The Russian pipe producer TMK Group (TMK) has announced that, due to the improvement of demand, the continued growth in pipe shipments in Q4 2009, up 22 percent quarter on quarter, enabled it to partially offset the decline in shipments observed in the first half of 2009, thereby narrowing the level of decrease as compared to 2008.
Accordingly, TMK's full year 2009 shipment volumes decreased by 13 percent year on year to about 2.79 million mt, reflecting the relative stability of the tubular industry during the downturn. In 2009, TMK shipped 1.67 million mt of seamless pipes - down 16 percent, and 1.12 million mt of welded pipes - down ten percent, both compared to 2008.
Due to the increasing demand from key oil and gas customers and seasonal procurement factors, in Q4 2009 TMK increased its shipments of oil country tubular goods (OCTG), a key segment of its business, by 42 percent quarter on quarter to 322,000 mt; however, over the whole of 2009 shipments of the goods in question saw a year-on-year decrease of 17 percent to 1.046 million mt. In 2010, TMK expects an improvement in OCTG demand in Russia due to announced plans for higher capital expenditure by major Russian oil and gas companies and increasing drilling activity at new and existing fields.
Driven by the construction of major Gazprom and Transneft pipeline projects, TMK continued to experience increased demand for its large diameter (LD) pipes in the second half of 2009; the producer's LD pipe deliveries totaled 19,000 mt in Q1, rising to about 70,000 mt in Q2 and also in Q3, and amounting to over 150,000 mt in Q4. The current LD order backlog is quite significant and already extends through the second half of 2010. In 2010, TMK expects LD pipe shipments to be 1.5 times higher than the full-year volume for 2009.
Average pricing for TMK products were generally stable in the second half of 2009, following a significant decline in the first half of the year. In the US, prices have only recently started to stabilize and to show signs of recovery from their 12-month low. "We expect a gradual price recovery in Russia and in the United States in 2010 on the back of the continued upturn in demand and increasing capacity utilization rates in the industry. We also expect a modest price increase in Europe driven by similar market dynamics," reads the company's statement.
As of December 31, 2009, TMK's total interest bearing loans and borrowings amounted to $3.729 billion, of which 66 percent was long-term debt and 34 percent short-term debt.
"Over the next twelve months, we expect to substantially increase production volumes and surpass 2009 levels as a result of the successfully completed ramp-up of new capacities and the expected growth in demand for TMK pipe products that was witnessed in the second half of 2009 and that we expect to continue in 2010. The company plans to increase prices for pipe products in 2010 to offset expected raw material price increases. Higher average selling prices coupled with higher utilization rates and a more favorable product mix are expected to result in improved profitability in 2010," says the company's statement.