According to Octagon, the purchase will be announced in the near future. Asset price differences have been settled. The combined company will control about 50 percent of Russian production of large diameter pipes (LDP), radically changing the balance of power in the market. The new pipe giant is set to grow even more and has already begun the hunt for more assets.
Time to dump ballast
Andrey Komarov, who owns 85.6 percent of ChTPZ, has been looking for an investor for his pipe plants - Chelyabinsk Pipe-Rolling Plant and Pervouralsk Novotrubny Pipe Plant for several years. Negotiations were carried out both with metallurgical and pipe companies, and with banking structures. They entered an active phase this summer. Due to the coronavirus, ChelPipe failed to conduct a secondary placement of shares on stock exchanges. In addition, the market situation revealed the futility of working on the market alone and in the absence of guarantees of demand for products.
- This year the market for large-diameter pipes began to decline, which is associated with the completion of such a large project as Power of Siberia. Pipes for Nord Stream 2, regardless of the prospects for its implementation, have also already been produced and purchased, and there will be no new orders, ”predicts Viktor Tarnavsky, head of the analytical department of the Metal Supply and Sales IIS.
Considering that ChTPZ enterprises have long been burdened with debts, the decision to get rid of the ballast was obvious. It was much more difficult to find a buyer, but everything was decided by a cardinal shift in the industry - the emergence of a new major player.
The press service of ChTPZ does not comment on the progress of the transaction. At the same time, sources close to the leadership of ChelPipe, on condition of anonymity, told Octagon that they knew about the positive course of the negotiation process, although they did not confirm the signing of any documents. Sources of the newspaper, familiar with the course of the negotiations, claim that the latest disagreements on the price have been overcome, and the deal may be announced soon. As well as information about its amount.
How the balance of power in the market will change
Currently, there are five players on the market for large-diameter pipes used in the construction of oil and gas pipelines. In addition to the Chelyabinsk and Zagorsk plants, there are Anatoly Sedykh's United Metallurgical Company (OMK), Aleksey Mordashov's Severstal and Dmitry Pumpyansky's Pipe Metallurgical Company (TMK). After the takeover of ChTPZ, Zagortsy will receive an almost 50 percent share in the total volume of LDP production (at the end of 2019, ChTPZ's share in the total volume of LDP production was 31 percent, ZTZ - 18 percent).
It would seem that there is no need to talk about a monopoly, but one should take into account the special resource that is at the disposal of the Zagorsk plant, when receiving orders - the resource of personal capabilities.
The main owner of ZTZ is Denis Safin, and the minority co-owner is Nikolai Yegorov, partner of the law firm Egorov Puginsky Afanasiev and Partners, classmate of President Vladimir Putin.
“We came to the market to change it. And we did it, ”the website of the enterprise, which is located near Sergiev Posad (Moscow region), says. The plant was built in record time (in 16 months, commissioned in 2015), without experiencing any problems with financing and permits.
“In recent years, the Zagorsk enterprise has won the best tenders from Gazprom,” recalls Igor Yushkov, a leading analyst at the National Energy Security Fund.
In this regard, it is no coincidence that the deal will be financed by Gazprombank - according to Octagon, the credit institution is the guarantor of the deal. Previously, ChTPZ actively worked with Sberbank.
Considering that the market demand for large-diameter pipes has significantly decreased recently, it can be assumed that in the near future the competitors of the merged company will face sales difficulties. According to Viktor Tarnavskiy's estimate, the current consumption is only 1.5 million tons, and the total production capacity is about 6 million.
Nevertheless, the LDP market is not going to wind down. Severstal told Octagon that "in the second half of 2020, in response to weakening demand in the domestic market, the company plans to redirect part of its volumes to export markets." In addition, the company emphasizes that in July 2020, the Izhora Pipe Plant (part of Severstal) won a tender for the supply of 320 thousand tons of large-diameter pipes for Gazprom with a delivery time of 2021-2022.
Purchase will not be the last
Experts believe that TMK's advantage is its high availability of its own raw materials. OMK plans to solve the problem of the shortage of its own raw materials by building a steel production complex in Vyksa (it should start working in 2024). It is possible that after the merger of ChTPZ and ZTZ, you will also have to attend to the construction of a new production.
