Gazprom seeks discounts from pipe manufacturers

Gazprom "bent" suppliers of large diameter pipes for a 20% discount. Due to what now the main owner of the Pipe Metallurgical Company Dmitry Pumpyansky will finish building his 100-meter yacht Project Blade?
 The owner of the gas transportation system of Russia and the largest consumer of large-diameter pipes - Gazprom - is seeking a 20% discount from the pipe companies for their products. This was told by four people close to the different sides of the talks.

One interlocutor says that the decision has already been made and all pipe manufacturers agreed to give a discount. Two argue that today in St. Petersburg this issue was discussed between the top managers of Gazprom and the pipe companies, but no final decision has been made. Another person says that Gazprom's position is clear: "The discount to the current price should be 20%, and the decision must be agreed before the end of the week."

In Russia, four major pipe manufacturers - Severstal, TMK, OMK and ChTPZ. In addition to them, trader "Pipe Innovation Project" (TIT) takes part in tenders of Gazprom. Gazprom annually buys pipes from them for several tens of billions of rubles. In total, since 2014, the gas monopoly has spent about 400 billion rubles on LDP. Recently, another participant in the market - the Zagorsky Pipe Plant, built in 2015 - received the right to supply its products for construction of new gas pipelines.

 Representatives of Severstal, TMK and Gazprom did not comment on the situation. The representative of ChTPZ declined to comment, and the representative of OMK could not be contacted.

On April 19, 2016, Gazprom completing a tender for the purchase of 501,600 tons of pipes. The total value of contracts amounted to 56.8 billion rubles. Most of the order was received by OMK Anatoly Sedykh: 30% of the purchase by 17.2 billion rubles. TIT Ivan Shabalov won contracts for 16.5 billion rubles, ChTPK Andrew Komarov - 11.6 billion rubles., TMK Dmitry Pumpyansky - 5.7 billion rubles. and Severstal Alexei Mordashov - to 5.6 billion rubles.

Pipes were purchased for the construction of a land section of the North European Gas Pipeline - a land section on the territory of Russia to the Nord Stream pipeline 2. However, in December 2017, Gazprom found the cost of pipes inflated and terminated all contracts.

 Gazprom intends to cut prices for large diameter pipes, the reason and catalyst for this could be the emergence of a new player in the pipe market, said a man close to one of the pipe companies. Zagorsky Pipe Plant in July began to supply pipes to Gazprom. He offered a discount to current prices of 13-15% and promised to further increase the discount to 20-25%. The plant has a contract with the state-owned company for 112,000 tons, it can produce 500,000 tons per year.

Pipes really increased in price significantly over the past three years. For example, in October 2014, a ton of pipes with a diameter of 1420 mm with a wall thickness of 15.7 mm with plugs cost only 64,000 rubles. (with VAT), and in 2017, a ton of the same pipes rose in price to 102,614 rubles. It follows from the purchase documentation of Gazprom.

TMK owner Dmitry Pumpyanskiy is building a 100-meter yacht Project Blade worth more than 100 million euros at a shipyard in Turkey. Given that the Pipe Metallurgical Company is burdened with a debt of 2.6 billion dollars, it is not clear whether the oligarch will now have enough money for its completion.