Interpipe wheel sales volume plunges 46% m/m in June

Railway product sales volume at Ukraine’s largest
producer Interpipe (INTHOL) was 10.6 kt in June, a 42.8% m/m plunge, according
to the company’s monthly operational report for June released on July 20. Pipe
sales inched up 4.8% m/m to 48.9 kt, while external billet sales jumped 66.1%
m/m to 5.4 kt. Total sales volume slid 5.2% m/m to 64.9 kt.

 

The m/m plunge in railway product sales was driven by
sales of wheels (-46.4% m/m to 8.6 kt).

 

The m/m gain in pipe sales volume in June was driven
by mechanical pipes (2.1x m/m to 2.5 kt), welded pipes (+8.6% m/m to 9.5 kt) and
OCTG pipes (+9.7% m/m to 4.3 kt).

 

During 1H20, Interpipe’s pipe sales dropped 25.4% yoy
to 236.8 kt, driven mostly by a 55.8% plunge for OCTG pipes to 44.6 kt and a
33.1% drop for welded pipes to 37.4 kt. Railway product sales in 1H20 gained
8.5% yoy to 104.5 kt, driven mostly by a 5.0% rise for wheels to 91.3 kt and a
52.4% jump for wheelsets to 10.4 kt.

 

Interpipe’s share of pipe sales in Ukraine in 1H20
dropped 8pp from 2019 to 17%, and the share of sales in the Americas plunged
12pp to 12%. At the same time, Europe’s share in pipe sales gained 8pp to 32%,
and the share of MENA rose 9pp to 24%. The share of CIS countries in 1H20 rose
2pp to 12%.

 

The share of its railway product sales in Ukraine in
1H20 dropped 7pp from 2019 to 15%, while the share of sales to Europe gained
8pp to 34% and the share of sales to CIS countries slid 2pp to 43%.

 

Regarding production volumes, which might be
indicative of sales volumes in future months, Interpipe’s pipe production slid
2.2% m/m to 39.4 kt in June, while railway product output plunged 30.7% m/m to
12.2 kt. Steel production was flat m/m in June at 60.3 kt.

 

In the highlights section of its report, Interpipe
noted that its railway product sales dropped drastically m/m in June following the reintroduction of a 34.22% anti-dumping duty
in Eurasian Economic Union (EAEU) from June 2. The railway product sales to the
EAEU in June was over 13x smaller m/m, according to the report, which was
partially offset by an increase in sales to other CIS countries and by sales in
Ukraine.

 

Dmytro Khoroshun: The
Russian/EAEU market was essentially closed for Interpipe’s railway products in
June, and a plunge of the profitability of the company’s railway product
segment remains a significant risk going forward.

 

Namely, the 26% drop in railway product
prices exported from Ukraine during 4M20 might be
exacerbated by Interpipe’s efforts to redirect its wheel sales volumes away
from the EAEU and further depress Interpipe’s profitability from its sales
outside the EAEU in 2H20.