- Both enterprises do not have their own production of thick plates for producing large diameter pipes. In the future, perhaps, they themselves will want to build such a production for themselves, since there is no one to acquire it. Thick sheets are made by MMK (Magnitogorsk Metallurgical Combine. - τ.), Severstal and OMK. They will definitely not sell these assets, - says Victor Tarnavsky.
The new player is determined not to stop at the deal to buy the credited ChelPipe.
It will ask the price first of all for those pipe holdings that have weaknesses - both purely in business due to the crisis, and complex ones, due to the fact that many companies' business depends on lobbyists at the regional and federal level. Large industrial holdings receive support measures from both federal funds and regional infrastructure orders. A striking example is the Sinara Group, whose owner Dmitry Pumpyansky knows the moves both to federal programs to support industry and to large infrastructure projects in the Urals (the general contractor of the Universiade facilities is now evaluating potential profits, which amount to billions of rubles). And these moves allow him to patch holes in the balance sheet of his enterprises.
In the companies - competitors of ZTZ keep outward calmness. When asked whether they personally had an interest in acquiring ChTPZ and whether such an offer was made to them, the press services of OMK, TMK and Severstal do not answer.
This issue was also ignored at the Novolipetsk Metallurgical Combine of Vladimir Lisin, who, as you know, was related to pipe tenders for the construction of the Eastern Siberia - Pacific Ocean oil pipeline, Northern and Southern Streams. Sources of "Octagon" associate Lisin's silence with the fact that he adopted new rules of the game, which are now dictated from Sergiev Posad.
Time to dump ballast
Andrey Komarov, who owns 85.6 percent of ChTPZ, has been looking for an investor for his pipe plants - Chelyabinsk Pipe-Rolling Plant and Pervouralsk Novotrubny Pipe Plant for several years. Negotiations were carried out both with metallurgical and pipe companies, and with banking structures. They entered an active phase this summer. Due to the coronavirus, ChelPipe failed to conduct a secondary placement of shares on stock exchanges. In addition, the market situation revealed the futility of working on the market alone and in the absence of guarantees of demand for products.
- This year the market for large-diameter pipes began to decline, which is associated with the completion of such a large project as Power of Siberia. Pipes for Nord Stream 2, regardless of the prospects for its implementation, have also already been produced and purchased, and there will be no new orders, ”predicts Viktor Tarnavsky, head of the analytical department of the Metal Supply and Sales IIS.
Considering that ChTPZ enterprises have long been burdened with debts, the decision to get rid of the ballast was obvious. It was much more difficult to find a buyer, but everything was decided by a cardinal shift in the industry - the emergence of a new major player.
The press service of ChTPZ does not comment on the progress of the transaction. At the same time, sources close to the leadership of ChelPipe, on condition of anonymity, told Octagon that they knew about the positive course of the negotiation process, although they did not confirm the signing of any documents. Sources of the newspaper, familiar with the course of the negotiations, claim that the latest disagreements on the price have been overcome, and the deal may be announced soon. As well as information about its amount.
How the balance of power in the market will change
Currently, there are five players on the market for large-diameter pipes used in the construction of oil and gas pipelines. In addition to the Chelyabinsk and Zagorsk plants, there are Anatoly Sedykh's United Metallurgical Company (OMK), Aleksey Mordashov's Severstal and Dmitry Pumpyansky's Pipe Metallurgical Company (TMK). After the takeover of ChTPZ, Zagortsy will receive an almost 50 percent share in the total volume of LDP production (at the end of 2019, ChTPZ's share in the total volume of LDP production was 31 percent, ZTZ - 18 percent).
It would seem that there is no need to talk about a monopoly, but one should take into account the special resource that is at the disposal of the Zagorsk plant, when receiving orders - the resource of personal capabilities.
The main owner of ZTZ is Denis Safin, and the minority co-owner is Nikolai Yegorov, partner of the law firm Egorov Puginsky Afanasiev and Partners, classmate of President Vladimir Putin.
“We came to the market to change it. And we did it, ”the website of the enterprise, which is located near Sergiev Posad (Moscow region), says. The plant was built in record time (in 16 months, commissioned in 2015), without experiencing any problems with financing and permits.
