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Severstal sells pipes according to the tolling model

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Severstal presented the interim results of the implementation of the partnership scheme for the production and supply of electric-welded pipes for the construction industry at the 10th All-Russian Conference “Steel Pipes: Production and Regional Sales.

Despite the difficulties during the pandemic, Severstal »Ensured 100% utilization of CherMK's capacities by reaching new customers and expanding the sales geography in Central Asia, Northern Europe and the Far East. The company is also actively developing a tolling scheme in the domestic market, offering hot-rolled coils for processing according to a tolling scheme to independent pipe plants.

“In the field of production of electric-welded pipe for tolling among metallurgical companies, we are the first in the domestic market,” said Igor Ignashov, Sales Director construction companies of PAO Severstal. “In September 2019, the first pipe under this scheme was delivered to our customers. Today, other metallurgists are taking an example from us.”

In metallurgy, the tolling model of cooperation between a manufacturer of rolled metal products and a processor assumes that the manufacturer remains responsible for the sale of finished products. This partnership scheme gives each of the parties certain benefits:

  • for the processor - the provision of rolling stock (especially in the season), the guarantee of a complete portfolio of orders, as well as minimization of the need for working capital;
  • for the manufacturer - the opportunity to better understand the requirements of the consumer and timely adapt its production to the requirements of the market.

Currently, Severstal is implementing a tolling model with such partners as Ryazan TZ, Borsk TZ, Nizhne-Volzhskiy TZ and expects expanding the geography of presence. From January to June 2020, the volume of rolled metal products processed in this way almost tripled - from 10.9 thousand tons to 27.8 thousand tons. During the same period, under the tolling scheme, Severstal delivered more than 110 thousand tons of pipes to customers.

Severstal uses a creative and non-standard approach to solving problems, - noted Victoria Gordievskaya, Commercial Director of PTK LLC ( Rostov-on-Don). - For us, working with Severstal is confidence in the supplier and product quality, minimization of risks, transparency of work, which allows us to make plans for the future. Thanks to the joint work on the tolling scheme, our sales volumes for the first seven months of this year 2020 increased by 20% compared to the same period of 2019. We have completely changed the purchasing portfolio: if earlier we took pipes from all manufacturing plants, now 90% of the portfolio is products of the Severstal company.

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