№ 2, 2012

Setting the world in motion

iWheel KLW Customer NeWsLetter

KLW accomplishes certification for its continuous cast steel wheels

KLW engineering: a new direction in the wheel brand development

KLW at Innotrans 2012

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CONTENT

1 toP newS

KLW accomplishes certification of its continuous cast steel wheels

2 BUSineSS newS

Interpipe presented the new name and logo of its electric steel melting complex

Interpipe has published its annual consolidated financial statements

3 QUAlitY toP PrioritieS

Working with reclamations at KLW: interaction, aimed at the result

Interpipe NtrP successfully passed the inspection audit of wheels made specifically for Deutsche Bahn

4 innoVAtionS

KLW: permanent striving for perfectionIntegration of the wheel rolling production with Interpipe steel KLW engineering: a new direction in the wheel brand development

5 PArtnerShiPS

KLW held a scientific and practical conference with ukrzaliznytsya

6 Klw CUStomerS

sales geography. KLW Focus

7 eVentS

Innotrans 2012 european Football Championship was conducted in ukraine metallurgist Day

8 mArKet trendS

3 internAtionAl CertiFiCAtion

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In July 2012 Interpipe obtained its first certificates for the wheels produced out of the Interpipe Steel continuous cast billets. Certification of compliance with requirements of GOST standards will enable delivery of this new high-quality product to the CIS and Baltic countries

KLW aCCOmpLishEs CErTifiCaTiON Of iTs CONTiNuOus CasT sTEEL WhEELs

The present certificate proves that duly

identified products, forged wheels for

railway rolling stock (out of the vacuum

degassed steel grade 2 produced at

INTERPIPE STEEL), serial production

according to GOST 10791-2011 correspond to

the safety regulations.

Producer: Interpipe Nizhnedneprovskiy

Tube-rolling Plant, Dnepropetrovsk, Ukraine

1. toP newSthe certification procedure has been preceded by a test program with the aim of confirming the enterprise's readiness to produce wheels out of continuous cast billets. the test program included a number of stages:

Inspection of the wheel production facilities by experts from the register of Certification at the Federal railway transport;

sampling and subsequent tests of wheels at the independent test center of the ukrainian Carriage engineering research Institute;

Presentation of results at the commencement of the full-scale production to the expert Commission with participation of representatives from the ukrainian state railway transport Academy "ukrzaliznytsya".

After analysis of the documentation, assessment of personnel training level, and visits to the production floors, the Commission confirmed that Interpipe NtrP was ready for the production of wheels and tyres out of continuous cast billets in accordance with Gost 10791 and Gost 398.

aNdrEy KOrOTKOv, iNTErpipE NTrp ChairmaN Of ThE BOard:"We have completed the first and, therefore, the most complicated stage in the process of certification of Interpipe NtrP wheel products out of the continuous cast billets. this has been one of the most significant phases in the company’s transition to a vertically integrated structure. However, the mill's departments still have a long road ahead with a number of key certifications to be done on other types of wheels, tyres, and wheel centers, produced out of the metal

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6 71. toP newS 6 7

On july 2, 2012 interpipE NTRP obtained the first certificate of conformance for wheels of the principal assortment – ø957 mm out of the vacuum degassed Steel Grade 2, produced by Interpipe Steel. The certificate was issued by the Register of Certification at the Federal Railway Transport (Moscow, Russian Federation)

of Interpipe Company's new electric steel melting complex".

dmiTry BOgdaN, hEad Of TEChNiCaL dEparTmENT aT iNTErpipE NTrp:

"In addition to complete monitoring of a chemical composition cycle, mechanical properties, and metallographic researches, our wheels have been subjected to certification tests for fatigue resistance to fractures, simulating real operating conditions. All these types of tests have

been performed in accordance with the conformance conditions, established by the certification agency".

aLExaNdEr rOsLiK, hEad Of WhEEL aNd TyrE TEChNOLOgiEs dEparTmENT aT iNTErpipE NTrp:

"Now – 4 months after the rolling of the first wheel, made out of the continuous cast billets – we have received the certificate, enabling our deliveries of electric steel wheels to the CIs and Baltic countries. We are also going through the process of certification, in accordance with european standards, for this type of wheel. to ensure the supplies of railway wheels out of the continuous cast billets for Deutsche Bahn, the mill is now engaged in obtaining manufacturer-related product qualifications (HPQ). Also, together with VuZ – the Czech republic certification agency - Interpipe NtrP has commenced the procedure

of wheels' certification in accordance with tsI norms. For other consumers from India, China, and NAFtA, to ensure the deliveries of railway wheels out of the continuous cast billets, the Company has scheduled a number of audits of its production facilities based on the ongoing process".

8 92. BUSineSS newS 8 9

the new name and the logo represent Interpipe’s new brand's stylistics, refl ecting the innovation at the mill.

the main symbol of the Interpipe steel visual image represents a dawn, symbolizing the commencement of a new day, new expectations

Interpipe has presented the new name and logo Interpipe has presented the new name and logo of its state-of-the-art mill – Interpipe Steel. The of its state-of-the-art mill – Interpipe Steel. The change in name refl ects the connection of the change in name refl ects the connection of the new mill with other enterprises of the company. new mill with other enterprises of the company. While "Interpipe Pulse", the inscription in the While "Interpipe Pulse", the inscription in the logo, refl ects the role of the new mill in forming logo, refl ects the role of the new mill in forming the Company's new production culture.the Company's new production culture.

iNTErpipE prEsENTEd ThE NEW NamE iNTErpipE prEsENTEd ThE NEW NamE aNd LOgO Of iTs ELECTriC sTEEL mELTiNg aNd LOgO Of iTs ELECTriC sTEEL mELTiNg COmpLEx COmpLEx

red – bright and hot, co-generic with fi re. this is the color of vital energy, symbolizing the fullness of life, persistence, and dynamics.

orange – the color of the fi re element, embodiment of changes, confi dence, inventiveness, vitality, and enthusiasm. It expresses sincerity, life, action, and ambitions.

Yellow – the symbol of light, purity, and verity. this is a solidifi ed sunbeam, bright and warm. Yellow is the color of optimism, intelligence, and friendliness.

