7 November 2013
NLMK and OMK renew contract for slabs used in large diameter pipe production
NLMK Group (LSE: NLMK), Russia’s largest steelmaker, and OMK Group, Russia’s leading pipe manufacturer, signed a new Agreement on long-term cooperation renewing the contract for the supply of slabs until and inclusive of 2016. These slabs will be rolled into plates at the new Vyksa Steel Works (VMZ) Mill-5000 (MKS-5000) to be further used for the production of large-diameter pipes.
The Agreement was signed by NLMK Group President Oleg Bagrin and OMK Group President Vladimir Markin, on 7 November at the Vyksa Steel Works as part of a ceremony to mark the supply of the half-millionth tonne of slabs from NLMK to VMZ. The companies signed the initial contract in 2012.
According to the Agreement, in 2014-2016 NLMK will supply Vyksa Steel Works with approximately 2 million tonnes of slabs with superior chemical composition and steel structure standards, and in dimensions that are unique for the Russian market.
NLMK slabs will be rolled into wide plates at the VMZ Mill-5000 to be further used for the production of large-diameter pipes at the VMZ Electric-Weld Pipe Workshop No. 4. Launched in 2011, VMZ Mill-5000 supplies the plant’s large-diameter pipe production capacities with 4.85 m wide plates.
Deliveries to OMK’s Vyksa plant form a substantial part of NLMK’s total third-party sales of slabs. Between the launch of the VMZ Mill-5000 in November 2011 and September 2013, approximately 460,000 tonnes of plates were produced from NLMK slabs.
Cooperation between NLMK and OMK allowed replacing imported plates, significantly improving OMK’s logistics and production processes, and ensured a consistently high quality of products for oil and gas companies through end-to-end monitoring of all production stages. The Agreement plays a strategically important role in the process of replacing imported HVA products, namely pipes and substrate required for their production, by high-quality domestically produced goods.
“The launch of the VMZ Mill-5000 and our partnership with NLMK Group created a large-scale sustainable process flow for the Russian ferrous steelmaking industry, from the production of steel to rolling plates and manufacturing large-diameter pipes. Cooperation with NLMK supports our certainty in the quality and promptness of our deliveries, and our ability to execute the most complex orders in time,” said OMK Group President Vladimir Markin.
“Our cooperation started in August last year, and allowed resolving an important challenge, i.e. eliminating the dependency of Russian pipe manufacturers on imported plates. A hi-tech chain was set up for the production of large-diameter pipes, from ore extraction through steelmaking to pipe manufacturing. This was made possible through multi-billion investments into technical upgrading by NLMK and OMK. I am convinced that our further cooperation will become an important step in the development of the entire industry, strengthening OMK’s leadership in the global pipe market and making NLMK Group the largest supplier of steel products for the pipe sector,” said NLMK Group President Oleg Bagrin.
In 2012 and 2013, VMZ produced 1,285 million tonnes of large-diameter pipes. These products went towards Russian and international pipeline projects, including Gazprom’s Bovanenkovo-Ukhta and Ukhta-Torzhok, Transneft’s Zapolyarye-Purpe, and the construction of the third stage of the Central Asia-China gas trunk line, etc.
About the companies
United Metallurgical Company (OMK) is one of Russia’s largest producers of pipes, railway wheels and other steel products for energy, transport and industrial companies.
OMK unites six large metallurgical enterprises: Vyksa Steel Works (Nizhny Novgorod region), Almetyevsk Pipe Plant (Tatarstan), Trubodetal Plant (Chelyabinsk region), the Casting and Rolling Complex (Nizhny Novgorod region), Blagoveshchensk Valve Plant (Bashkortostan) and OMK Tube plant (Texas, USA).
The key buyers of OMK’s products are major Russian and foreign companies: Gazprom, Russian Railways, Lukoil, AK Transneft, Surgutneftegas, Rosneft, TNK-BP, ExxonMobil, Royal Dutch/Shell, General Electric and Samsung. OMK’s products are delivered to 30 countries worldwide.
OMK’s Chairman of the Management Board is Anatoly Sedykh; President of the company is Vladimir Markin.
NLMK Group is a vertically integrated steelmaking company, and Russia’s leading manufacturer of steel and HVA rolled products. NLMK Group’s high-quality steel products are used in a variety of industries, from construction and machine-building to the manufacture of power generation equipment and offshore windmills.
In 2013, NLMK successfully passed an audit conducted by Det Norske Veritas (DNV), a Norwegian certification agency, to become a potential supplier of slabs for large-diameter pipe manufacturing for the Nord Stream Extension Project (NEXT).
NLMK’s production facilities are located in Russia, Europe and the USA. The Company’s crude steel capacity is over 17 million tonnes per year, of which approximately 16 million tonnes in Russia. The Company generated US$ 12.2 billion in revenue and US$ 1.9 billion in EBITDA in 2012. NLMK’s ordinary shares are traded on the Moscow Stock Exchange (MICEX-RTS) and its global depositary shares on the London Stock Exchange.