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TMK Announces Production Results for the First Quarter of 2008

OAO TMK (“TMK” or “the Company”), one of the world’s largest pipe producers, today announces its production results for the 1^st quarter of 2008. TMK shipped 707 thousand tonnes of pipes, which is 8% less than in the 1^st quarter of 2007. Despite an 8.5% decrease in demand for pipes at the Russian market in the Q1 of 2008, the Company managed to increase its Russian market share to 25.7% up from 24.8% in Q1, 2007. This growth was due to an increase in supplies of line pipes, including anticorrosion-coated, both seamless and welded line pipes by 7% and 43% respectively. Oil and gas industry, which is now experiencing the shift to oil and gas production in challenging geological conditions, has shown greater demand for such pipes. The demand for such tubular goods in the CIS also enabled the Company to increase its shipments of seamless line pipes by 16%.

In Q1, 2008, TMK continued implementing its Strategic Investment Program, aimed at increasing production volumes of higher value-added tubular goods, improving product quality and reducing costs. The scheduled shutdown of obsolete Pilger mills to be replaced by the state-of-the-art PQF rolling mill at Tagmet rendered significant impact on seamless pipe sales volumes. The Q1 2008 sales volumes of seamless pipes decreased by 7% compared to the Q1 2007 figures and amounted to 485 thousand tonnes. However, commissioning of the new 600 000 tpa high-tech PQF mill scheduled for the 3d quarter of 2008 will enable TMK to enter the market with new products of a higher quality, including Premium connections, and to increase its seamless pipe shipment volumes at year end. Moreover, in Q1 of 2008, despite a 6% decrease in OCTG shipments, the Company continued increasing shipment volumes of drill and tubing pipes by 40% and 2% respectively versus Q1, 2007 figures. 

Delays associated with the implementation of large-scale pipeline projects, such as “Eastern Siberia – Pacific Ocean Pipeline” resulted in a decline of the Russian large-diameter pipe market. This situation remains favorable for TMK, as in the Q3 of 2008 the Company is going to launch its new welding mill producing longitudinal large-diameter pipes with up to 42 mm wall thickness, which will significantly enhance TMK’s competitiveness and readiness prior to the launch of large-scale pipeline projects.

Meanwhile, respective TMK’s shipments in the Q1 2008 decreased by 12% amounting to 222 thousand tonnes. Nevertheless, in March, 2008, the Company increased large-diameter pipes sales by 10% versus February. For the first time ever TMK shipped a 10 thousand tonnes batch of large-diameter pipes to Turkmenistan under the contract signed with “Turkmenneft”, the leading oil company in the country. Additionally, the Company started shipping its large-diameter pipes to the Nord Stream pipeline project.