Dark-blue – the symbol of verity, consistency, devotion, and perfection. this is the color of the sky and sea, infi nity, eternity, purity, safety, and trust. It represents calmness, chastity, and spiritual life.

Green – the symbol of nature and youth. this is the color of hope and activity. It expresses hope and joy, wisdom and renewal of life, abundance and prosperity.

Black - the color of power, reliability, confi dence, and strength. this is the symbol of dignity, depth, and completeness. It conveys deference, prudence, and wisdom. the black color increases the intensity,

saturation, and substantiveness of any neighboring color.

White – the symbol of unity and fairness. It equally contains all spectrum colors, being the result of their mixture. the principal quality of the white color includes equality and impartiality. It symbolizes the air, enlightenment, purity, completeness, dedication, and spirituality

iNTErpipE sTEEL COLOrs

and accomplishments, and the beginning of a new stage. It is a symbol for change and unity. the logo's graphical form conveys aspiration, onset, challenge, and excitement. Freedom is the major principle in the stylistic solution. Bright, saturated, and dynamic colors predominate in the color gamma.

10 112. BUSineSS newS

In 2011 Interpipe has improved its main fi nancial results in comparison with results of 2010. the sales of pipe and wheel products grew by 10% and 6% respectively. At the same time the revenue grew by 32.7% and eBItDA rose by 86 million us$, reaching 255.5 million us$. this is demonstrated by FY 2011 consolidated fi nancial statements approved by the Board of Directors of Interpipe Limited (Interpipe). Consolidated fi nancial statements of the company are audited by ernst & Young.

iNTErpipE has puBLishEd iTs aNNuaL CONsOLidaTEd fiNaNCiaL sTaTEmENTs

• Total pipe sales increased by 10% to 911.7 thousand tons compared to 2010.

• Total wheels sales increased by 6% to 170.3 thousand tons compared to 2010.

• Revenue increased by 32.7% to US$ 1,670 million driven by higher sales volumes.

• Gross profi t increased by 52% to US$310 million.

• Adjusted EBITDA increased from US$169.5 million for 2010 to us$255.5 for 2011. Adjusted eBItDA margin amounted to 15.3% for 2011.

• Net profi t was US$41 million for 2011 as compared to us$(24) million for 2010.

• In November 2011 the Company has fi nalized the restructuring of its us$887 million credit portfolio. As a part of the restructuring, lenders provided the Company with the additional

fy 2011 highLighTs:

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funding in the amount of us$136 million for implementation of the Interpipe’s investment program.

aLExaNdEr KiriChKO, iNTErpipE CEO:“Financial results of 2011 verify the effi ciency of our strategy and stable fi nancial status of the Company, – Alexander Kirichko, Interpipe Ceo, says. – We continued the construction of the new electric steel melting complex, which will provide the company with its own steel billets, and also created a foundation for the growth of our sales at the top-priority markets – the NAFtA region and the middle east. these factors will become the basis for our further development.”

Please, fi nd consolidated fi nancial statements for 2011 document here: http://www.interpipe.biz/en/investment/fi gures/statement/

Interesting fact: INTERPIPE STEEL is one of few industrial enterprises, open for visitors. To date more than 7.5 thousand people have visited the mill.

"Interpipe steel is the state-of-the-art, energetic, and stylish mill, - Dmitry Kisilevskiy, Head of Corporate Affairs Department at Interpipe, comments. We have young and highly educated people working here. And it is quite essential for us to ensure that all visual manifestations of the mill – be it advertising, working clothes, or design of the work place comply with the company's spirit".

the introduction of the new branding will be carried out step by step. the completion of the main stage is scheduled for the end of 2012.

Along with the new image Interpipe steel gets a new appearance: the Company is currently fi nishing the embellishment of the mill's territory, production premises, and personal service rooms.

interPiPe Steel — metAllUrgY oF new generAtion

12 132. QUAlitY toP PrioritY

Focusing on the customers' needs is KLW’s key principle. To deliver high-quality products on time and to comply with individual customer requirements are only the first part of our work. The Quality Department is directly engaged in obtaining feedback, reasons, which could cause dissatisfaction and process enhancement. Pavel Vishnyakov, Head of Quality Department at Interpipe NTRP gave us more details about the matter.

WOrKiNg WiTh rECLamaTiONs aT KLW: iNTEraCTiON, aimEd aT ThE rEsuLT

Despite the fact that Interpipe NtrP has a powerful multilevel system of quality control, all the same, the enterprise sometimes gets reclamations. As a matter of fact, this is normal, because virtually everybody has reclamations - sometimes more, sometimes not. However, in truth, the appearance of complaints or appeals is not a bad thing. on the one hand, this is because any complaint provides us with a possibility to understand how we can raise the level of customer's satisfaction and retain his/her loyalty and trust. At that, a timely response to the reclamation makes it possible not only to keep our customers, but also to strengthen our relationship with them. on the other hand, any complaint can be regarded as consulting, allowing the identification of "bottlenecks" in the production, logistics, and other internal processes of the enterprise, as well as a considerable stimulus for continuous improvement.

Four years ago Interpipe introduced regulations on the company departments’ interaction with consumers to review complaints on the quality of products and services. this is a single legal document and a guide for all the company's enterprises and the Interpipe Headquarters,

"We should thank our customers for their appeal on the quality of products or services. This is a very important source of feedback from our consumers. And the most essential thing is not to turn a blind eye to a complaint, but to take advantage of it".

CONsidEraTiON Of rECLamaTiONs aT iNTErpipE

defining who, what, when, and why in order to achieve two results. Firstly, this is a consumer satisfaction document, and secondly, these are corrective actions, aimed at the elimination of dissatisfaction amongst customers. thanks to the introduction of these regulations over the last 4 years - from 2009 until 2012 - the number of reclamations on the quality of the wheel and tyre products fell by 39%.

the average period for consideration of reclamations on the quality of the wheel and tyre products at Interpipe NtrP is 4 days – i.e. usually within a week the customer already has a complete response to the situation encountered. While 4 years ago this process took 30 days.

