Interpipe pipe sales volume plunges 35% m/m in April

Pipe sales volume at Ukraine’s largest producer
Interpipe (INTHOL) was 29.3 kt in April, a 35.2% m/m fall, according to the
company’s monthly operational report for April released on May 18. Railway
product sales slid 3.4% m/m to 17.7 kt, while external billet sales plunged
62.7% m/m to 2.0 kt. Total sales volume dropped 29.0% m/m to 49.1 kt.

 

The m/m plunge in pipe sales volume in April was
driven by line pipes (-30% m/m to 18.1 kt), OCTG pipes (-46% m/m to 6.2 kt) and
welded pipes (-40% to 3.8 kt).

 

The m/m drop in railway product sales was driven by
sales of wheels (-2% m/m to 15.6 kt) and wheelsets (-30% m/m to 1.5 kt), which
was partially offset by an increase in sales of tyres (0.3 kt in April after
zero in March).

 

During 4M20, Interpipe’s pipe sales dropped 31.9% yoy
to 141.7 kt, driven by a 42.4% plunge for OCTG pipes to 36.4 kt, a 53.6% drop
for welded pipes to 19.2 kt, and a 13.4% drop for line pipes to 80.7 kt.
Railway product sales in 4M20 jumped 20.9% yoy to 75.8 kt, driven mostly by a
19% rise for wheels to 67.1 kt and a 64% jump for wheelsets to 6.9 kt.

 

Interpipe’s share of pipe sales in Ukraine in 4M20
dropped 6pp from 2019 to 19%, and the share of sales in the Americas plunged
14pp to 10%. At the same time, Europe’s share in pipe sales gained 10pp to 34%,
and the share of MENA rose 7pp to 22%. The share of CIS countries in 4M20 rose
2pp to 12%.

 

The share of railway product sales in Ukraine in 4M20
dropped 5pp from 2019 to 17%, while the share of sales to Europe gained 5pp to
31% and the share of sales to CIS countries slid 1pp to 44%.

 

Regarding the production volumes, which might be
indicative of sales volumes in future months, Interpipe’s production of pipes
slid 6.6% m/m to 40.4 kt in April, while railway product output dropped 8.4%
m/m to 17.4 kt. Steel production plunged 30.4% m/m to 54.2 kt.

 

Dmytro Khoroshun: Because of
the recent plunge in oil demand and prices, Interpipe’s monthly pipe sales
volumes in 2Q20-3Q20 are likely to remain depressed, in the range of 25-35 kt,
possibly dropping to 20 kt for some months. This will be a 30-60% drop in
comparison to 50 kt per month on average in 2019.

 

The profitability of Interpipe’s railway product
segment likely will also decrease, for two reasons. Firstly, the railway wheel
prices for exports from Ukraine had likely peaked in 4Q19, and these prices might eventually drop 35-45% during the next several
quarters from their end-2019 levels. Secondly, the 34.22% duty on imports of
railway wheels from Ukraine into Russia, which has been temporarily suspended since
3Q19, will likely be
reinstated from June 1. This will further cut the profitability of Interpipe’s
sales of railway products.