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Added valueproducts,dedicatedservices, tailored R&D

7/o710th Issue

2 Tenaris News

Investments to provide tubularcomponents, customized logistics,and dedicated product develop-ment enhance customer relation-ships

Tenaris News 3Tenaris News 3

During the last year, Tenaris has been

making investments to set up a dedicated

component centre in Zalau, Romania, to

serve the tubular component needs for

applications in hydraulic cylinders of

Caterpillar’s trucks, hydraulic excava-

tors, wheel loaders and tractors.

Starting from August TenarisSilcotub’s

Component Center will supply a wide

variety of tubes, flanges and assembled

components to the customer.

The long tubes, manufactured at the

Costa Volpino plant in Italy, have to sati-

sfy strict technical requirements.

To ensure their quality, Tenaris performs

electromagnetic inspections and ultraso-

nic testing. The long tubes are then sent

Expanding Capabilities to Serve Caterpillar’s Needs

A dedicated component center inRomania will provide added valueproducts to the giant earthmovingmachinery manufacturer.

to Romania for further added value

operations.

With an investment of about 3 million

USD, Tenaris’s component centre will

have new equipment which, in addition

to traditional cutting, beveling, pre-tur-

ning, welding of flanges and other

accessories, will also perform drilling

and tapping of the flange holes in order

to have a component ready for assem-

bly at the customer’s site.

“All our customer will have to do is

paint the component before assembly

in the finishing lines, thus saving time

and money,” explained Fabio Saita,

Component Center Project Manager in

Zalau.

4 Tenaris News

subject to strict qualification processes

(PPAP – Production Part Approval

Process), in order to test not only the

dimensional tolerances but also the qua-

lity of the mechanical working, such as

the welding, through to mechanical,

metallurgical, destructive and non

destructive tests,” continued Saita.

Lorenzo Caserta, Product Development

Manager for Components, explains:

“Welding is a crucial operation in the

assembly process.

Our Research and Development team

has been collaborating with the Italian

Welding Institute to obtain the qualifi-

cation of suitable GMAW (Gas Metal

Arc Welding) welding procedures, speci-

fically for hydraulic cylinder compo-

nents. A sound weld between the tube

and the flange is fundamental for the

structural integrity of the hydraulic

cylinder. The qualified WPS (Welding

Procedure Sheet) was developed by

performing several welding tests at one

of the Italian laboratories of the

PraxAir group, a leading company in

the construction of robotic welding

stations.”

This project also features critical logi-

stics and services aspects. “The compo-

nents produced in Romania will have to

be sent to the United States, with just-

in-time deliveries and personalized

stock management,” concluded Saita,

“Tenaris will have a consignment stock

near the client in order to guarantee the

product is available immediately.”

Installation of all the new equipment in

Zalau has been completed end of June

and the first supply is expected to be at

the beginning of August. ≤

A sound weld between the

tube and the flanges is fun-

damental for the structural

integrity of the hydraulic

cylinders.

4 Tenaris News

Additionally, a shed has been revamped

and adapted in order to satisfy the strict

requirements demanded when perfor-

ming mechanical operations on the

tubes. It has been thermally isolated to

ensure a controlled temperature that

will avoid deformation during opera-

tions, thus respecting the very tight

dimensional tolerances requested.

“The tubes for hydraulic cylinders are

Tenaris performs an entire set of operations on the tubes in order to provide a component ready forassembly

Tenaris News 5

Enhancing the Relationship Between Customer and Supplier

The Tenaris Supply Agreement aims at achieving 100%compliance with customers’ requests.

The analysis of the demands of auto-

motive and industrial customers, mainly

in the hydraulic cylinders sector, where

timely and cost effective production pro-

cesses are key market drivers, made evi-

dent for Tenaris the need to set up a

logistics agreement aimed at optimizing

specific supply chain and order manage-

ment issues.

Through a better definion of the opera-

tive procedures, process responsibilities

and order processing based on supplier’s

capabilities and customer’s needs, the

Tenaris Supply Agreement benefits both

customer and supplier.

The first Tenaris Supply Agreement

(TSA) was drafted in May 2004 for a

customer buying tubes for hydraulic

cylinders. The high service level required

in the complex environment the custo-

mer operated showed supply success

depended on the timely orchestration of

all departments and thorough definition

of logistic rules.

The agreement details:

• the material supplied;

• Tenaris mills involved in the

production;

• norms of reference for the tube

production;

• terms of the supply based on delivery

dates, shipping notes, invoices, quan-

tities, etc. requested by the customer;

• order and re-order operative procedu-

res as well as the possible need for a

safety stock;

• the name of the commercial front end

who will be the direct point of

contact with the customer;

• the order manager, managing the fore-

cast, reserving mill capacity and fol-

lowing up orders with production.

