Pipe makers abandoned 47 billion Gazprom

They did not sell monopoly pipe with an additional discount.
16.10.2018
Vedomosti
Origin source
On October 15, Gazprom was forced to close five tenders for the purchase of large-diameter pipes (LDP), follows from the materials of the public procurement portal. The customer was Gazprom Komplekt LLC. For nearly 602,000 tons of products, the largest Russian consumer of LDP was willing to pay 47.4 billion rubles, but the largest pipe manufacturers refused to participate in the tender on the proposed conditions. “No applications have been submitted for participation in the request for proposals”, “to recognize the request for proposals as failed”, according to the minutes of the meeting of the Gazprom procurement commission.

The price of contracts offered by Gazprom was unacceptable, people close to the three pipe makers explain. “Now the pipe producers are waiting. Companies will consider participating in the tender if Gazprom offers more attractive terms, ”says one of them. “The conditions of the tenders are not enforceable, as they will lead to losses [pipe producers]. It is not only about the price, but also about a part of other conditions, ”adds another, but does not specify what the conditions are.

Representatives of Gazprom, TMK, OMK, ChTPZ, Severstal and ZTZ declined to comment. The Federal Antimonopoly Service has received no complaints about these procedures, a service representative said.

LDPs whose supply contracts were ignored were to be ordered for the construction of the Kovykta-Chayanda gas pipeline with a length of 803.5 km. This is an integral part of the Power of Siberia project - a pipeline to China. Now Gazprom is completing its first section - from the Chayanda field to the border with the PRC in the Blagoveshchensk region (2157.9 km). Deliveries on it in accordance with the contract with the Chinese CNPC should begin at the end of 2019. But the Chayanda development project provides for production of only up to 25 billion cubic meters. m per year. Without connecting to the pipe of the Kovykta field (the same number), fulfill the conditions of the contract with China - from 2025 to supply 38 billion cubic meters. m annually - Gazprom will not be able to.

Pipes for failed contracts were to be delivered in the first quarter of 2020. Based on public procurement materials, the average cost of 1 ton of LDP (1,420 mm with an external multi-layer anti-corrosion coating), which Gazprom was ready to pay, was just over 78,000 rubles. (63 000 rubles without VAT).

For comparison: at the beginning of 2016 Gazprom Komplektatsiya purchased 501,600 tons of LDP for 56.8 billion rubles, or an average of about 93,000 rubles. for 1 ton without VAT. However, in December 2017, Gazprom considered the value of the contracts to be too high and sent a notice of termination to the pipe producers. The pricing policy of Gazprom in relation to the purchase of LDP has changed, it was reported in the letters “Gazprom picking” received by the plants. The prices for pipes from 2016, when the purchase was made, went down, but the pipe manufacturers did not want to take this into account, explained the source of Vedomosti in Gazprom. “We have to educate,” he said. "Gazprom" demanded to reduce prices by 20%, the pipemakers told Vedomosti. All January there were negotiations with the monopoly, but as a result, the suppliers agreed to its terms.

The new price benchmark proposed by Gazprom is slightly lower than the current level, but generally adequate, according to Maxim Khudalov, director of the ACRA corporate rating group. Now the average cost of 1 ton of pipes with a wall thickness of 14 mm excluding VAT is about 68,000 rubles, he cites data. “But a weak ruble and rising steel prices are causing pipe manufacturers to expect higher prices,” says Khudalov. Prices for pipes for the year fell by 20%, and steel products, on the contrary, increased by 20%. “So pipe-workers without their own steel — and that’s all except Severstal — is not easy now. And they hope for a recovery in prices, ”says Khudalov.

At the current exchange rate, the price of $ 1,200 for 1 ton of LDP (approximately 78,000 rubles including VAT. - “Vedomosti”) is average for the market, says Nikolai Sosnovsky, director of metallurgy and mining of Prosperity Capital Management. While the Russian LDP production facilities are not more than 2/3 loaded, the companies refuse orders to look strange, he said. “But prices for steel, scrap, tackles are rising. It is logical that pipe companies do not want to take on large and potentially unprofitable contracts, ”continues Sosnovsky. In his opinion, everyone will eventually have to sit at the negotiating table: the market is narrow, there are few suppliers, and even fewer consumers will have to negotiate.

The main risk for pipe companies is ruble fluctuations, an independent analyst of the metallurgical industry is convinced: “The profitability of the proposed contracts is lower than usual, but any jump in the rate turns them into a completely unprofitable enterprise.” This can theoretically be avoided by agreeing on a significant proportion of the prepayment, but Gazprom has not paid for its pipes in advance for a long time, he adds. Now the margin at trubnikov - 10-20% and serious currency fluctuations can greatly affect the financial results, agrees Sosnovsky. “In addition, indexing usually takes place with a delay of several months,” he adds.

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