* Gazprom slashes large-diameter pipe buys
* OMK, ChelPipe rely heavily on LDP, gasp for new orders-analyst
* Gazprom sees its LDP demand flat in 2013-2014
By Alexei Anishchuk
MOSCOW, July 20 (Reuters) - Russia’s manufacturers of steel pipes will lose a big chunk of sales this year after their main customer Gazprom decided to slash purchases of tubes for its gas pipeline projects.
The decision to reduce purchases was widely expected by market players, an industry source said, but the scale of the cuts still came as a surprise. It has compounded the negative effects of a slump in global steel demand.
Gazprom’s cutbacks will make life particularly tough for ChelPipe, the smallest of the pipe makers, while losing such high-margin business could also squeeze TMK , the biggest steel pipe producer for the country’s energy sector.
State-controlled Gazprom told the steel pipe industry last month that it would cut purchases of large-diameter pipes (LDP) by 40 percent to about 1.4 million tonnes this year, due to uncertainty over some projects.
Gazprom’s stalled talks on the development of the Arctic Shtokman gas field with its partners — French company Total and Norwegian group Statoil — have delayed pipe purchases for the project.
The Russian gas export monopoly will also halt purchases for its 2,200-kilometre Yakutiya-Khabarovsk-Vladivostok pipeline and 900-km Severo-Yeniseisky pipeline until 2014.
Gazprom revealed the cuts at a meeting in Chelyabinsk in June, saying it would scale back purchases after completing the first phase of its Nord Stream pipeline to export gas to Europe under the Baltic Sea.
Also, North America’s shale gas boom has propelled the United States past Russia as the world’s largest gas producer, depressing prices and putting pressure on the oil-price link that has underpinned Gazprom’s long-term export contracts.
Last year, the three Russian steel pipe makers had combined sales of roughly $13 billion, the lion’s share coming from Gazprom and oil pipeline monopoly Transneft, both of which have ambitious long-term plans to expand export pipeline routes.
Gazprom’s cuts have been a blow to ChelPipe, whose shares have fallen by more than half this year to value the company at just $400 million.
At TMK, Russia’s largest maker of steel pipes for the energy sector, LDP shipments have fallen by 43.4 percent in the first six months of 2012 in annual terms.
But it partly made up for the loss with the exports to the former Soviet Union in the first quarter, its spokesman said.
The company cut its overall pipe output by 2.8 percent in the first half of 2012, while it has achieved a 3.2 percent ramp-up in the shipments of seamless pipes, its main product.
But shrinking demand for LDP, which accounts for 10 percent of TMK’s sales, was the main downward driver in the first half of the year, the company said in its 2012 first half update.
TMK will continue to feel margin pressure from the reduction in LDP orders, Viktoria Bogomolova from Uralsib brokerage said.
“In the sluggish steel market pipe makers fight for every additional percentage of margin, and losing such a high-marginal share of business as LDP will not benefit TMK,” Bogomolova said. “But the company was prepared for that and is coping.”
TMK said it expected total shipments of its pipes to remain flat in 2012 year-on-year.
Its shares have gained 29 percent in 2012 to value the firm at $2.8 billion.
Unlisted United Metallurgical Company (OMK), another of the steel pipe groups, delivered roughly 30 percent of the 6 million tonnes of pipes it produced in the past seven years to Gazprom. It will now concentrate on other segments such medium and small-diameter pipes and railway wheels to make up for the loss.
“We have a diversified metallurgical production, which allows us to produce competitive products in various segments,” OMK President Vladimir Markin told Reuters.
“The correction of terms of fulfilment of major projects is an existing practice, and we perceive these LDP purchase plans by Gazprom as normal,” he said.
But OMK, as well as its peer ChelPipe, relies heavily on LDP production, and both will be hit hard by the Gazprom decision, Bogomolova from Uralsib said.
“For OMK and ChelPipe the situation is rather critical,” she said. “But there’s nothing they could do, but take it for granted and hope to take part in tenders to get some new orders (from Gazprom) next year.”
But their hopes for a pick up in orders could be disappointed. Gazprom sees its need for LDP flat in 2013-2014 at 1.4 million tonnes per year, the head of Gazprom’s investment and construction department Yaroslav Golko said last month.
A spokeswoman for ChelPipe declined comment.
$1 = 31.98 roubles Writing by Alexei Anishchuk; Additional reporting by Natalia Shurmina in Chelyabinsk; Editing by Douglas Busvine and Jane Merriman