“In recent years, the Zagorsk enterprise has won the best tenders from Gazprom,” recalls Igor Yushkov, a leading analyst at the National Energy Security Fund.
In this regard, it is no coincidence that the deal will be financed by Gazprombank - according to Octagon, the credit institution is the guarantor of the deal. Previously, ChTPZ actively worked with Sberbank.
Considering that the market demand for large-diameter pipes has significantly decreased recently, it can be assumed that in the near future the competitors of the merged company will face sales difficulties. According to Viktor Tarnavskiy's estimate, the current consumption is only 1.5 million tons, and the total production capacity is about 6 million.
Nevertheless, the LDP market is not going to wind down. Severstal told Octagon that "in the second half of 2020, in response to weakening demand in the domestic market, the company plans to redirect part of its volumes to export markets." In addition, the company emphasizes that in July 2020, the Izhora Pipe Plant (part of Severstal) won a tender for the supply of 320 thousand tons of large-diameter pipes for Gazprom with a delivery time of 2021-2022.
Purchase will not be the last
Experts believe that TMK's advantage is its high availability of its own raw materials. OMK plans to solve the problem of the shortage of its own raw materials by building a steel production complex in Vyksa (it should start working in 2024). It is possible that after the merger of ChTPZ and ZTZ, you will also have to attend to the construction of a new production.
- Both enterprises do not have their own production of thick plates for producing large diameter pipes. In the future, perhaps, they themselves will want to build such a production for themselves, since there is no one to acquire it. Thick sheets are made by MMK (Magnitogorsk Metallurgical Combine. - τ.), Severstal and OMK. They will definitely not sell these assets, - says Victor Tarnavsky.
The new player is determined not to stop at the deal to buy the credited ChelPipe.
It will ask the price first of all for those pipe holdings that have weaknesses - both purely in business due to the crisis, and complex ones, due to the fact that many companies' business depends on lobbyists at the regional and federal level. Large industrial holdings receive support measures from both federal funds and regional infrastructure orders. A striking example is the Sinara Group, whose owner Dmitry Pumpyansky knows the moves both to federal programs to support industry and to large infrastructure projects in the Urals (the general contractor of the Universiade facilities is now evaluating potential profits, which amount to billions of rubles). And these moves allow him to patch holes in the balance sheet of his enterprises.
In the companies - competitors of ZTZ keep outward calmness. When asked whether they personally had an interest in acquiring ChTPZ and whether such an offer was made to them, the press services of OMK, TMK and Severstal do not answer.
This issue was also ignored at the Novolipetsk Metallurgical Combine of Vladimir Lisin, who, as you know, was related to pipe tenders for the construction of the Eastern Siberia - Pacific Ocean oil pipeline, Northern and Southern Streams. Sources of "Octagon" associate Lisin's silence with the fact that he adopted new rules of the game, which are now dictated from Sergiev Posad.
Business
Related materials
-
Pumpyansky and Rotenberg blow in one trumpetBusiness | 09.03.2021
-
Russian special services earn on illegal alcoholCrime | 25.07.2019
-
Sergey Maslov put Denis Manturov in the saddleSociety | 23.04.2019
-
Zagorsky Pipe Plant of Nikolai Egorov and Denis Safin burst from the orders of GazpromBusiness | 26.11.2018
-
In the OFC bank money from the sewage treatment plants of SevastopolSociety | 04.09.2018
-
Victor Rashnikov voluntarily and compulsorily invested in high-speed projectionsBusiness | 23.08.2018
-
State Bank VTB intends to bankrupt "Crystal-Lefortovo"Business | 06.07.2018
-
Former president of the OFC-bank sent under house arrestSociety | 29.06.2018
-
Gazprom stopped buying pipesBusiness | 20.12.2017
-
Gazprom got another pipe supplierBusiness | 28.03.2017
-
Stagnation of pipe manufacturers: the crisis and the reduction of the construction changed the industry significantlyBusiness | 12.02.2017
-
A new fraud case is prepared against ChTPZ shareholder Andrey KomarovCrime | 29.04.2014