Japan objects to Russia's new pipe import tax

Eric Watkins
Senior Correspondent

LOS ANGELES, Nov. 27 -- Japan has objected to a decision by Russia to impose an 8% import duty on Japanese-made steel pipe. Nippon Steel, JFE, and Sumitomo Metal Industries are the manufacturers primarily affected.

"Japan expresses deep regret for Russia's decision to take such a protective measure," said Japanese Economics, Trade, and Industry Minister Akira Amari in a statement released Nov. 25.

He said Japan might call on Russian authorities to cancel the 3-year tax measure to be imposed starting Dec. 18, reportedly to protect Russia's industry from the rapidly increasing growth of imported pipe from Japan.

Russia's import of Japan-made pipes increased to 270,000 tonnes in 2004 from 3,000 tonnes in 2002, mainly due to the implementation of large-scale oil and gas development projects on Sakhalin Island, where the last batch of pipe for the Sakhalin-2 pipeline was delivered Oct. 1.

Pipe demand growing
The Russian tax coincides with efforts of pipe mills in both countries to increase output to match international demand, especially for natural gas pipelines.

In mid-November, Alexander Deineko, head of the Russian Pipe Industry Development Foundation, said investment in his country's pipe industry could total $1.5 billion during 2006-10.

He said investment in modernization and refitting capacity had reached $1.5 billion over the past 5 years, and he expects the same amount to be invested in the next 5 years.

Deiniek based his forecast on output from four major pipe mills—Izhora, Volzhsky, Vyksa, and Chelyabinsk—and on the smaller Seversky, Sinara, and Taganrog mills, where capital expenditure reportedly would be less.

The sector's main investors, Deiniek said, are traditional partners, such as Shell, Mannesmann, Danieli, and Voest-Alpine, with whom long-term relations have been established.

On Oct. 31, Japan's Nippon Steel Corp. announced plans to mass-produce high-strength pipe, starting in March 2008, based on its projections of increased demand for gas pipelines in frigid and deepwater environments.

To meet that projected demand, Nippon Steel said it would invest 4 billion yen at its Kimitsu Works in Chiba Prefecture, adding a production line for pipe to be used mainly for gas transportation.

Nippon Steel said it would add welding facilities and automatic measuring devices to the Kimitsu Works, where production capacity will reach 500,000 tons/year.

Contact Eric Watkins at hippalus@yahoo.com.

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