4.5.TMK’s Market Position

In 2015, TMK shipped a total of 3,871 thousand tonnes of steel pipe, down 12% year-on-year. This change was due to a considerable drop in sales by the American division amidst the adverse market environment in the USA.

Since 2009, the Company has been the world’s leading producer of steel pipe. The main focus of our business is the production of goods for the oil and gas industry. We own production facilities in countries that account for 81% of global drilling (USA, Russia, the Middle East states, and Canada). Tubular goods for oil & gas industry account for 78% of TMK’s total sales.

We ship a considerable share of our products to Russian oil & gas majors such as Rosneft, Gazprom, Surgutneftegaz, Lukoil, Transneft and Gazprom Neft.

The share of sales to our top five customers grew from 32% of the total sales of TMK’s products in 2014 to 39% in 2015. These changes in the sales structure were due to lower shipments to the US market on the back of weaker demand and adverse pricing environment in the US pipe market. In this context, we were building up our shipments of tubular products to key consumers in Russia. Specifically, Rosneft increased its purchases of OCTG due to higher volumes of exploration and production drilling, while Gazprom’s higher demand for LDP was driven by its efforts to pursue major infrastructure projects and the company’s import substitution programme.

We ship our products to over 80 countries through a geographically diversified network of our dealers and representative offices around the globe. In 2015, the Russian market accounted for 66% of our total revenue, the American market for 22%, and the European market 7%. Our share of sales in the Russian market grew largely due to a considerable rise in demand for LDP, while we shed market share in the USA on the back of low demand for OCTG and an unfavourable pricing environment. The Middle East, Central and South-Eastern Asia accounted for 5% of our revenue. Our geographically diversified assets and sales help us to mitigate risks and uncertainties while taking advantages of the opportunities offered by each market.

Pipe sales by division, thousand tonnes

	RUSSIAN DIVISION			AMERICAN DIVISION			EUROPEAN DIVISION
	2015	2014	Change, %	2015	2014	Change, %	2015	2014	Change, %
TOTAL, INCLUDING	3 252	3 198	2	440	1 019	–57	178	185	–3
seamless pipe, including	2 004	2 014	–1	227	361	–37	178	185	–3
seamless OCTG	1 108	1 128	–2	218	317	–31	—	—	—
welded pipe, including	1 249	1 184	5	213	658	–68	—	—	—
large diameter pipe	636	468	36	—	—	—	—	—	—