We conduct an analysis of the received reclamations on a monthly and quarterly basis,

Execution and registration of a complaint: (Head of sales Department )

picking out the key problems and developing measures, aimed to enhance Interpipe’s process. the most important thing today is to change the consciousness of people, their attitude towards their job, because the underlying cause, as a rule, lies in the organization of the process. And this is what we currently work on: how to organize the process in such a way as to avoid a situation which may lead to the production of inadequate output.

Development of a draft response

Consideration of an appeal at the mill, if necessary - a visit to the consumer's area and conduct of an independent expert examination: (Director of Quality )

Closure of the reclamationApproval of the decision (Head of sales Department) (Head of sales Department)

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14 153. internAtionAl CertiFiCAtion

Interpipe NTRP has passed the audit inspection of the finished railway wheels under the KLW brand, which are being produced specifically for Deutsche Bahn for the first time.

iNTErpipE NTrp suCCEssfuLLy passEd ThE iNspECTiON audiT Of WhEELs madE spECifiCaLLy fOr dEuTsChE BahN

Interpipe NtrP has passed the audit inspection of the finished railway wheels under the KLW brand, which are being produced specifically for Deutsche Bahn for the first time.

Last year Interpipe NtrP received Deutsche Bahn compliance certifications on machined wheels of various designs. this allowed Interpipe, for the first time, to enter into a contract for production and direct delivery of 1,000 finished railway wheels with a diameter of 1000 mm for truck transport of German Deutsche Bahn railroads. Previously, KLW delivered to Germany only pre-treated railway wheels, which then passed to the final machining at other companies in Western europe.

During the audit, Deutsche Bahn representatives inspected the machined wheels focusing on their surface cleanliness. the non-destructive testing line checked geometric parameters, magnetic powder inspection of surface quality, ust rim, hub and disc quality and wheels

miChaEL is'KOv, dirECTOr fOr raiLWay WhEELs saLEs"Deutsche Bahn is our strategic partner and one of the largest KLW products consumers in europe. Deliveries of finished wheels will allow to take our partnership with the German railways to a new level and give an opportunity to deliver high-tech products to the whole european market."

control for residual imbalance. Deutsche Bahn representatives also took samples for further destructive mechanical testing and for the monitoring of the chemical composition of steel. the test results completely met the requirements of normative documents eN 13 262 and e BN 918 277.

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16 174. innoVAtionS

When KLW customers were asked to define advantages of working with KLW, the principal answer was: "they offer individual solutions that virtually nobody else in the market could offer". What does this mean in practice? It means introducing railway wheels nonaffiliated to projects, the development of new types of wheel centers and tyres, production of specific steel grades, etc. Today we will have an interview with an innovator, capable of making impossible things come true by combining deep understanding of technologies and competent technical solutions – Alexander Roslik, Head of Wheel and Tyre Technologies Department at Interpipe NTRP.

the new electric steel melting complex interpipe Steel, which already supplies billets for the wheel rolling production at interpipe ntrP, has been commissioned this year. what exactly are the new possibilities provided by the electric Steel?

Firstly, the quality of the electric steel is significantly higher than the quality of steel, produced by an open-hearth furnace. the manufacturing of wheel products out of the steel of the new electric steel melting complex ensures great support to our competitiveness within the world market. Furthermore, electric steel provides a possibility to introduce new types of products, in particular, high-speed operation wheels. We are already in the process of ensuring that the quality of wheels is in accordance with eN 13262 category 1. the category is chosen when the rolling stock traverse speed exceeds 200 km/hour.

in 2002-2008 we accomplished a comprehensive investment program to increase our production capacity. in particular, we installed a new line for the full-profile processing of wheels. what are the results of this program? what effect has it had on the quality of your products?

equipping our production facilities with a line for full-profile processing of wheels has enabled a considerable rise in the quality of wheels' mechanical working. All machine tools that we had before could not ensure the required working accuracy and the grinding quality class. Accomplishment of this program – introduction of the line for the full-profile processing of wheels and the line for nondestructive control of the wheels' quality – enables the production of wheels to meet any customers’ requirements relating to roughness and tolerances. owing to this we have received contracts with such world leaders as Bombardier – a company, dealing with the production of railway rolling stock and railway transport for carriage of passengers. thanks to the high-quality wheels manufacturing we have obtained the Deutsche Bahn certificate and have also started our collaboration with

such companies as GAteX and Vr, widely known in europe. And, of course, the additional stock of machine tools in operation has ensured the raise of production capacities for the machines, existing in 2008, to 120 t/month.

Klw has been successfully working with several enterprises on the assembly of wheelsets, in particular, with such companies as lugCentroKuz, KolowAg, and rafil. in which way does interpipe ntrP participate in these projects?

Interpipe NtrP takes part in these projects by ensuring the production of wheels and harmonizing all technical documentation at the stage of wheelsets' development and the stage of concordance of wheels' design and characteristics. these projects allow us not only to conquer new markets for consumption of our products, but also to find, in the process of concordance with technical issues, new solutions on the improvement of operational characteristics of wheels and retaining our competitiveness in the world’s markets.

At your enterprise, you often receive audits by certifying organizations and customers. what do the auditors’ notes state - what positive changes appear at the mill?

our enterprise has the assortment of more than 250 types of w heels, operating in all continents, in more than 60 countries of the world. As a rule, a lion's share of these countries comes to us at least once a year with the aim to audit our production facilities and processes. thus, we can say that we have audits every week.

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KLW: pErmaNENT sTriviNg fOr pErfECTiON

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With each new visit our customers mention a qualitatively new level of our enterprise's development. this concerns not only the implementation of investment projects, but also a great number of elements in the chain of continuous improvement of our technologies, organization of our production processes, quality management, customer service, etc. Any audit is a look at the matter from a different standpoint. Accordingly, thanks to recommendations of our auditors we do not only make decisions on implementation of these or those investment projects, but also enhance minor but still very important technical issues and our documentation.

Whilst preparing for integration of the wheel rolling production with Interpipe steel we have implemented a number of investment projects. one of the most important objects of the program has included installation of a sawing complex for cutting of billets and an electric bridge crane with the lifting capacity of 20 tons. the total value of the project has reached usD$ 3 million.

