Sumitomo Metals Completes Production Capacity Expansion for Super High-end Products of Seamless Pipes

Sumitomo Metal Industries, Ltd. (Sumitomo Metals) has completed expansion work to add production capacity for high-end seamless pipes, at Steel Tube Works in Amagasaki and Wakayama Steel Works, both of the Pipe & Tube Company of Sumitomo Metals. Operations began in the end of June 2008. Capacity for seamless pipes has been increased by 100,000 tons (9%), particularly for high-margin, distinctive "super" high-end products such as super high-alloy and 13% Cr OCTG* pipe. This is in line with one of our medium-term business objectives to "accelerate distinctiveness."

1.Background
On the back of economic development of BRICs and other countries, global demand for energy has been growing and demand for seamless pipes used for exploration of oil and natural gas reserves, has continued to be at a high level. Furthermore, in recent years, in many parts of the world there has been a shift of the focus in energy demand from oil to natural gas, due to increasing need to reduce emission of greenhouse gases such as carbon dioxide. Natural gas is usually found in an extremely severe environment for wells -- at a few thousand meters below the surface of the ground, that is, much deeper than oil wells, and is often associated with highly corrosive gases.
Responding to customer requirements and those of major oil companies in particular, Sumitomo Metals decided to expand capacity for producing high-end seamless pipe for use in those severe environments in 2006. The construction at Steel Tube Works in Amagasaki and Wakayama Steel Works, both of the Pipe & Tube Company, had proceeded since then.

2. Overview of the Investment
(1) Scope of capacity expansion
   [Wakayama Steel Works]
A)Pipe production: Measures to improve its capacity utilization rate, such as shortening downtime by quicker tooling change for Medium-size Seamless Pipe & Tube Making plant
B)Heat treatment: Increased heat treatment capacity for small-diameter pipes
C)Threading: Increased threading capacity
D)Increased finishing line capacity for 13% Cr OCTG

  [Steel Tube Works (Amagasaki)]
A)Increased finishing line capacity for super high-alloy OCTG

(2) Investment amount: 35.0 billion yen

(3) Construction period: June 2006 to June 2008

3.Future Developments
Sumitomo Metals and the Vallourec Group have established a joint venture to operate an integrated blast furnace and seamless pipe production in Brazil. From mid-2010 when its facilities start operation, our global supply capacity from Japan and Brazil on a combined basis will be 1.6 million tons of seamless pipe per annum. This will allow us to better respond to requirements of our customers, the oil majors in particular, for high-end seamless pipe, and will accelerate our global development and distinctiveness in the steel and pipe business.

[Reference]
1.Sumitomo Metals' sales of seamless steels (million tons)

2.Information of completion ceremony for new finishing line
(1) Date: Tuesday, July 8, from 10:30 a.m.
(2) Place: Facility of the new finishing line in the Small-size Seamless Pipe & Tube Finishing Plant, Wakayama Steel Works (Kainan)
(3) Host of the ceremony: Kazuo Tanakamaru, Senior Managing Executive Officer and General Manager of Wakayama Steel Works
(4) Participants: Approximately 150 people, including Sumitomo Metals' President and executive officers, Representative of the labor union, Mayor of Kainan City, representatives from contractors, etc.

* OCTG (Oil Country Tubular Goods)
Seamless pipes used to drill wells in oil and natural gas development projects.

New Finishing Line Facility of the Small-size Seamless Pipe & Tube Plant at Wakayama Steel Works (Kainan)