South Stream, Russia Metals and Mining
According to OMK’s president V.Markin, last year was successful for the company. OMK has managed to achieve growth in the production of various types of pipes and other products, which was associated with participation in major projects. Thus, OMK won a tender to supply pipes for the first and second lines of South Stream, modified in the Turkish Stream project. The share of the company's products in this project will amount to about one third of the total required volume.
"The suspension of the project of the first line construction is completed, by the end of 2016 it is planned to supply the first gas via it. Our company must deliver 80 thousand tons of pipes for the first line, a part of which has already been made,"- said Vladimir Markin. In addition to Turkish Stream, OMK is one of the largest suppliers of pipes for Power of Siberia, Southern Corridor, Bovanenkovo-Ukhta, Kuyumba-Taishet, Zapolyarie-Purpe and a number of other construction projects, the company also plans to participate in the gas pipelines of Altai and the Krasnodar region – the Crimea.
In 2015, Gazprom may increase the purchase of large-diameter pipes (LDP) almost 2 times in comparison with the previous year to 1.7-2 million tons, chairman of the coordinating council of the Association of Pipes Producers Ivan Shabalov reports.
Last year's collapse of the rouble forced pipe producers ask "Gazprom" to revise the prices of their products.
Since May 2012 "Gazprom" pays for the pipes according to the formula price. But due to a sharp change in the market the system had failed, four employees of different pipe manufacturers told "the Vedomosti". Producers had to begin negotiations with "Gazprom" to raise prices on the pipes, they state. At the same time the shipment of products does not stop.
The outgoing year in metallurgy will be remembered by everyone, first of all, due to events with Mechel. In 2014, the most indebted company in the industry lost most of its capitalization. It was threatened with bankruptcy, default, was asked to sell assets, restructure its debt and convert it into shares. It was threatened with the dismissing of its general director and principal owner of the company Igor Zyuzin from its management - but there are still no specifics on the future of Mechel.
The first problems of Mechel were found at the end of February, when its shares "went" down for unknown reasons, although some analysts suspected that this was due to its debts. The manipulation with the shares was attributed to speculators, and the Central Bank undertook to investigate. But no one then imagined that everything would go so far.
But the company also had positive aspects in the current year, in particular, the sale of assets, and the fall of the ruble allowed it to significantly reduce its debt.
Russian pipe producers continue to ship pipes for underwater part of the "South Stream" pipeline to Bulgaria, the construction of which "Gazprom" canceled two weeks ago.
Russian pipe companies continued to produce and deliver the pipes for construction of the offshore section of the "South Stream" pipeline to Bulgaria, a source in one of the pipe companies told "the Vedomosti". Oleg Kalinskiy, the director of the Development Fund for the pipe industry, confirmed this: "We have not received official notification on the suspension of the "South Stream", and we continue to operate under the previous agreements".
The Vyksa metallurgical plant, in the structure of OMK, keeps executing the provisions of the contract on pipes production for South Stream, the head of the PR department of the enterprise, S. Zagulovsky, said.
According to him, currently the Vyksa metallurgical plant hasn’t received any notifications on the change of conditions of the signed agreements on pipes supply for the construction of South Stream due to the shutdown of the project.
“At the present time, according to the approved schedule, the Vyksa metallurgical plant keeps producing pipes for the first stage of the offshore site of South Stream”, Mr. Zalugovsky said.
According to him, in March 2014 OMK signed 2 contracts with SouthStream Transport BV, according to which the plant is to produce and supply to the customer over 600 km of pipes (over 1/3 of the necessary volume) for the construction of the first and second stages of the offshore part of South Stream.
MMK and TMK have closed the agreement about the applying of the formula for the calculation of large-format hot rolled steel plates when supplying to TMK’s enterprises before the end of 2015. They signed the document the CEO of MMK, P.Shilyayev and the CEO of TMK, A. Shiryayev.
MMK will supply hot rolled steel plates to Volzhsky pipe plant of TMK that will make large diameter pipes of the product. They are meant for the largest Gazprom pipeline projects Power of Siberia, South Stream and Bovanenkovo – Ukhta.
Producers of pipe products, demand for which reduced after 2011, again increase the volume of orders. Due to launch of new projects in the oil and gas industry - pipelines Power of Siberia, the second string of Bovanenkovo – Ukhta and Central Asia – China, in 2013 the consumption of pipes grew from 9.43 million tons to 9.7 million tons. According to analysts, namely oil and gas projects will be the driver for the pipe industry in the coming years.
According to the Development Fund for the pipe industry, Russian pipe companies sell from 65% to 75% of its production in projects of pipeline transport and production of hydrocarbons. That is why the completion of major oil and gas projects sensitively affects producers of pipes. In the period from 2009 to 2011, the consumption increased from 6.2 million tons to 10.4 million tons, as a number of pipeline projects - Nord Stream, Sakhalin - Khabarovsk - Vladivostok, Eastern Siberia - Pacific Ocean (ESPO) and Baltic Pipeline System-2 (BPS-2) - were implemented. However, after completion of their construction by results of 2012, the consumption of pipes decreased to 9.43 million tons. The market recovery began in 2013, when the demand for large-diameter pipes (LDP) increased due to such projects as Bovanenkovo - Ukhta, South Stream, Central Asia - China. Last year, the consumption amounted to 9.7 million tons. In January-July 2014, the growth was 1.4% as compared to the same period in 2013.
South Stream Transport has certified large-diameter pipes, produced by the United Metallurgical Company (OMK) of NLMK’s steel slabs, the press centre of NLMK reports.
The certificate enables to use pipes, made of NLMK’s steel, for the construction of the offshore section of the South Stream gas pipeline.
The Ukrainian crisis has helped the Kazan engine builders to load their capacity to a record level, providing six-month profitability for the first time since 2008.
As the BUSINESS Online has got to know, in July 2014,the Kazan engine-building industrial association (KMPO) supplied two sets of gas pumping units to compressor station Pysarevka of the Urengoy - Novopskov gas pipeline within the reconstruction of the station for the receiving of gas for the filling of the South Stream pipeline project. Due to contracts with Gazprom, the accelerated works on the gas pipeline, in the first six months of the year the KMPO’s revenue grew by 81% and exceeded $4 billion rubles. At the same time, the plant started to expand its staff, while during the past 6 years the planned staff reductions took place.
Crisis as Opportunity
In the first six months of this year, the KMPO’s proceeds increased by 81% from 2.25 billion rubles in the first six months in 2013 to 4.07 billion rubles.
The first thing that attracts attention is the fact tat the proceeds managed to significantly outstrip the growth of costs. Let’s recall that in semi-annual term the KMPO’s main costs regularly outstripped the revenues that made impossible even the total profit, not to mention the net profit. Now we see as the record amount of the revenue, as a nice break from the costs.
On the results of the first six months of this year, the total profit of the Kazan producer of gas pumping stations increased by 418.6 million rubles to 582.8 million rubles.
Let’s recall that in 2013 KMPO shipped only 12 GPA-16 "Volga" to Gazprom. According to the estimates of Gazprom, the reconstruction of the gas transportation system requires 150-180 gas compressor units annually. In the next few years, having such requirements of the gas giant, we should expect the continued growth of the KMPO’s revenue. Lets note that one of the factors of the Gazprom’s increased appetite became plans to accelerate the construction of South Stream, which must be launched to avoid the risk of failure of the gas supplies to the EU through the Ukraine, which is not friendly today.