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Interpipe disciplined by antimonopoly committee for wheel tenders

Interpipe disciplined by antimonopoly committee for wheel tenders

30 October 2020

Ukraine’s largest pipe and railway wheel producer
Interpipe (INTHOL) was fined UAH 69.3 mln (USD 2.4 mln) by the Antimonopoly Committee
of Ukraine (AMCU), according to the company’s Oct. 29 press release. The AMCU’s
reason for its decision, as cited by Interpipe, was the company’s abuse of its
monopoly position at Ukraine’s market for railway wheels.

 

Interpipe fiercely disagrees with the AMCU’s
conclusions and plans to challenge its decision in the courts, its release
said. Such complaints are filed with the AMCU by Interpipe’s unscrupulous
competitors in order to discredit the domestic producer and to secure supplies
of Russian products to Ukraine, according to the release.

 

The AMCU found four limited liability companies
(Interpipe Ukraine, Retek, Transport Investments, and Intervtorprom Firm)
guilty of distorting tender results, according to the AMCU’s decision published
on its website on Oct. 29. As a result, the AMCU fined these companies more
than UAH 70 mln collectively and barred them from participating in public
procurements for three years, the decision said.

 

The tenders in question (for a total of almost UAH 700
mln) happened in 2018, were all won by Interpipe Ukraine LLC, and the buyers
were branches of Ukrainian Railways (RAILUA), according to the decision. The
AMCU concluded that the four seller companies had common interests and mutual
agreements, and that their competition at the tenders was fictitious, the
decision said.

 

Dmytro Khoroshun: Interpipe
should be able to continue offering, without interruption, the wheels it
produces to Ukrainian Railways via public procurement tenders, even after this
AMCU decision.

 

We think that all it takes is creating another
intermediary company, like the four LLCs in question. Furthermore, Interpipe
should be able to do it in time for the next tender, because it has long been
aware of the AMCU risks and because such tenders are irregular and the next one
might be months away.

 

We also think that Ukrainian Railways replacing, in an
open tender, the volumes of railway wheels it usually procures from Interpipe
with Russian wheels is unlikely in the near future. One reason is that the CIS
wheel markets are only starting to recover from two years of deficits and might
still be far from abundant surplus. Other reasons are politics, as well as the
fact that Russia is imposing a 34.22% duty on imports of Ukrainian wheels
and is reportedly considering banning these imports altogether.

 

In any case, we estimate that Interpipe sells up to 25
kt per year (or 12% of its 2019 total) of its railway products to Ukrainian
Railways, and that a complete loss of these sales volumes will result in a
decrease in EBITDA of up to USD 20 mln per year.

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