Argentine giant vies for RI seamless pipe venture

By Riyadi

CAMPANA, Argentina (JP): Siderca SAIC of Argentina, one of the world's largest producers of seamless pipes, is looking to set up a joint venture with Indonesia's Bakrie Group in order to penetrate the East Asian market.

A memorandum of understanding was signed on Saturday for the integrated production of seamless pipes in Indonesia.

The agreement was signed by their respective presidents, Aburizal Bakrie of the Bakrie Group and Paolo Rocca of Siderca.

"We agree to strengthen our current strategic alliance and hopefully we will be able to upgrade our current cooperation into forming a joint venture," Aburizal said at Siderca's headquarters in Campana, 100 kilometers north of Buenos Aires.

The venture will expand on their current arrangement, in which the Argentinean company gives technical assistance to Seamless Pipe Indonesia Jaya (SPIJ), a subsidiary of the publicly-listed Bakrie & Brothers.

SPIJ commenced commercial production in 1993 at its plant in Cilegon, West Java. It imports US$20 million a year in unfinished seamless tubes from Siderca and puts the finishing touches on the tubes before selling them to its consumers, mostly oil and gas firms in the region.

"This cooperation is important for us because we want a backward integration of our industry toward building a hot mill to produce seamless tubes," Aburizal said.

The $300-million finishing plant in Cilegon has an annual production capacity of 150,000 tons of seamless pipes. However, the plant runs at only one-third of its total capacity because of a limited market.

Aburizal explained that SPIJ cannot compete in the region because it still imports unfinished seamless tubes from Argentina, which incurs high freight costs.

SPIJ hopes to put an end to its losses and break even by next year.

"When we have our own hot mill we will be able to run our mills more efficiently and compete in the global market," Aburizal said, adding that some $250 million will be invested in the hot mill.

Rocca said his company wants to make Indonesia its main base in East Asia to challenge the regional domination of Japanese seamless pipes producer Sumitomo.

"We already supply the market. However, the closer the market to Japan, the less we can penetrate the market, and we think that the Cilegon plant could be a platform to serve the region," Rocca said.

Siderca, together with its affiliated companies -- Dalmine in Italy and Tamsa in Mexico -- controls the largest market share of the world's seamless pipes trade with 23 percent, followed by Mannesmann 19 percent and Sumitomo 12 percent.

Siderca, Dalmine and Tamsa had combined seamless pipes exports of 1.3 million tons last year, of which 29 percent went to European and former Soviet Union countries, 21 percent to countries in the Middle East, 19 percent to Latin American countries, 11 percent to the United States, 9 percent to China, 8 percent to Africa and 6 percent to East Asia, excluding China.