Consumption of large-diameter pipes falls amid reduced gas production

Shipments of large-diameter pipes (LDP) in January-July decreased by 24% against the backdrop of a reduction in the repair program of Gazprom. Despite this, pipe companies maintain their utilization at the level of last year, mainly due to exports, which more than doubled, according to Russian Railways. The Ministry of Industry and Trade, recognizing the fall in demand for LDP, notes that the indicators are supported by the growth in consumption of building range pipes.

The consumption of large-diameter pipes in Russia decreased by 24% in the first half of the year, to 942,000 tons, according to data from the industry agency Metals & Mining Intelligence. At the same time, the total consumption of pipes increased by 3%, to 5.4 million tons. Consumption of small and medium-diameter pipes (MSD) for the needs of the fuel and energy complex increased by 8%, to 1.8 million tons, due to the complexity of production and an increase in the metal consumption of wells. Consumption of structural pipes also increased by 13% to 2.6 million tonnes.

Pipe companies, like ferrous metallurgists, have suffered from Western sanctions. The EU last year banned the import of steel products from Russia, including a wide range of seamless and welded pipes. The EU blacklist included Dmitry Pumpyansky, who before the sanctions was the main owner of TMK, the largest player in the Russian pipe market. In March 2022, Mr. Pumpyansky transferred control of the company to management.

In 2022, the oil and gas industry was a key growth point for demand for pipes and rolled metal products. According to Severstal’s estimates, steel consumption in this segment increased by 28% to 5.9 million tons, mainly due to Gazprom’s largest investment program in the past five years. The upstream and field development segment also grew as oil companies prepared to increase oil production as they pulled out of the OPEC+ deal. Although the launch of a special military operation disrupted these plans, the adjustment of investment programs took time, and the reduction in drilling and repairs on pipelines occurred already in early 2023.

In the first six months of 2023, steel consumption in the oil and gas sector decreased by 6%, to 2.6 million tons. The reason is a temporary decrease in the demand for large-diameter pipes due to the completion of projects that started in 2021-2022, Severstal noted. Since May last year, Gazprom began to sharply reduce exports to Europe. The volume of gas production in the Russian Federation in January-June 2023 decreased by about 9.8% year-on-year, to 330 billion cubic meters. m of gas. In June, according to Kommersant sources familiar with the statistics, 44.8 billion cubic meters were produced in the Russian Federation. m of gas, which is 4.5% less than a year earlier (see Kommersant dated July 26).

According to the estimates of the Ministry of Industry and Trade, set out in the strategy for the development of the metallurgical industry, the production and consumption of steel pipes in 2023 should remain at the level of 2022 – 12.5 million tons and 11.3 million tons, respectively. Deputy Minister of Industry and Trade of the Russian Federation Viktor Evtukhov told Kommersant that the pipe industry maintains capacity utilization at the levels of recent years, and the actual values ​​for 2022 “are generally within the planned indicators, including those set out in the metallurgy development strategy until 2030 “. “We expect that the forecast indicators for 2023 can be achieved by the industry within the forecast values,” he said. According to the ministry, in the first half of the year, the production of steel pipes of various grades increased by 8.5%, from 5.7 to 6.2 million tons. “At the same time, taking into account the schedules for the construction of main pipelines, shipments of large-diameter pipes to the domestic market have slightly decreased – from 1.36 to 1.15 million tons. At the same time, production growth is stimulating demand for building grade pipes, thanks in part to the state program to modernize utility infrastructure. Thus, shipments to the domestic market increased by 29% over six months, to 2.68 million tons,” commented Mr. Yevtukhov. The Pipe Industry Development Fund (industry lobby) and pipe companies did not provide any comments.

JSC RZD “Kommersant” reported that the transportation of large-diameter pipes for export increased by 2.8 times in the first half of the year. According to Metals & Mining Intelligence, export deliveries of LDP amounted to 260,000 tons. The most promising export direction in the near future will be the EAEU countries, comments independent industrial expert Maxim Shaposhnikov. For example, he says, the gasification of Kazakhstan will require up to 1-1.5 million tons of pipes. In the long term, demand for Russian pipes from Iran, India and African countries is possible, but the volume of supplies may be limited due to expensive logistics.

Evgeny Zainullin, Natalya Skorlygina