Within the framework of this project the mill-providing section of the wheel rolling shop has been completely modernized to support continuous cast billets Interpipe has installed and commissioned the high-performance radial saw machine Kss 1600, produced by Lisinger company from Austria, as well as the labeling machine and machine tool mechanization equipment. to ensure smooth work in the warehouse and the sawing complex, the company has purchased a new electric bridge crane with a magnetic crossbeam and the lifting capacity of 2 x 10 tons.

the necessity of the new equipment installation has been conditioned by the properties of billets, being produced by

Total weight of the sawing complex - 128 tons. Actual cutting cycle time – less than 3 minutes, including the feeding. Cutting width - 11 mm, which is 5-6 mm less than with the existing ingot cutting machines.

"our work within the framework of conduct of such audits is extremely important: every time i come to interpipe ntrP i find more and more improvements".

4. innoVAtionSInterpipe steel. the transport metal requires cut-to-length billets from 6,200 to 10,000 mm; at that, the minimum weight of a bar like this equals to more than 9 tons. on the one hand, it exceeds the lifting capacity of cranes used for transportation of ingots, melted with the open-hearth method. on the other hand, the ingot cutting machines, notching ingots of the open-hearth billets, can work with the length of 3,050 mm maximum.

the successful accomplishment of this investment project has enabled operation of the mill-providing section of the wheel rolling shop with the continuous cast billet, produced by Interpipe steel.

aLExaNdEr rOsLiK, hEad Of WhEEL aNd TyrE TEChNOLOgiEs dEparTmENT aT iNTErpipE NTrp:

"to ensure production efficiency, any modernization must be comprehensive - one issue leads to another issue: it would be impossible to machine the continuously cast billets with the old equipment. therefore, in many aspects thanks to the implementation of this program, we have managed to commence the full-scale manufacture of a new high-quality product – Gost wheels made out of the continuous cast billets, produced by Interpipe steel".

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iNTEgraTiON Of ThE WhEEL rOLLiNg prOduCTiON WiTh iNTErpipE sTEEL

Here is what mr. Bismarck – a representative of deutsche Bahn said during his recent visit to our Company:

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A comprehensive solution is quite rare in any market, from a consumer one and up to the industry of high technologies. major reasons for that include specialization in certain areas and absence of inter-branch relations. Klw’s long term experience and presence in the market, as well as its deep understanding of customers' needs have enabled Klw to transition into a new stage of development and offer of a unique solution – Klw engineering. more details are available in the interview with the project manager - mr. ruslan Bouryak.

4. innoVAtionS

ruslan, what is Klw engineering exactly? And how has this project appeared?

KLW is well-known in the world as a large supplier of wheel and tire products, so, for convenience, we can call it KLW Production. KLW engineering is a project, within the framework of which we develop and generate atypical ideas for the wheel industry. that is we offer our customer a service beyond just a good-quality wheel, we offer a comprehensive solution which will improve the operation of wagons in the long run.

the reasons why we are able to arrange such projects is mainly down to our experience in the wheel industry and our status: for more than 75 years Interpipe NtrP has been producing wheels, operated all around the world. over these years we have established close partnerships with many companies – railway operators, wagon producers, and scientific institutes – not only in the CIs, but also abroad. In addition to that we have a good understanding of the market and its needs.

Could you please tell us more about the market profile and what needs there are in the CiS today and their peculiarities?

In the last several years the CIs has had a shortage in wagons. As such, there is a need for components and wagon castings. Despite the fact that the CIs rail carriage building capacities are concentrated in russia and ukraine, the capacities for castings are quite limited. other regions have completely different scenarios: India and China have excess wagon castings - they have experience, production capacities, and modern equipment. Going back to the already existing projects, I would like to mention that in the nearest future KLW intends to supply imported wagon castings to the CIs countries. Currently we conduct negotiations with a large Chinese rail carriage building corporation, producing castings for approximately the last 60 years.

KLW ENgiNEEriNg: a NEW dirECTiON iN ThE WhEEL BraNd dEvELOpmENT

let's get into more details on the projects. where is their focus? do you cooperate with research institutes?

Yes, ukrainian scientists and manufacturers are currently engaged in many interesting developments in various fields; however, they often have no opportunities to put them into practice. For instance, the theoretical mechanics Institute has designed a new profile, different from the Gost one, which, based on the results of experimental tests, has shown unique operational characteristics - increase in the overhaul life by 2 and sometimes even 3 times, comparing to ordinary profiles. this profile has been patented, and we are currently conducting negotiations with the authors to transfer this technology. ukrzaliznytsya is already using this profile: it purchases standard wheels from us and regrinds them on its own. that is, having mastered the technology of production, we will be able to provide a consumer with a finished solution.

Klw has been working a lot with the leading wagon producers. Are there any joint projects in the Klw engineering plans?

the second production project is focused on the provision of rail carriage building companies with wagon profiles. to strap their wagons they currently use rolled-formed sections, or angle bars, or channel bars, which require subsequent welding, so the process is quite long and inconvenient. While our Interpipe NmPP - electric-welded pipe production plant - has sufficient capacities for the respective pipe rolling. We are now in the process of discussing the project acquisition and assembly of additional cutting equipment. subject to its successful implementation, in one year we will already be able to supply rail carriage building companies, ukrainian and european, with shaped tubes in the amount of approximately 25-35 thousand tons a year.

According to many market analysts and experts, there is a huge growth potential in the development of municipal transport in the CiS countries. do you have any plans in this area?

At present we are conducting quite active negotiations with the Kyiv subway. By the way,

did you know that the passenger traffic of the Kyiv underground railway exceeds such large cities as, for instance, madrid or Hong Kong, transporting up to 1.7 million people every day? And, despite certain problems with financing, they still continue their development: they refresh their wagon fleet and, furthermore, they pay special attention to noise reduction in the underground railway.

the Kyiv subway intends to purchase, for a trial period, wheels with advanced German noise insulation technology in the form of special pads on the disks. We have conducted a simple, but quite demonstrative test: we have struck these on the paddles wheels first, and then on the wheels with a pad. In the first case the sound emitted was similar to the tinkling of a crystal glass, while in the second case no noise could be heard. this shows that the pad ensures complete cancellation of sonic waves. such wheels are less affected by the rail junctions and, as such take better care of passengers’ health.

what other areas do you intend to cover?

