Interpipe railway product sales jump 39% m/m in December, becomes first Ukrainian steel company to the EU Green Deal targets

By bne IntelIiNews January 22, 2021

The railway product sales volume at Ukraine’s largest producer Interpipe (INTHOL) was 17.1 kilotonnes in December, a 39.0% month-on-month jump, according to the company’s monthly operational report released on January 20. Pipe sales soared 37.2% m/m to 44.1 kt, while external billet sales skyrocketed 5.7x m/m to 4.8 kt. The total sales volume swelled 45.8% m/m to 66.0 kt.

The m/m jump in railway product sales in December was driven by sales of wheels (+54.3% m/m to 15.1 kt), which were partially offset by a drop in wheelset sales (-30.6% m/m to 1.2 kt). 

The m/m rally in pipe sales in December was led by a surge in line pipes (+75.0% m/m to 28.3 kt), driven by a recovery of consumption in key markets, MENA and the US, following the rally of steel commodity prices, the report said. An offsetting factor was a 34.1% m/m drop in welded pipe sales to 4.7 kt, driven by an unfavourable market environment across all regions, Interpipe said. 

Seperately, Interpipe Steel said that it is the Ukraine’s first steel company to meet European Green Deal targets for 2050: its emissions do not exceed 250 kg of CO2 per ton of steel produced.

This producer of steel pipes and railroad wheels in Dnipropetrovsk was built from scratch nine years ago involving $1bn investments. Founded and owned by Viktor Pinchuk, the company made these announcements on the occasion of the arrival of the company’s new CEO, Artem Polyakov.

During 2020, Interpipe’s pipe sales dropped 21.0% year on year to 469.9 kt, driven mostly by a 52.2% plunge for OCTG pipes to 83.2 kt and a 28.0% drop for welded pipes to 80.1 kt. Railway product sales slid 5.4% y/y to 192.4 kt in 2020, driven mostly by an 8.5% loss for wheels to 166.4 kt, and partially offset by a 32.0% jump for wheelsets to 19.5 kt. 

Ukraine's share of Interpipe’s pipe sales in 2020 dropped 3pp to 22% from 2019, and the share of sales in the Americas plunged 13pp to 11%. At the same time, Europe's share in pipe sales gained 5pp to 29%, and MENA's share rose 9pp to 24%. The share of CIS countries in 2020 climbed 1pp to 11%. 

The share of Interpipe’s railway product sales in Ukraine in 2020 slid 8pp to 14% from 2019, while the share of sales to Europe gained 9pp to 35% and the share of sales to CIS countries slid 2pp to 43%. 

Regarding production volumes, which might be indicative of sales volumes in future months, Interpipe’s pipe production inched up 2.5% m/m to 38.4 kt in December, while railway product output jumped 27.6% m/m to 16.5 kt. Steel production gained 11.0% m/m in December to 61.8 kt. 

The y/y decrease in pipe sales in 2020 was driven by a 1H20 drop in oil prices, according to Interpipe’s January 20 press release on yearly operational results. A bright spot was an increase in the company’s pipe sales in the Middle East to customers in Turkey, the UAE and Qatar, the release said. 

Interpipe boosted its railway product sales to Europe by 29% y/y to 67 kt in 2020 by expanding sales of new products in the cargo segment and by entering the passenger segment, in particular, for the high-speed Deutsche Bahn trains, according to Interpipe’s press release. 

“We estimate Interpipe’s railway product sales might slow down further in 2021 by 6-12% y/y to 170-180 kt. This is because in 2020, the company’s average sales volume was 18.8 kt per month in January-May (before the June 2 reinstatement of a 34.22% duty on imports into Russia), but fell to 14.0 kt per month in June-December (including 15.1 kt per month in 4Q20). Even though the 34.22% duty for imports of Ukrainian railway products into Russia is set to expire on January 22, there is a risk it will be reinstated in some form if Interpipe boosts its Russian sales volumes,” an analyst at the Kyiv-based Concorde Capital brokerage said in a research note.

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