Several groups of Russian producers are simultaneously seeking to make 1,420 mm-diameter pipes for trunk gas pipelines. The United Metallurgical Company (UMC) has probably come to accomplishing the task closer than others. In an interview with Eurasian Metals president of UMC Anatoly Sedykh shares his views on this subject.

Anatoly Sedykh

EM: What is your assessment of the situation in the Russian pipe market in 2003? Are there any trends common to the Russian and foreign markets? And if there are, what are they?

AS: To a large extent trends there reflect the situation in oil-and-gas markets. That is why, as far as the consumption is concerned, due to favorable conditions in oil industries in 2003 these markets have been quite stable. And the Russian one has even been on the rise despite considerable increase in domestic prices for metals. This year prices for the Russian-made strip jumped up 45 %.
In the second half of 2003 the demand for pipes has decreased somewhat but it is a temporary phenomenon. Most likely, there will be no sharp upsurges and the general level of pipe production will remain the same. In 2003 Russian pipe plants will produce, all in all, about 5.5 million tons of pipes.
By experts’ estimates, in the nearest two years the world level of pipe consumption will rise no more than 2 % to 3 %. These are average figures for most countries, including Russia. As for other common trends, there are quite a few of them as well since Russian pipe producers are entering the world market and they are adapting their offers to its requirements. For example, the demand for pipes with higher consumption characteristics is growing all over the world and Russia is no exception.

EM: The United Metallurgical Company is known for its intention to produce pipes with the diameter of 1,420 mm. How things are going with your project?

AS: They are moving forward as planned. By the year’s end we will complete the first stage and we will be prepared to produce pipes with the diameter of 1,067 mm. Some time between December 2004 and January 2005 everything will be set to start making 1,420 mm-diameter pipes. Our equipment suppliers are reliable partners: SMS Meer, the Novo-Kramatorsk Machine-Building Plant... So far everything has been going in accordance with our plans.

EM: The diameter of 1,420 mm is called the "Russian size" because such pipes are used in Russia, mainly. Don’t you feel frustrated by the market’s narrowness?

AS: The competition will, undoubtedly, get stronger with one more player coming in. But I am sure that our company will find its own niche. Why do I feel so confident?
First, the modernization of large-diameter pipe production facilities, which is underway at the Vyksa Steel Works, will permit UMC to expand its presence simultaneously in several segments of this market starting with 530 mm-diameter pipes and moving to production of 1,420 mm-diameter pipes. A unique production composition is being created at the plant. Two parallel production lines will make it possible to fulfill at same time several orders for pipes with different diameters, from 530 mm to 1,420 mm.
Second, we will offer the market pipes of a radically new quality. The project provides for producing longitudinal welded pipes with the diameter of 1,420 mm made of cold-resistant and corrosion-resistant steel grades that belong to high strength categories, up to X80, and with the length of up to 24 m. If required by customers, the thickness of pipe wall can be increased up to 48 mm. They will be capable of withstanding pressure of up to 250 atm. These pipes can pass through an enormous amount of hydrocarbons and provide full security when transporting them underwater and in seismically hazardous regions. Such pipes are needed and needed not only by Russia.

EM: But Gazprom is still the principal buyer of 1,420 mm-diameter pipes? To what extent do you rely on its orders?

AS: Gazprom’s position is understandable: it needs high-quality pipes for "good" prices. And Gazprom clearly declares its intent to buy them from Russian producers. This year Gazprom’s deputy chairman of the board Alexander Ananenkov visited Russia’s three large pipe-producing enterprises, including our Vyksa Steel Works. The very fact that Gazprom’s high official went to pipe plants proves its considerable interest in cooperation with Russian producers.
So far Gazprom has been buying most of straight-line-seam pipes with the diameter of 1,420 mm in Ukraine. They are cheaper than others. In 2002 Gazprom bought 242,000 tons of 1,420 mm-diameter pipes from Ukraine and other foreign producers, this year the amount will come to 300,000 tons and, by estimates, in 2004 the company will purchase from 350,000 to 400,000 tons. In other words, the market’s capacity is rather limited and, thus, the competition for Gazprom’s orders will be difficult. In addition to Ukrainian producers, the Volzhsky Pipe Plant and Vyksa Steel Works will be among its participants. In my opinion, this rivalry will be taking place in terms of prices as well as in terms of pipe quality. The Vyksa Steel Works will become the first among CIS enterprises that will offer pipes, which will fully meet Gazprom’s requirements by their quality characteristics, service life and capacities.

EM: Producing world quality pipes requires an appropriate metal, wide sheet. How are you going to reduce risks connected with metal supplies for 1,420 mm-diameter pipes?

AS: Well, in fact, risks are minimal. The rolling mill that belongs to the Severstal Group is being reconstructed now at the Izhorsky Plant near Saint Petersburg. It will produce 250,000 tons of high-quality strip at the first stage and 800,000 tons at the second stage. Besides, strip is produced abroad as well. Wide-strip rolling mills are also available in Japan and European countries. These producers expressed the willingness to cooperate with UMC and we have already received their consent in principle.

EM: Has this year been memorable for your company? What plans do you have for 2004?

AS: This has been a tense but very interesting year. It has been marked by major victories of UMC at tenders for the Sakhalin-1 and Sakhalin-2 projects that have resulted in orders from such companies as Exxon Mobil and Shell. We have also won a number of prestigious tenders in CIS member countries and have doubled volumes of pipe supplies to other outside markets. The unprecedented contract for $1.25 billion has been signed to supply till 2010 railroad wheels to Russian Railways JSC, the largest state company. These victories especially important because we have gone through several stages of the large-scale modernization at the Vyksa Steel Works that makes both pipes and wheels. And we have done this without suspending the production process. Next year should become the year of completing modernization and starting production of 1,420 mm-diameter pipes.