TMK Says Investor Sell-Off Following U.S. Ruling Was Unjustified

OAO TMK, the largest steel-pipe maker by output, said a decline in its stock following a U.S. decision not to impose dumping penalties on South Korean competitors was unjustified.

TMK’s depositary receipts fell 13 percent in London trading yesterday after the U.S. Department of Commerce issued a preliminary decision that it wouldn’t penalize shipments of welded pipes from the East Asian country.

“Investors overreacted,” TMK Senior Vice President Vladimir Shmatovich said today by telephone from Moscow. “The decision of the watchdog is a bit disappointing, but it’s not final yet. Even if it’s confirmed, our U.S division will improve its performance this year.”

The U.S. ruling, which imposed anti-dumping duties on imports from eight other countries, came after the market closed on Feb. 18. The Commerce Department may make a firm decision in July, before the U.S. International Trade Commission issues a final judgment by Aug. 21. A trade complaint was filed by U.S. Steel Corp. and other domestic producers on Dec. 18.

South Korean deliveries account for 25 percent of U.S. imports of oil-country-tubular-goods, or OCTG, pipes, according to Morgan Stanley data. Shipments from the Asian nation compete with supplies from U.S. Steel and TMK’s U.S. division. U.S. Steel shares fell 7 percent yesterday.

“Our U.S. welded-pipes business generates less than half of the division’s profit and we see ways to improve its margins by cutting costs and changing logistics,” Shmatovich said. TMK sells as much as 900,000 metric tons of welded pipes a year in the country and about 400,000 tons of seamless pipes, including about 180,000 tons of pipes with premium connections, he said.

“Our Russian business is absolutely stable and generates more than 80 percent of consolidated Ebitda,” or earnings before interest, taxes, depreciation and amortization, he said.

TMK fell 0.6 percent to 89.86 rubles in Moscow trading as of 12:49 p.m. local time.

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