We have a huge number of ideas and try to cover all kinds of areas and fields: we study the arrangements of our warehouse network in russia; we consider the possibility of exporting small and medium-size castings produced in ukraine; we develop consulting projects and finally look into many other projects like these. Due to various reasons, we implement only 10 projects out of every 30-40 projects that are available to us; however, we still hold continuous brainstorms to keep momentum going.

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22 235. PArtnerShiP

KLW hELd a sCiENTifiC aNd praCTiCaL CONfErENCE WiTh uKrZaLiZNyTsya

The Conference was conducted on April 26-27, 2012 at Interpipe NTRP – one of the world's largest producers of railway wheels under the KLW brand. It was organized together with the State Rail Transport Administration of Ukraine.

Approximately 150 people, representing 29 ukrainian and 10 russian enterprises and organizations, took part in the Conference, showcasing the relevance and importance of this event in the railway industry of the "1520 area". railway employees, scientists, leading technical experts in this industry, manufacturers and consumers of wheel products from ukraine and russia joined their efforts in search for ways to reduce the excessive wear of wheels and rails. the attendees discussed the results of research on the reasons for formation of wheel surface defects, and thought about ways to extend the operation life of rails and wheelsets of the rolling stock.

the program of the Conference included a vast spectrum of reports and presentations from leading experts both in the research area — the state research Center of railway transport of ukraine, Dnipropetrovs'k National railway transport university, Ferrous metallurgy Institute at the National Academy of science of ukraine, Physical and mechanical Institute after G. V. Karpenko at the National Academy of science of ukraine, and the sphere of practical application of technologies — INterPIPeNtrP, ukrzaliznytsya, metinvest, Yugtechnotrans, and many others. the speakers presented approximately 25 reports during these two conference days.

“We are really happy that scientific thoughts in the railway industry do not stand still and progress quite quickly, - Andrey Korotkov, Interpipe NtrP Chairman of the Board, has noted. – undoubtedly both customers and manufacturers benefit from this situation. In our everyday activities we are usually busy with present-day problems. And that means we do not have enough time to think about perspectives, about deep scientific research, influencing the manufacture and operation of products. this scientific and practical conference is the required working floor for communication, exchange of best practices and joint discussion on technical problems, which, beyond all doubt, will promote resolution of topical issues for wheel products' operation and the development of up-to-date production technologies”.

"Efficient solutions for the excessive wear of wheels and rails are conditioned by the exchange of experience and consolidation of efforts with railway employees, scientists, and manufacturers of railway products at the "1520 area". This is the conclusion reached by the participants of the II International scientific and practical conference "Development of up-to-date production technologies for national enterprises - a basis to reduce the wear of the "wheel - rail" pair".

In the course of the Conference the participants got acquainted with the latest technologies of railway wheels' production at the facilities of Interpipe NtrP wheel rolling shop. In addition to that, within the framework of the Conference, the company conducted a tour around the new high-tech steel melting complex of Interpipe Company.

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24 255. PArtnerShiP

miChaEL is'KOv, dirECTOr fOr raiLWay WhEELs saLEs:“We are so grateful to all participants of the conference, who have found some time to come to Dnepropetrovsk and to discuss things, without which the existence of railroads in not only ukraine, but also of the entire post-soviet area would be impossible. I mean the interaction of wheels and rails. representatives of the ukrainian rail carriage building works, such as Azovmash, Dneprovagonmash, Kriukov car building works and other companies have shared their thoughts, developments, and practical recommendations on this very relevant matter. I think we have made a good start to arrange and to conduct similar events at our facilities on a regular basis”.

NiCOLay sErgiyENKO, firsT dEpuTy gENEraL maNagEr Of ThE sTaTE raiLWay TraNspOrT aCadEmy Of uKraiNE "uKrZaLiZNyTsya":

“ukrzaliznytsya and Interpipe have quite an old and traditional collaboration. We are a large consumer of wheelsets and tyres, while Interpipe is the major and only producer of wheels and tyres in ukraine. At present we are engaged in real earnest in dealing with the problem of high-speed operation, issues of resource-saving and extension of the wheels' service life period, and we will need

COmmENTs Of CONfErENCE parTiCipaNTs:

new types of wheels with the axle load of 25 tons, new profiles, and new steel grades”.

igOr KarapEyChiK, aZOvmash ChairmaN Of ThE BOard - gENEraL maNagEr: “today's conference is very relevant and timely, because here we discuss the principles of further perspective development for the railway industry. my point of view is that this conference has gathered quite a serious scientific potential, providing us with a possibility to say that those bottlenecks, not yet eliminated, will be taken for strong and comprehensive consideration soon. All leading positions must be always supported and nourished by science - no innovative development of the industry would be possible without it”.

OrEsT OsTash, CaNdidaTE Of TEChNiCaL sCiENCE, hEad Of dEparTmENT aT ThE physiCaL aNd mEChaNiCaL iNsTiTuTE afTEr g. v. KarpENKO aT ThE NaTiONaL aCadEmy Of sCiENCE Of uKraiNE: “I represent academic science and really appreciate the chance to participate in this conference, since, for approximately 10 years already; I have been dealing with the problems of steel for wheels production, in particular for Interpipe NtrP. We are really grateful to Interpipe as the leading company in ukraine, developing the high-tech production. such high-tech production facilities are exactly the places where we can see our participation as research officers, capable of contributing to our experience and knowledge. Interpipe, in

24 25

our opinion, is on the right track, extending its scientific researches and investing considerable economic resources into this process”.

