Annual Report 2013

Development trends

For the full year 2014, we observe an increase in demand in the Russian pipe market mainly due to higher consumption of oil and gas pipe grades. In particular, as a result of horizontal drilling growth and further development of unconventional oil and gas reserves, we expect increasing demand for high quality TMK UP connections, uniquely designed to meet specific drilling applications.

In the U.S. we expect further improvements in drilling efficiencies throughout 2014, as well as in the percentage of horizontal and directional rigs relative to total rig count, which as of the end of 2013 amounted to 75% of total rig count. Both trends combined with the recent uptick in average rig count, point towards slight gains in OCTG consumption during 2014. Given the preliminary decision of the U.S. Department of Commerce concerning the OCTG trade case, we do not anticipate an improvement in OCTG prices during 2014.

The environment in the European pipe market, which is going through a lasting recession, will remain largely unchanged in 2014 compared to 2013.