Severstal acquires 20% stake in construction pipe plant, strengthening position in domestic and export markets

PAO Severstal, one of the world's leading vertically integrated steel and mining companies, announces that it has received permission from the Federal Antimonopoly Service of Russia (FAS) to acquire a 20% stake in LLC Production Association Nizhne-Volzhsky Pipe Plant (NVTZ), a large pipe enterprise located in Volzhsky in the south of Russia. NVTZ currently covers 60% of the construction pipe market in the Southern Federal District. The transaction is expected to be completed within the next month.

In April 2020, Nizhne-Volzhsky Pipe Plant combined the capabilities of three manufacturers of small and medium diameter pipes in the Southern Federal District of Russia: TK Profile-Akras, PC DIA and VTPZ. Today the production site includes 17 pipe-electric welding mills with a total annual capacity of over 600 thousand tons of products. NVTZ steel pipes are suitable for water and gas supply, construction of prefabricated buildings and greenhouses, building playgrounds, park areas and other urban infrastructure, furniture, and other applications. The transaction strengthens Severstal's position in the domestic market for small and medium diameter pipes, and significantly expands the Company’s export markets for pipes into the CIS countries. Previously, Severstal’s key markets were Central and North-West Russia. The acquisition of a stake in NVTZ will enable the Company to establish a presence in the Southern Federal District, as well as start supplying small and medium-diameter g/c and x/c pipes to the Central Asian market. NVTZ already supplies products to CIS countries including Kazakhstan, Azerbaijan, Kyrgyzstan, Uzbekistan and Armenia.

Alexander Shevelev, CEO of Severstal, commented:

"The acquisition of a stake in the NVTZ Production Association is fully in line with Severstal’s strategy of finding reliable partners and expanding our product portfolio, while increasing the share of higher-margin products and providing a superior customer offer. This partnership will enable us to expand our range of small and medium diameter pipe products and complements the investment programme at the Cherepovets Steel Mill’s rolling Mill, which has improved the quality of rolled metal. In addition, we will be able to access new sales markets supported by NVTZ’s well-established supply chains."

Yevgeny Chernyakov, Director, Sales and Business Development, Building and Construction Sector of Severstal, commented:

"This exciting development is the result of a long-term and successful collaboration between Severstal and NVTZ. This partnership began when we produced our first pipe for the domestic market in partnership with Akras DIA pipe plant, which later became part of NVTZ. With this new deal, we will work together to develop the Russian market for small and medium diameter pipes. By combining three decades of experience in manufacturing pipe products at NVTZ’s enterprises and the power of our partnership to deliver modern sales and product delivery schemes, optimal and efficient production chain management, and quality control, we see strong potential for success".

Maxim Zimovets, General Director of Production Association Nizhne-Volzhsky Pipe Plant, LLC, commented:

"The addition of one of Russia’s leading metallurgical companies, Severstal, to the NVTZ partnership will enable us to continue to develop our opportunities and remain the first-choice supplier of pipes for our customers. As a result of this partnership, NVTZ will have access to modern management and high-quality systems, including in occupational safety, since Severstal is now an industry leader in this area. In addition, by partnering with the largest manufacturer of rolled steel, NWTZ will be able to expand our offering of small and medium diameter pipes for our customers at competitive prices, guaranteeing the availability of high-quality products, regardless of the market situation. This partnership strengthens our company’s position as the leading manufacturer of small and medium diameter pipes in the south of Russia and the largest exporter of MSD pipes in the CIS market."