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Severstal strikes rolled steel supply agreement with Zagorsk Pipe Plant

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Severstal strikes rolled steel supply agreement with Zagorsk Pipe Plant

PAO Severstal will supply Zagorsk Pipe Plant with 300,000 tonnes of rolled steel in 2019, providing enough sheet for the next six months, Interfax reported Dec. 17.

Under the terms of the agreement, Severstal will supply Zagorsk, also known as ZTZ, with hot-rolled, thick-sheet steel for the production of large-diameter pipes.

The steelmaker provided a third of ZTZ's sheet metal requirements in 2018. Russia's third-largest steelmaker in 2017, PJSC Magnitogorsk Iron & Steel Works, also supplies the Moscow Oblast-based company.

Severstal sold 218,000 tonnes of hot-rolled plate in the third quarter and a total of 642,000 tonnes of hot-rolled plate in the first nine months of 2018. The company booked a net profit of US$455 million for the three-month period.

ZTZ outlined plans in November to increase its production capacity for large-diameter pipes to 700,000 tonnes in 2019, after it won a contract worth 42 billion Russian rubles to sell 500,000 tonnes of steel pipes to Kremlin-controlled PJSC Gazprom for the construction of part of the Power of Siberia pipeline.

The unusually short tender process, which concluded within 26 hours, left other pipe and steel producers on the back foot.

ZTZ, which began producing pipes in December 2015, said it continued to diversify its steel supplies last year and bought small batches of sheet metal from Korean producer POSCO.

Severstal shares finished up 2.30% at 947.88 rubles apiece Dec. 17 in Moscow, while Magnitogorsk closed down 4.64% at 44.56 rubles per share.

As of Dec. 14, US$1 was equivalent to 66.77 Russian rubles.