Robert Sagyan: I don't see any prerequisites for growth in oil and gas pipes yet

09.03.2022       

According to pipe market participants, prices are being reviewed in the companies of the industry. Some companies are even trying to revise the prices for previously concluded contracts, but for new applications they cannot yet issue commercial offers. Some market participants note that the price of an oil and gas pipe may soar by a third.

There is another opinion, in particular, pipe market expert Robert Sagyan, who has been involved in purchases in one of the largest Russian oil companies, sees no reason to panic. The expert, in particular, notes: " Europe has closed itself to such major sheet metal producers as Severstal. The European market in 2021 formed 34% of Severstal's total revenue. Where will these volumes go? To the domestic Russian market.
Analyzing the Chinese market, we see that the Celestial Empire is increasingly getting by with its own raw materials. China exports more than it buys raw materials. This also applies to scrap metal. China began to seek scrap resources in the domestic market and was very successful in this. Where will China export? The European market is quota-based, so draw your own conclusions.
For information — about 40% of the cost of the pipe is billet. Ore in Russia has its own, electricity — own. Yes, the equipment of our pipe makers is foreign, the software — foreign, but this cannot compensate for the tendencies noted above. An increase in the dollar exchange rate makes it difficult for Kazakh, Italian, German, and Japanese pipes to enter the Russian market. Yes, pipe makers are interested in raising the cost of their products under any pretext. It has always been like this since the 90s, but I still don’t see any prerequisites for an increase in prices for oil and gas pipes."

Another experienced expert Avtandil Mammadov notes the following four trends in the Russian pipe market:
1. Reduction of domestic consumption by Russian oil and gas companies, under the conditions:
1.1. Reducing hydrocarbon exports to the US and Europe.
1.2. Decrease in financing of projects due to the exclusion of Western loans.
1.2. Increasing lending rates of Russian banks.
2. Reduced shipments to European and US markets. For example, the Izhora Pipe Plant successfully supplied products to the US and Europe.
3. Decrease in sales to joint projects operated by companies such as Exxon Mobil, Shell, BP and others.
4. "Grassroots sanctionsВ» (conditional term), when there are no sanctions at the state level, and consumers themselves refuse Russian products. Something like what happens with Russian brands of vodka in the US and Europe.
For now, I can note these circumstances. There are other threats as well: limitation of certification by the American Petroleum Institute (API), WTO, the situation on the market, the state of the market for graphite electrodes for electric arc furnaces, and so on.

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