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. Last Updated: 07/27/2016

Alliance Says Pipe Project Is on Track

Steel producer Severstal and the country's leading pipe manufacturer, United Metals Co., or OMK, are 100 days and $45 million into a $300 million plan to produce the biggest pipes in Russia, company officials said Tuesday.

Severstal and OMK last month registered a joint venture, Alliance-1420, to make pipes with a diameter of 1,420 millimeters. Such pipes are used only for gas trunk pipelines, making Gazprom the only potential customer domestically and the main customer globally.

The two companies, each of which owns 50 percent of the venture, plan to increase Alliance's charter capital to $100 million by January 2002, Severstal first deputy director Vadim Shvetsov said at a news conference.

Severstal has contributed to the new enterprise its 5000 mill, the only such mill in Russia capable of producing metal sheets for such large-diameter pipes. OMK has contributed two workshops at its holdings, the Biksunsky Metal Plant and the Chelyabinsk Pipe Plant. Reconstruction of the workshops is in the planning stage, said an OMK spokesman.

Alliance is already producing single-seam pipes with diameters from 508 mm to 1,220 mm. When reconstruction of the mill and workshops is complete, Alliance will have capacity to produce 2.9 million tons of pipes a year, including 860,000 tons of the 1,420-mm diameter pipes. Production of the 1,420-mm diameter pipes should start in 2004.

OMK and Severstal said Alliance's production costs would allow them to competitively price the 1,420-mm diameter pipes. Gazprom currently imports them from Japan, Germany and Italy.

In addition to competition from exports, Alliance could face a dead end if Gazprom favors an alternative plan advanced by the Nizhny Tagil Metal Plant.

"The government has been supporting the Nizhny Tagil project, which requires large investment, including investment from Gazprom," said Mikhail Seleznyov, metals analyst at UFG.

Asked about alternative plans if Nizhny Tagilsk wins the contract, OMK board chairman Andrei Komarov said, "We won't allow that to happen."