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Interpipe reduced sales of pipe and railway products in 2020

Ukraine / Ferrous metallurgy

The share of INTERPIPE sales to export markets exceeded 80% at the end of the year.

Interpipe reduced sales of pipe and railway products in 2020

The Ukrainian industrial company Interpipe in 2020 reduced sales of pipe and railway products in tons by 17%. The total sales volume amounted to 662.4 thousand tons. The export share in the sales structure was 81%, while the Ukrainian market share decreased from 24% to 19%.

Sales of pipe products fell by 21% compared to 2019 and amounted to 469.9 thousand tons as a result of a drop in demand for pipes for oil and gas production. The main factor is the decline in oil prices in the 1st half of 2020.

Pipe deliveries to the Ukrainian market decreased by 31% compared to 2019 and reached 102 thousand tons. The main factor is the curtailment of the gas production program by Ukrgazvydobuvannya. In 2020, UGV reduced the program for drilling new wells by almost 4 times. At the same time, shipments to private gas producers remained approximately at the level of 2019.

Similar trends were observed in the United States. The oil production crisis due to falling prices for hydrocarbons has led to the bankruptcy of many oil companies in the US market, which has reduced the demand for OCTG pipes. Moreover, on the US market, Ukrainian pipe products are subject to a total duty of 32.5%. As a result, sales of Interpipe pipes in North and South America decreased by 63% to 52 thousand tons.

Interpipe supplied 137 thousand tons of pipes to European customers (-6% by 2019). The decline in sales was mainly due to the coronavirus pandemic, which led to a slowdown in the consumption of pipe products. In addition, the European market is limited by import quotas, which do not take into account the capacities of the Vallourec Niko Tube JV.

At the same time, Interpipe increased sales in the Middle East by 9%, to 111 thousand tons, due to the start of sales of premium UPJ-F connections to Turkey and line pipes to such leading oil-producing giants as the National Oil Company of Abu Dhabi and Qatar Petroleum.

Sales of railway products - wheels, tires, axles and wheelsets - in 2020 decreased by 5.4% compared to 2019 and amounted to 192.4 thousand tons.

Sales to the markets of the CIS countries in 2020 decreased by 10%, to 84 thousand tons, after the return of the a /d duty on the supply of Ukrainian wheels to Tamsoyuz and a reduction in freight traffic during the coronavirus pandemic. In Ukraine, there was also a decline in the consumption of railway products due to the crisis in the domestic car-building industry. As a result, Interpipe reduced sales to car-building and car-repair enterprises by 42%, to 26 thousand tons.

At the same time, the volume of sales of railway products to the European market in 2020 reached another maximum, amounting to 67 thousand tons (+ 29% by 2019). These indicators were achieved by increasing production of new products for freight transport, as well as entering the segment of wheels for passenger rail transport, in particular, for high-speed trains of the national German operator Deutsche Bahn.

The volume of round steel billet production at Interpipe Steel in 2020 amounted to 758.7 thousand tons, which is 11% lower than in 2019. The decline is explained by the decline in demand for finished goods.

Denis Morozov, Director for Finance and Economics, Interpipe:

- The share of INTERPIPE sales to export markets exceeded 80% at the end of the year. We entered new segments and delivered deliveries to market leaders. The Pipe Division has successfully shipped premium threaded products to Turkish Petroleum, line pipes to ADNOC (Abu Dhabi National Oil Company) and Qatar Petroleum. The wheel division passed certification and carried out the first deliveries of passenger railway wheels for high-speed trains Deutsche Bahn.

As an exporting company, we have seen increased protectionism in key markets throughout the year. The pandemic has strengthened the desire of other states to provide orders primarily to their producers by tightening quotas, introducing anti-dumping duties and other instruments aimed against importers. On the other hand, within Ukraine, Interpipe's operation was negatively impacted by high electricity prices. Consumption and prices for key energy carriers in the world - oil, natural gas and coal - were falling, while in Ukraine tariffs for electricity for industry were growing.

The company will continue to grow by investing in increasing capacity for export markets. In 2021, we plan to complete the construction of an additional workshop for the production of wheelsets, start construction of new facilities for the production of pipes with premium threaded connections for oil and gas production.

About the company:

Interpipe is a Ukrainian industrial company, manufacturer of seamless pipes and railway wheels. The company's products are supplied to more than 80 countries of the world through a network of sales offices located in key markets of the CIS, the Middle East, North America and Europe. In 2020, Interpipe sold 662 thousand tons of finished products, including 192 thousand tons of railway products. Railway product sales

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