TUBE AMNESTY IS ROUND THE CORNER (Part 1)

On November 1, 2014 quotas on stainless steel tubes and pipes into the territory of the Customs Union will expire. This means that the only import encumbrance with the exception of cold-deformed seamless pipes from China (till 09.05.2018 the anti-dumping duty is at the rate of 19.15%) will remain as the import duty.
After Russia’s accession to the WTO, import duties on stainless steel pipes are gradually declining. By early September 2016, they’ll basically reach 7.5% of the customs value. Will it be enough for the certain level of protection for domestic producers of stainless steel pipe?

Part 1. Let’s have a look at seamless pipes as an example.
In Russia two main producers of cold-deformed stainless steel tubes are JSC "Pervouralsk New Pipe Plant" that belongs to the group of CHTPZ and "TMK-INOX" - a joint venture between RUSNANO and TMK.

As initiators of all restrictions on imports of stainless steel pipes (hike of duties, quotas, antidumping duties)  Russian companies do not produce steel billets, they buy it in the domestic and, what is more interesting , in the foreign market. For PNTZ the main supplier of billets is "DSS" (Ukraine), and for TMK-INOX - company VIRAJ PROFILES LIMITED (India).

In the first five months of this year, TMK-INOX bought from Dneprospetsstal on DDU Volzhsky (Volgograd region) 767 tons of billets (08Cr18Ni10Ti) at an average price of 3584 USD / ton and from the company VIRAJ PROFILES LIMITED on CIF St. Petersburg 802 tons billets (TR321/08-12H18N10T) at an average price of 3235 USD / ton. The recipient of Ukrainian and Indian pipe billets is "VTZ" (TMK) where the hot-worked  (pressed) tubes are made for cold processing at TMK-INOX in Kamensk-Uralsk (Sverdlovsk region).
After refining process "purely Russian" cold-worked stainless steel tubes, meeting all requirements of supervisory organizations are sent to various customers through Russia.
Subject to the metal yield on two process stages, depending on the size of cold pipes 1200 1400kg billets per ton of finished product are used up.
With this data, each of you can calculate without assistance the approximate cost of production of cold-deformed seamless pipes, taking into consideration that based on the assurances of the producers the cost of metal is about 85% of the cost of production.

I wonder then how high could be release prices for Russian-made pipe?
The fact is that there are no two tubes. Russian and Ukrainian producers mainly focused on the consumers in nuclear engineering, where prices are significantly higher than prices for seamless stainless pipes for general use. In this segment, they will keep their positions as long as there is no permission to use import pipes.
In common segment (GOST 9941) outlook of domestic producers is poor.
Let's have a look at what prices seamless cold-deformed tubes 08-12X18H10T (TR321/1.4541) were imported.

In the period from January to May 2014 shipments and average customs value from the main source natures were as follows:
- Ukraine - 647tn - 14591 USD / t *
- China - 282tn - 3803 USD / t,
- Malaysia - 242tn - 3868 USD / t,
- The Republic of Korea - 104tn - 3158 USD / t,
- India - 59tn - 4712 USD / t *.

* Pay attention to the price of pipes and billets from which they are made of. For Ukraine it’s 4591 USD / ton and 3584 USD /ton and for India - 4712 USD / ton and 3235 USD / ton respectively.

Taking into consideration that the foreign manufacturers of pipes and tubes have being learned to produce pipes on the Russian GOST, it is easy to predict that after the abolition of quotas (even with anti-dumping duty of 19.15% for the PRC) foreign seamless cold-deformed stainless steel pipes and tubes will have a significant price advantage.
And if a lot of flexibility in deliveries and high management skills are added, the conclusion becomes obvious. Where it’s possible (on specification), import tubes and pipes will replace the products of the domestic and Ukrainian producers.