26 275. PArtnerShiP

aLExaNdEr BaBaChENKO, CaNdidaTE Of TEChNiCaL sCiENCE, dEpuTy maNagEr Of ThE fErrOus mETaLLurgy iNsTiTuTE aT ThE NaTiONaL aCadEmy Of sCiENCE Of uKraiNE:“the conference focused on the problem of "wheel and rail" interaction, arranged at Interpipe NtrP facilities, is one of the best not only in ukraine, but also in the entire post-soviet area. All issues, discussed within the framework of this event, are essential and relevant for railway transport in ukraine. the majority of decisions, being made at the conference, are implemented by way of conduct of research by the Ferrous metallurgy Institute, the Physical and mechanical Institute, and other institutes both with ukrzaliznytsya and Interpipe NtrP”.

aLExEy suKhOv, CaNdidaTE Of TEChNiCaL sCiENCE, hEad Of mETaL sCiENCE LaBOraTOry aT ThE russiaN sCiENTifiC aNd rEsEarCh iNsTiTuTE Of raiLWay TraNspOrT:“It is really gratifying that such conferences are conducted both in ukraine and russia. All issues, being discussed here, are undoubtedly relevant for russian railways as well. I listen to the speakers and understand that, beyond all doubt, the conference, gives a lot for our "satiation", because the level of communication that we have here enriches all of us”.

dmiTry yEL'NiK, hEad Of marKET rEsEarCh aNd COmpETiTivE prOCEdurEs dEparTmENT aT uraLvagONZavOd:“the problem of contact between the wheel and the rail will always be relevant and timely; this topic is a permanent and necessary one, because the railway safety depends on it. Interpipe is the leading company in this respect, constantly involved in the matters of engineering and equipment, working out new variants to improve the quality of its products. therefore, this conference will contribute a lot, because many people have just had discussions and extracted something new and interesting from them. I am sure they will continue these meetings and discussions”.

vLadimir shish, hEad Of ThE ChiEf dEparTmENT ON dEvELOpmENT aNd TEChNiCaL pOLiCy aT ThE sTaTE raiLWay TraNspOrT aCadEmy Of uKraiNE "uKrZaLiZNyTsya":“We are maintainers of these products and are very interested in this conference, so we hope it will be conducted on a regular basis, because the more dialogue like this we have - including such scientific and technical cooperation between representatives of the science, manufacturers of railway products, and maintainers - the better is for all of us. We learn a lot of things now and we see lots of things in a different way”.

26 27

28 296. CUStomerS

If you map all railways on the terrestrial globe, then add the railways and mark in the yellow KLW emblem, those of them using railway wheels under the KLW brand, you will likely not find a place on the globe where the KLW wheel brand has not been.

saLEs gEOgraphy. KLW fOCus

aT ThE paCE Of mOrOCCO KLW has been in cooperation with oNCF (office National des Chemins de Fer du maroc), which is the moroccan national operator of railway transport, for the last 4 years. the first contract has included the delivery of 3,000 wheels. In the course of operation all railway wheels under the KLW brand have proved to be a high-quality and reliable product. such reputation has resulted in the increase of consumption volumes by the key consumer.

so in 2012 KLW has already signed the fourth contract with office National des Chemins de Fer du maroc. the total volume of wheels supplied to morocco under the concluded agreements has exceeded 9 thousand pieces.

At present morocco is among the countries, actively developing the system of high-

the KLW wheel brand has been the partner of the Indian railways for approximately 20 years already. KLW railway wheels are used for locomotives, freight cars, and suburban electric trains. In 2012 KLW has concluded another contract with Indian railways to deliver approximately 6 thousand locomotive wheels under the KLW brand until the end of this year.

speed mainline railroads inside the country. the current plans of this national railway operator include the completion of construction of a new line Casablanca – rabat – tangier. taking into consideration the successful collaboration of KLW and oNCF, we can forecast some more joint projects.

susTaiNaBiLiTy: iNdia

29

gaLiNa KLEvaNsKaya, KLW saLEs maNagEr

In 2010 KLW won the tender to supply wheels for maintenance of the Delhi subway rolling stock. During these two years of cooperation and within the framework of this project KLW has already delivered approximately 1.5 thousand wheels. At first sight such volume does not look significant; however, KLW has covered the need of Delhi metro railway Corporation in railway wheels by 100% thanks to the high wear resistance of the delivered products.

28

the first railway line in morocco was built in 1911. total length of railway lines is 2120 km. gauge of railway – 1435 mm.

30 31

sTraTEgiC TriaNgLE: uKraiNiaN WhEELs – ChiNEsE raiLWay Cars – KaZaKhsTaN raiLsCooperation horizons are also expanded towards Kazakhstan. this year the Company has reached trilateral agreement, under which the Chinese CNr rail carriage building corporation supplies the rolling stock, equipped with KLW wheels, to the Kazakhstan railways. In June 2012 the partners signed the technical specification for the delivery of experimental wheels with the axle load of 25 t for internal tests at the Chinese test center and the running tests at the car trucks in the Kazakhstan railway network. subsequently, within the framework of the joint project of KLW and Kazakhstan temir Zholy, the Company will arrange the supply of pre-machined wheels for processing at the new wheel workshop in the city of ekibastuz (Kazakhstan). All wheels, after their finishing mechanical operation, will be used to complete transportation vehicles for Kazakhstan in China.

In general, the Chinese CNr rail carriage building corporation has signed contracts with Kazakhstan railways - Kazakhstan temir Zholy - to deliver 2,000 open-top wagons and 1700 trucks by December 2012. the Kazakhstani Company has showed its intention to buy other types of the rolling stock from CNr in 2013, such as covered wagons, railway wagons, and platforms. It is assumed that they will also be equipped with wheels produced by Interpipe NtrP.

Klw strategic partnership with locomotive engineering companies in russia and CiS countries:

In russia railway transportation is one of the key methods for relocation of both people and cargoes. this is the country, where large-scale companies have their own car fleet, yielding to no governmental carriers in this respect. the market is growing all the time, and customers get more and more needs. so we decided to ask Vadim shkuratov, the expert on KLW wheel products' sales in russia and the "KLW boss" in this country, how KLW is represented in the russian Federation:

6. CUStomerS 30

LUKOIL Trans is the largest Russian operator of railway transportation services for fluid cargoes in the international and intra-Russian railway communication. This company dispatches and provides railway wagons for transportation of oil, petroleum products, liquefied hydrocarbon gases, and products of chemical enterprises to all CIS countries, Bulgaria, Romania, Finland, Germany, Poland, and China.

during the last years interpipe ntrP mastered the production of wheel centers. what companies do you work with in this regard?

