Zagorsky Pipe Plant of Nikolai Egorov and Denis Safin burst from the orders of Gazprom

Powerful administrative support has turned the company, to which generous orders of the gas monopoly have fallen, into a reseller of large diameter pipes from other manufacturers in Russia.
26.11.2018
Vedomosti
Origin source
The Zagorsky Pipe Plant (ZTZ) gained access to the orders of Gazprom only in 2017, but in a year and a little it managed to drastically reshape the market for large-diameter pipes (LDP). Over the year, the company entered into two very large contracts with Gazprom: at the end of 2017, a three-year contract for the supply of 250,000 tons of pipes annually and more recently a two-year contract (the start of deliveries was January) for a total of 500,000 tons. Both signed on the terms of a single supplier . The capacity of the enterprise is 500,000 tons of pipes per year. Thus, only these two contracts allow starting the plant with 100% starting next year.

It is possible that ZTZ is already fully loaded now and is buying pipes from competitors to fulfill contracts with Gazprom. At least four people close to large pipe companies say so. “According to the results of 10 months of 2018, the ZTZ facilities are almost 100% loaded,” says one of them. In the summer, the plant stopped coping and began to buy pipes from competitors, he adds. Procurement continues today, confirms another source "Vedomosti". He is aware that ZTZ purchased pipes at least from ChTPZ and TMK.

Buying pipes on the side was only once, the representative of ZTZ claims. In the summer, the plant was forced to purchase about 15,000 tons of pipes from other manufacturers. In the middle of summer, restrictions were placed on the Moscow railway junction for the shipment of goods in connection with the World Cup. At that time, obligations to deliver products to Gazprom were at their peak - about 50,000 tons in June and 45,000 tons in July. Therefore, "the customer has agreed to us special conditions involving the purchase of pipes on the market to maintain the pace of repair of the gas transmission system," said a plant representative. The condition was to preserve the cost of pipes for the monopoly, he stressed, but at what price they were purchased from competitors, he did not say.

 Gazprom is the largest consumer of LDP in the country. Traditionally, orders were distributed among ChTPZ, OMK, TMK and Severstal.

But ZTZ CEO Denis Safin has always said that the plant is ready to supply pipes 15–20% cheaper than the market. The competitive struggle added sharpness to the accelerated admission of the new plant to the supply for new gas construction projects that generate the main demand for pipes. The presence of an aggressive new player made it possible for Gazprom to put pressure on the remaining pipe manufacturers and in January 2018 force them to reduce prices. Compared with the contracts concluded in 2016 (on average, about 93,000 rubles per 1 ton), they were reduced by 20%. In September, Gazprom decided to push this level even lower by placing tenders for 602,000 tons of large diameter pipes with a total value of just over 47 billion rubles. (about 63,000 rubles without VAT, minus 33% to the price level of 2016), but all manufacturers ignored the competition. As a result, Gazprom concluded a record-breaking contract with ZTZ: 500,000 tons of pipes for 41.4 billion rubles, i.e., almost 83,000 rubles each. for 1 t.

“It was our appearance on the LDP market that allowed us to radically change the cost curve for pipes for Gazprom.” If from 2011 to 2016 it grew, then with our appearance, the cost of LDP for a gas company decreased by more than 30%, ”Safin’s words were quoted in the message about the deal.

 “Adequate to current conditions, taking into account the rise in metal prices, should be objectively higher [proposed ZTZ],” the source interviewed Vedomosti in one of the pipe companies. The total capacity utilization in Russia fluctuates around 40%, but “for some pipe mills” the load may “exceed production capacity”.

In just a little less than 1.5 years, Zagorsk concluded contracts with approximately 63 billion rubles for the structures of Gazprom, contracts with Gazprom amounted to 99.4% of the plant’s revenue structure. In 2017, ZTZ shipped about 146,000 tons of products, which accounted for about 11% of the total LDP consumption. In 2018, the total demand for such pipes will drop to 1.65 million tons (forecast of the Pipe Industry Development Fund), and the share of the ZTZ market, if it can cope with Gazprom’s contracts, can triple.

 The only time the plant violated the time of delivery to Gazprom was at the beginning of 2018, the representative of ZTZ insists. “The company only entered the production facilities, we had insignificant delays in deliveries agreed with the customer (with the signing of the relevant documents), which did not affect the monopoly repair schedule. The situation has finally leveled off since May 2018, ”he says. Since September, the plant is ahead of delivery time: “Already today we are closing the lot with delivery in I quarter of 2019.”

Competitors deliberately aggravate the situation, the employee of ZTZ is sure. The representative of Gazprom is calm: “The capacities of ZTZ make it possible to fulfill obligations under contracts with Gazprom.”


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