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TMK is the largest Russian producer of steel pipes, primarily for the oil and gas industry. Its products are casing and tubing, which are used to complete wells, and large-diameter line pipes. The shares trade on the Moscow Exchange under the ticker TRMK.
Demand for pipes comes not from the consumer but from drilling: the more wells oil companies start, the more pipes they need. The company's results are therefore determined by the capital spending programmes of oil and gas companies — a quantity it has no influence over and learns about in advance.
Within the product range there is an important distinction. Plain pipes are almost a commodity, where producers compete on price. Oil country tubular goods with premium threaded connections are a complex product: they operate in wells with complex geometry and an aggressive environment, and there customers pay for quality, not per tonne.
Production cost is determined by the price of steel billet, which the company partly produces itself and partly buys.
Casing and tubing with premium connections for wells.
Products for trunk oil and gas pipelines.
Products for mechanical engineering, power generation and construction.
Strengths and weaknesses describe the business itself. Opportunities and threats describe what may happen around it.
The company produces steel pipes: casing and tubing for oil and gas wells, large-diameter pipes for trunk pipelines, and also industrial pipes.
These are the pipes used to complete a well: casing holds its walls in place, while tubing lifts the oil to the surface. They work under pressure in an aggressive environment, which is why special requirements are imposed on them and the connections are made premium.
On the volume of drilling. The more wells oil and gas companies start, the more pipes they buy. A pipe maker's results are therefore determined by the capital spending programmes of its customers, not by consumer demand.