KLW is the trusted supplier to a number of transportation companies in russia. Particularly, we cooperate with sinara - transport machines, ural Locomotives supplying high-specification wheel centers. We are planning to engineer,

manufacture and certify the wheels for the new Desiro regional electric trains which will transport spectators and athletes to russia’s olympic Winter Games in 2014. Currently KLW reached an agreement with ural Locomotives to develop new wheel products for 2es10 locomotives. Work is well under-way.

In 2012 we have signed an agreement with Kolomna machine-Building Plant, under which we have commenced the production and certification of forged wheel centers for teP70 diesel locomotives. Later this year the Kolomna locomotive builders will test out new trucks equipped with KLW products.

31

it is an open secret that many private companies in russia have their own car fleet. do we work with this type of customers?

sure. KLW wheels are used for the maintenance of Freight one, second Freight Company, metalloinvest rolling stock. this year we have supplied railway wheels for maintenance of the Novotrans railway Holding rolling stock for the first time. Novotrans like major car fleet owners outsource such companies as VKm stariy oskol, techcomplex for the maintenance of wheel pairs. KLW has been working with these companies for a number of years. thus we not only continued and developed cooperation with the regular partners but also attracted new customers.

the list of "newly-born" customers also includes the leader of the russian oil industry - LuKoIL Company. In 2012 Interpipe has won the tender to supply railway wheels for the wagons, owned by LuKoIL. We intend to develop our cooperation with LuKoIL and are going to take part in the next tender to supply the railway products for LuKoIL in the 4th quarter of 2012.

32 337. eVentS 32 33

On September 18th to 21st, 2012 Berlin will host InnoTrans - the largest international exhibition of transportation technologies, where Interpipe Company will, in accordance with tradition, present its KLW wheel brand. Mikhail Is'kov, Sales Director of KLW Wheel Products, will lift the veil on some quite interesting developments for exhibition visitors at the KLW stand.

iNNOTraNs 2012

railway technical conference in the world, attracting engineers from the international rail community. the Wheelset Congress was founded in 1963 and fi rst took place in Italy. since then, with only two exceptions it has been held every third year. the location of the congress is chosen worldwide according to a rotational rule. It was held in Germany, France, uK, Czech republic, Japan, Australia, usA, and Australia. ukraine is the fi rst CIs country to host such an event; therefore, our stand will provide detailed information on the Congress, as well as important information on ukraine, its traditions and peculiarities. the visitors of our stand will have an opportunity to enjoy ukrainian music and to get ukrainian souvenirs.

"we've had a plentitude of positive "we've had a plentitude of positive changes during the last two years: changes during the last two years: we have implemented a number of we have implemented a number of investment projects, introduced new investment projects, introduced new products, and expanded our collaboration products, and expanded our collaboration with leaders of the railway industry. we with leaders of the railway industry. we have lots of things to talk about and to have lots of things to talk about and to share with people, so we will be happy share with people, so we will be happy to welcome you at our Klw stand!" to welcome you at our Klw stand!"

In september 2013 Kiev city will host one of the most authoritative events in the global wheel industry – the International Wheelset Congress - co-organized by KLW. It is the oldest

34 357. eVentS 34 35

www.17iwc.com

THE 17 TH INTERNATIONAL WHEELSET CONGRESS

NEW TECHNOLOGIES TO EXTEND THE OPERATIONAL LIFE CYCLE OF WHEELSETS

THE MAIN TOPICS FOR PAPERS TO BE PRESENTED AT THE CONGRESS:

1. Development of new steel grades for rolling stock wheels

2. The latest non-destructive testing technologies for railway wheels and axles, as well as hardness testing

3. Increasing the load on conventional rolling stock

4. Wheel defects resulting in failure – the main types of wheel wear and how to control it

Please visit our website www.17iwc.com to find out more about the Congress and the requirements for submitting an abstract

The deadline for submitting your abstract is December 1, 2012

CALL FOR PAPERS IS ALREADY OPENED

5. Equipment to test wheel strength characteristics - analysis of the fatigue properties of rails and axles

6. Technical peculiarities of high-speed-rail wheels and axles - trends and overview

7. Rail/wheel/brake-shoe interaction 8. Monitoring wheel life cycle and

establishing a feedback between wheel producers and users - development of automatic wheel identification systems and integrated electronic databases

A very signifi cant stage in the company's history relates to the launch of the new high-tech electric steel melting complex Interpipe steel, providing our enterprises with high-quality billets for production of pipes and

wheels. In July Interpipe NtrP – manufacturer of railway wheels under the KLW brand – obtained its fi rst certifi cates of conformance for the forged wheels out of the continuous cast billets, produced at INterPIPesteeL.

36 377. eVentSEurOpEaN fOOTBaLL ChampiONship Was CONduCTEd iN uKraiNE

From June 8th until July 1st the attention of europe was focused on ukraine and Poland as they, hosted the 14th european Football Championship, ueFA euro 2012 tm. According to ueFA data, the number of fans that attended the Championship matches exceeded 1.44 million.Both customers and employees of Interpipe were among them. thirty five of the company’s best employees attended 4 matches of the euro-2012. Firstly two groups of lucky men and women supported ukraine at the match where sweden played england; others attended the Kyiv match between sweden and France; while the last team of Interpipe fans watched the competition between the national teams of Portugal and spain from the stands of Donbas-Arena.

mETaLLurgisT dayInterpipe congratulated residents of the Dnepropetrovsk city and region with a concert tour of the legendary rock band BI-2. Celebration concert shows, dedicated to the metallurgist Day, were held in the cities where the company’s plants are located. these concerts included performances by the "ukraine's got a talent" show stars, finalists of the "Voice of the country" project, and many others. BI-2 rock band was the major star of this festival tour. the first show was held in Nikopol on July 13th, while the second one was held in Novomoskovsk on July 14th. the concert tour final developed into a tremendous show hosted in the centre square in Dnepropetrovsk on July 15th.

"metallurgist Day is one of the main holidays in the Dnepropetrovsk region. It not only has Interpipe plants, but also may other enterprises. We wanted to put on a real festival for our employees and all residents of Dnepropetrovsk, Novomoskovsk, and Nikopol, comments Dmitry Kisilevskiy, Head of Corporate Affairs Department. – that is why we invited legendary BI-2 band as the major guest of this concert show program. Another present to young people, who are quite numerous among our employees, included performances by stars of the popular ukrainian projects".

