Interpipe to face higher duties on pipe exports to US

Ukraine’s largest pipe producer Interpipe (INTHOL)
might face an increase of anti-dumping duty on imports of its OCTG pipes into
the US to 30.19% from 7.47%, according to a preliminary review by the US
Department of Commerce (DoC) dated Aug. 2 and published on Aug. 9. The final
review should be issued within 120 days.

The US also will introduce a 23.75% duty on imports of
standard, line and pressure seamless pipes from Ukraine, according to the final
determination by the DoC dated June 25 and published on July 2. The decision to
introduce this duty might be made by Aug. 9, or 45 days from the final decision
date, according to Interfax-Ukraine.

Interpipe already pays a 25% section 232 duty on all of
its steel exports to the US, and the additional 23.75% duty on line and other
pipes make the total trade barriers prohibitive for Interpipe’s sales into the
US, according to an interview by Interpipe’s first deputy CEO Denis Morozov to
Metal Expert as cited on Aug. 10 by Interfax-Ukraine.

In 2019, Interpipe sold 133 kt of pipes into the US
(11.1 kt per month, or 22% of its total pipe sales and 93% of its pipe sales
into the Americas region).

In 1H21, Interpipe sold 35.4 kt of pipes (5.9 kt per
month, or 15% of its total pipe sales) into the Americas, we calculate from the
company’s operational update. In 2020, Interpipe sold 51.7 kt of pipes into the
Americas (4.3 kt per month, or 11% of its total pipe sales).

The EBITDA of Interpipe’s pipe segment (after
reallocation from its steel segment) amounted to USD 15.2 mln in 1Q21, with
about USD 15 mln due to the release of provisions.

Dmytro Khoroshun: The
increases of the US duties are negative for Interpipe.

The profitability of the company’s pipe segment in
1Q21 was already depressed (zero EBITDA after adjusting for provisions
release). In 2Q21, Interpipe’s performance might improve because of its passing the recent input cost inflation onto its customers,
but the duty increases for pipe exports to the US will weigh negatively in
2H21, we expect.