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Russian Demand for Large-Diameter Pipes to Grow by 50% Next Year

Russian Demand for Large-Diameter Pipes to Grow by 50% Next Year

The owner of Pipe Innovation Technologies, told Reuters that the demand for large-diameter pipes (LDP) from Russian energy firms is expected to increase by up to 50% next year as major projects overcome delays and finally seem ready for development.

Ivan Shabalov believes that Gazprom and the Russian oil pipeline monopoly Transneft alone will need 1.8 million tonnes of pipe next year; a welcome change following the drop in demand in 2013.

“We see a fall in LDP demand from Gazprom and energy firms this year ... Next year looks more promising.”

Related article: Why Canada's Oil Future isn't Going South

The main drivers behind this growth in demand are the development of the South Stream natural gas export pipeline that is due to carry gas from Russia, under the Black Sea, and into Europe via Bulgaria, and the Power of Siberia pipeline that will carry gas to China.

South Stream pipeline
South Stream pipeline.

Shabalov predicts that without these two giant projects, the demand for LDP would fall a further 20-30 percent this year compared to 2012.

Russia’s economy is only expected to grow by 1.8 percent this year, just half the rate initially forecast at the beginning of the year. To try and reduce inflation the government plans to cap tariffs charged to monopolies. Shabalov recognised that “Gazprom may cut investment due to the recent government decision to freeze rates. As a metallurgist I have to take this into account.”

Related article: Canada Ramps up Pipeline Plans

Russian steelmakers are vying to win a tender for the supply of pipes to the South Stream project for the offshore section that runs 925 kilometres under the Back Sea. Severstal, United Metallurgical Company, and ChelPipe are the Russian companies bidding for the contract, against small European firms, Tata Steel of India, and Nippon Steel, and Sumitomo Metal Corp. of Japan. The tender will be awarded in December or January.

Steelmakers around the world have suffered in recent times as a slowdown of growth in China, coupled with market stagnation in Europe, and oversupply, have sent prices tumbling.

Russia’s top companies produce an average of 10 million tonnes of steel, which Shabalov warns is uncompetitive compared to other global firms that produce 50-100 million tonnes a year. This could lead Russian steelmakers to lose out to larger firms.

By. Joao Peixe of Oilprice.com



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