Within these concert shows, in addition to the headliners, the metallurgists and citizens saw the performances by the "ukraine's got a talent" show stars and finalists of the project "Voice of the country". the concert show program included "No Comments" group, string quartet "Asturias", А6 show ballet, drummers' show, and, finally, some strongman's extreme. Also all our guests got a chance to participate in enthralling contests, quiz games, and a huge number of other surprises. the festival was closed with an amazing firework show, enjoyed all guests of metallurgy Day.

36 37

aNdrEy BarsuK, sENiOr fOrEmaN aT iNTErpipE NTrp:

“there were an amazing show before the beginning of the match and an incredible football atmosphere, so we were just overwhelmed with emotions. We did everything possible to support our team. everybody was happy”.

aNdrEy shOLKOv, sTEELmaKEr's apprENTiCE aT iNTErpipE sTEEL OuT-Of-furNaCE sTEEL TrEaTmENT uNiT:

“only yesterday euro-2012 seemed like an unreal venture, and now I am inside the legendary stadium with a ticket from Interpipe. mixed feelings and emotions boil up in my soul: on the one hand this is the pride for my country and fellow countrymen, while on the other hand I am worried about the final results in today's competition. the public followed every successful movement by the players on our team with thunderous applause. It felt like nobody heard the final whistle by the referee. everybody was overwhelmed with a wave of joy and pride for the results - for the victory!”

38 398. mArKet trendS

marKET TrENds

uKraiNEthe ukrainian railway wheels market in the second quarter of 2012 remains quite stable. Ample investment into the rejuvenation of the rolling stock in the russian Federation and Kazakhstan maintain a stable level of demand for products from the ukrainian rail carriage building enterprise. the production of wagons in ukraine for the first 6 months of 2012 has exceeded the analogous period of 2011 by

Rolling stock production, wagons

Wheel markets, thndt. t

SIC (RF and Ukr excl.)

RF

Ukraine

SIC (RF and Ukr excl.)

RF

Ukraine

630

2 quarter 11

16143

12039

827

3 quarter 11

16452

13952

1005

4 quarter 11

15097

11814

741

1 quarter 12

15641

11965

959

2 quarter 12

17454

13421

358

1 quarter 11

14462

12046

Wheels market, pcs

Freight turnover, billion t/km

5,4

2 quarter 11

100,0

50,0

3,2

3 quarter 11

95,3

52,4

4,9

4 quarter 11

86,5

28,5

9,1

1 quarter 12

112,8

46,9

11,3

2 quarter 12

115,1

44,6

8,2

1 quarter 11

107,2

43,5

480

2007

500

2008

403

2009

383

2010

397

2011

404

2012E

453

2000

421 426 426

351382

398 395

Rolling stock production, wagons

Wheel markets, thndt. t

SIC (RF and Ukr excl.)

RF

Ukraine

SIC (RF and Ukr excl.)

RF

Ukraine

630

2 quarter 11

16143

12039

827

3 quarter 11

16452

13952

1005

4 quarter 11

15097

11814

741

1 quarter 12

15641

11965

959

2 quarter 12

17454

13421

358

1 quarter 11

14462

12046

Wheels market, pcs

Freight turnover, billion t/km

5,4

2 quarter 11

100,0

50,0

3,2

3 quarter 11

95,3

52,4

4,9

4 quarter 11

86,5

28,5

9,1

1 quarter 12

112,8

46,9

11,3

2 quarter 12

115,1

44,6

8,2

1 quarter 11

107,2

43,5

480

2007

500

2008

403

2009

383

2010

397

2011

404

2012E

453

2000

421 426 426

351382

398 395

Rolling stock production, wagons

Wheel markets, thndt. t

SIC (RF and Ukr excl.)

RF

Ukraine

SIC (RF and Ukr excl.)

RF

Ukraine

630

2 quarter 11

16143

12039

827

3 quarter 11

16452

13952

1005

4 quarter 11

15097

11814

741

1 quarter 12

15641

11965

959

2 quarter 12

17454

13421

358

1 quarter 11

14462

12046

Wheels market, pcs

Freight turnover, billion t/km

5,4

2 quarter 11

100,0

50,0

3,2

3 quarter 11

95,3

52,4

4,9

4 quarter 11

86,5

28,5

9,1

1 quarter 12

112,8

46,9

11,3

2 quarter 12

115,1

44,6

8,2

1 quarter 11

107,2

43,5

480

2007

500

2008

403

2009

383

2010

397

2011

404

2012E

453

2000

421 426 426

351382

398 395

1,150 pieces and amounts to a total of 25,236 wagons. However, based on the 2012 results, we expect that the overall production of wagons in ukraine in 2012 will be slightly lower than in 2011 with a total of 40-45 thousand pieces. slowdown in the pace of ukrainian carriage engineering will be somewhat conditioned by the saturation of the rolling stock market and commissioning of new construction facilities in the russian Federation.

russiaN fEdEraTiON the railway wheels market in the russian Federation retains its positive dynamic. sustainable financing for the rejuvenation programs of the rolling stock, as well as long-term contracts between russian carriage engineering plants and transportation companies promote

high level consumption of railway wheels. the second quarter saw a market growth of 2% compared with the first quarter of 2012. In the third quarter we expect to get moderate growth in the railway wheels market, most likely within 2-3% (quarter/quarter).

EurOpE

the consumption volume of railway wheels in europe has been at quite a low level since 2009 (400 thousand pieces a year). Despite restoration of the turnover of railway freight in europe in the last years, the demand for wheel products

has virtually remained unchanged. We expect increase in demand – back up to the levels of 2007-2008 - within the european wheel market only in the long-term perspective for 2015-16.

38 39

40 41

klw.biz

№ 2, 2012

Setting the world in motion

iWheel KLW Customer NeWsLetter

KLW accomplishes certification for its continuous cast steel wheels

KLW engineering: a new direction in the wheel brand development

KLW at Innotrans 2012