vitaly Sadykov The ChTPZ Group’s general director. Born in 1959 in the Urals region. Graduated from the Magnitogorsk Mining and Metallurgical Institute as well as the Ural Polytechnic Institute with diplomas in engineering and economy. Doctor of economics. From 1985 to 2000 worked at the Volzhsky Pipe Plant, where made a successful career and became the enterprise’s general director. Ensured the restoration and considerable growth of its production volumes. Later became vice president of YUKOS, the oil company. Being the general director of the ChTPZ Group secures its operational management, formation of the enterprises’ system of complex interaction and introduction of the up-to-date management technologies. Winner of the Russian Manager of the Year contest (1999), awarded with the diploma of the international program "Partnership for the sake of progress".

Besides ChTPZ the Group also incorporates the Chelyabinsk Zinc Plant, two pipe component-producing enterprises (the Moscow-based Plant of Special Assembly Elements and Magnitogorsk Plant of Mechano-Assembly Blanks VostokMetallurgMontazh) as well as the metals trading company MeTriS.
The strategic activity of the ChTPZ Group is aimed at providing comprehensive services to enterprises of the fuel-and-energy complex. The Group’s general director Vitaly Sadykov singled out three main business directions: producing pipes, developing a spot market network for the system of MeTriS’ supplies and providing customers with overall services to furnish equipment.
In Sadykov’s opinion, the spot market is developing fast enough and managers from the ChTPZ Group would like to apply new approaches. The task is to directly reach a final customer even in the spot market segment.
In order to have an opportunity to provide customers with a whole complex of services, the Group not only has acquired two enterprises that make steel reinforcement and pipeline bends but it has also started construction of a plant in the city of Chelyabinsk, which will produce pipe bends of a large diameter.
"These are just the first steps so far. Today, we are studying new opportunities as far as supplies for the oil and gas sectors are concerned. And I think that in the coming months we will determine what our next steps will be in strategic terms", Sadykov says.
In August the Chelyabinsk Tube Rolling Plant has been placed first among Russian pipe producers by volumes of products’ deliveries. As compared with the level of last year, the production level at ChTPZ has increased 48 %, up to 80,500 tons a month. The growth rates of producing large-diameter pipes for oil and gas transportation are especially high: they are rising 2.2 times, up to 39,400 tons a month. The plant’s officials are saying that these are the highest rates of monthly growth volumes in the last 10 years.
Such a dynamic development, of course, has been helped by the intensification of the market as a whole, which, in Vitaly Sadykov’s words, has grown up 17 %. The largest growth of consumption rates has been registered in the niche of large-diameter pipes: about 65 % to 66 %. The ChTPZ Group’s positions are particularly strong precisely in this segment and it has managed to secure a third of this increment. As the general director believes, the Group will be able to maintain the achieved rates till the end of the year. "We are not going to yield our positions in the future as well", Sadykov says. " In five to seven years the market of large-diameter pipes will continue to grow, maybe, not so rapidly as this year, though". Above all, Russia needs additional pipelines for export pumping of oil and gas and this guarantees new major orders to pipe producers.
It goes without saying that the Russian market is attracting foreign producers as well. The leading rivals of Russian companies are Ukraine’s pipe enterprises, which are subsidized by the State and which can, thus, offer their products at lower prices. In the opinion of Vitaly Sadykov, in the nearest future volumes of import shipments from Ukraine will hardly come down. He says that rivals’ actions are not "exactly of the market nature" and explains: "Of course, we do not like, when Ukraine does redistribution of its export shipments in favor of large-diameter pipes despite the coordinated quota. Besides, they are seeking additional quotas on supplies of such pipes". As Sadykov believes, Ukrainian exporters’ quota for 2004 should not be raised. "Our government should take care of Russian producers’ interests in the first place", he says. However, it should be recognized that in the Cabinet’s actions political motives often prevail over this evident and objective consideration.
In its turn, the ChTPZ Group is also a major exporter shipping its products to 20 countries. "Our plans for the immediate future include further developing new markets in the Middle East, where we will be offering, in the first place, water and gas tubes as well as galvanized pipes for the oil-and-gas complex and water-supply networks", informs Vitaly Sadykov. "After the second reconstruction phase at the plant is completed, we hope to expand our presence in Europe’s markets as well. Entering American markets is also among our projects".
The program of modernizing ChTPZ is meant to last till 2007 and it consists of three phases.
In Vitaly Sadykov’ words, the first phase provides for "doing everything that has obviously to be done". "This means to do small but efficient upgrades: to install measuring tools, to change the technological process flow in some places and in some places to change insufficiently productive equipment". Design decisions have already been made, most contracts have already been signed, manufacturing equipment has already been started, he explains. All works should be completed in a year.

Chelyabinsk Tube Rolling Plant, Shop No.6, large-diameter pipe casings

The second phase is to reconstruct two main shops of ChTPZ: the pipe-rolling shop that produces seamless pipes and the pipe electric welding shop. The European Bank for Reconstruction and Development has provided a credit of $50M for this purpose. As a result of the reconstruction, new capacities will become available to produce up to 75,000 tons of high-quality pipe casings a year and the total production capacity of the pipe-rolling shop will increase up to 300,000 tons. The modernization of the pipe electric welding shop will lead to radical improvement in quality of pipes for trunk oil and gas pipelines. It will also make it possible to start production of pipes with the wall thickness of up to 20 mm. Besides, the production capacity of the corrosion-prevention coating section will double thanks to using technologies and equipment provided by the company Selmers.
Implementing two phases of the modernization program with the budget of $150M is supposed to ensure the entry of ChTPZ in new markets. At present, the attention is being given to the possibility of increasing the production capacity of the thread-cutting enterprise, expanding the range of pipe casings and lifting pipes as well as reconstructing the line of moulding pipes with the diameters from 508 mm to1,220 mm and doing some other works.
The essence of the third phase is not finally settled yet. Vitaly Sadykov says that the company is asking its shareholders to consider a possibility of setting up production facilities to make the company’s own round billets. "It may be either rolled or cast billets", Sadykov says. But he does not doubt the need to solve this problem. "Currently, there are no such production facilities in the country that fully meet our requirements", he insists. The Group’s management regards getting its own metal as one of the priority directions of the company’s development. In Sadykov’s opinion, the "excellent" results of ChTPZ’s activity for 8 months of 2003 permit to revise the plans that were worked out with the participation of the consulting company Roland Berger. These plans, which were adopted as a program of the enterprise’s production and economic growth till 2007, can be now re-considered in terms of expansion. It is planned that already this year ChTPZ will reach the annual volume of 800,000 tons of pipe products.