Gazprom and pipe producers switching to contracts with price formula
The Gazprom headquarters hosted a regular meeting moderated by Alexey Miller, Chairman of the Company's Management Committee and devoted to pipe products cost optimization and organization of their deliveries.
Taking part in the meeting were Deputy Chairmen and Members of the Gazprom Management Committee, heads of the Company's specialized structural units and subsidiaries as well as Ivan Shabalov, Chairman of the Pipe Producers Association Coordinating Council, Anatoly Sedykh, Chairman of the United Metallurgical Company Board of Directors, Dmitry Pumpyansky, Chairman of the Pipe Metallurgical Company Board of Directors, Andrey Komarov, a shareholder of the Chelyabinsk Pipe Rolling Plant and Dmitry Goroshkov, Marketing and Sales Director of the Severstal Russian Steel Division.
The meeting participants have coordinated the price formula to be applied when concluding contracts for pipe products supply, primarily large diameter pipes (LDP).
The LDP price formula will take account of:
- the price quotations for metallurgy raw materials (iron-ore concentrate, coking coal and scrap steel);
- the behavior of prices for steel sheets and large diameter pipes;
- the index measuring changes in prices for the industrial commodities sold in Russia by manufacturers.
Variations in the indicators constituting the price formula will be tracked on the basis of data obtained from the Economic Development Ministry of the Russian Federation and specialized information agencies (in particular, Steel Business Briefing and Metal Bulletin Research).
The meeting participants agreed on the conclusion of mid-term (one to two years) and long-term (over two years) contracts for LDP supply based on the price formula starting from January 1, 2012. The formula covering other pipe products is scheduled for completion by the end of 2012.
“Switching to the contracts based on the price formula means the transparency, predictability and mutual benefit of the long-term cooperation between Gazprom and Russian pipe manufacturers,” said Alexey Miller.
In April 2011, following the meeting of Alexey Miller, Chairman of the Gazprom Management Committee and heads of Russia's leading pipe companies, a task was given to develop the price formula applicable when concluding long-term contracts for supplying gas products. Accordingly, the working group was formed. The group was headed by the experts from the Pricing and Economic Expert Analysis Department and included the representatives from Gazprom komplektatsiya, the Pipe Producers Association as well as domestic pipe and metals companies.
The formula will be valid while the conclusion of long-term contracts for supplying pipe products by Gazprom and the following domestic companies: the United Metallurgical Company, the Pipe Metallurgical Company, the Chelyabinsk Pipe Rolling Plant and Severstal (Izhora Pipe Mill).