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25 Jul, 2008 06:35

Prime minister Putin calls for pipemaking industry to move to new technological level

Prime Minister Vladimir Putin has proposed solutions for holding down prices on the domestic black metals market.During his visit to one of Russia’s oldest metallurgical plants, Putin called for cuts in import duties, and investment in new technology.

Russia is the world’s third biggest steel exporter. But soaring world metals prices are causing big problems for domestic industry and infrastructure projects.

The Vyksa pipe mill in Nizhny Novgorod produces pipe for some of the world’s biggest oil and gas projects. Vyksa will supply over 30% of the pipes for the Nordstream Baltic pipeline project. But the plant currently has to use German hot rolled plate, which significantly increases production cost.

During his tour of the Vyksa metal plant, Prime Minister Putin called for more new Russian technology and abolition of import duties.

Experts say the demand of the Russian market by 2015 will be around 70 million tones of metal roll.  This is practically the volume of the whole industry today.  In order to satisfy domestic demand, and at the same time hold on to our export potential its necessary to move production onto a new technological level.

In 2010, Vyksa will open a new mill for production of hot rolled plate used in pipe manufacturing, which will make the plant self-sufficient.

However, due to delays in the project, the company had to cut output by 20%.

George Buzhenitsa, analyst at Unicredit Aton isn’t expecting self sufficiency for the sector soon.

I don’t think there will be self sufficiency in our pipe market in the next 2 or 3 years because not many pipe producers in Russia expand their production base.  When Gazprom and Transneft will start building their main projects, which are ESPO and Nordstream, they will require loads of pipes.

The delay should give the Vyksa plant time to lower production costs, providing Nordstream with sufficient pipe. Vyksa is 250 years old, but new investment will soon allow it to compete with the world’s best.