At the very beginning, both parties also

subscribe to an emergency plan so that

production continuity is guaranteed.

The definition of the TSA involves a wide

group of people, from Production,

Planning, Logistics, Shipping and

Technical Assistance, but the Order

Manager plays a key role.

As Cinzia Rottoli, Order Execution

Manager, explains: “The Order Manager

is the link between the supply chain struc-

ture and the end-user logistic team.

This figure is in charge of order entries

and follow-up, claim management, credit

coordination, logistic rules in agreement

with customer, stock management with

attention to the aging rate. He is conti-

nuously in contact with several areas,

such as commercial team, accounting and

credit departments, quality, program-

ming, warehouse and services, shipping

companies and the mill.”

“TSA aims at promoting a strong busi-

ness partnership in which both the sup-

plier and the end-user commit themsel-

ves to follow specific procedures while

communicating with each other,”

explained Danilo Pagni, Services

Development Regional Manager.

“Tenaris’s purpose is to give the maxi-

mum assistance to its customers in

order to reach 100% compliance with

their specific needs. Success depends on

respecting every aspect of the supply

detailed in the document.”

A frequent and timely flux of communi-

cation within the Tenaris working group

and the customer is essential and allows

the administrative costs associated with

the logistic chain to be reduced.

The logistics

agreement

aims at

optimizing

specific

supply chain

and order

management

issues.

6 Tenaris News

Tenaris News 7

Today, Tenaris is the main supplier of

world known airbag manufacturers,

with a production representing nearly

27% of the worldwide segment con-

sumption, highly concentrated in the

Nafta market.

To answer the demand of a constantly

growing market, Tenaris has set up a

multimillion-investment plan to increase

production capacity of the cold drawn

facility at its mill in Mexico and expand

the automotive component centre there.

“The first stage of the plan is about to

finish. With an investment of 5,600,000

USD, we added 3,500 sqm to the total

component centre’s surface and instal-

led new equipment to perform cutting,

drilling, stamping, punching and spot

facing operations,” explained Ramón

Espinosa, Investment Project

Coordinator. With this investment,

annual production capacity will increase

from the initial 6 million pieces in 2004

to more than 33 million in 2008.

Furthermore, two important contracts

have been signed in China where the

automotive component centre in

Mexico will be supplying approximately

2 million pieces per year to global air-

bag manufacturers.

In Romania, last summer, a total invest-

ment of 2 million USD was approved to

create a dedicated line for the supply of

2,125,000 pieces per year to the global

airbag inflator manufacturer, ARC

Automotive. The expansion of the faci-

lity in Zalau and the installation of new

machines to perform added value opera-

tions, such as cutting, stamping and tur-

ning previously managed at Costa

Volpino, Italy have been carried out.

More recently, as the first line didn’t

have the capacity to fully produce all the

requested pieces, another cutting machi-

ne having excellent performance with

high-strength steels has been added.

Special recruitment and training of ope-

rators were tackled as well as the crea-

tion of a dedicated team. “The product

and service quality requested is very

high, as well as the compliance level and

reactivity. The supply chain system

we’re setting up is also very complex,

due to the integration with Costa

Volpino and the just-in-time deliveries

requested,” explaines Fabio Saita,

Component Centre Project Manager in

Zalau.

The Engineering Product Department is

also conducting a feasibility study to

perform the steel making and the cold

drawn production entirely in Romania

in order to optimise the whole manufac-

turing process and better manage the in-

house material stock. Once finalized, it

will be possible to control all the opera-

tions thus reducing costs, and turning

the focus on developing alternative pro-

duction cycles, such as hardening and

quenching.

“We are convinced that having manu-

facturing facilities located in cost com-

petitive countries, ready to supply regio-

nally the requirements of our airbag

customers, will give us the flexibility

and efficiency requested by the dynamic

automotive market, thus consolidating

our global leading position in the airbag

segment”, says Fabio Gomez,

Automotive Sales Director.

Strategic Investments in the Airbag Segment

Tenaris has been investing in Mexico and Romania toexpand its production capacity and will supply tubularcomponents to global airbags manufacturers in China.

The product and service quality requested in the airbag segment is very high as well as the

compliance level and reactivity.

8 Tenaris News8 Tenaris News

Stelmi Italia: a European Partner Distributor

Know-how inhigh qualityprecision tubesties up withtechnologicalleadership in theskiving androller burnishingprocess to betterserve thehydrauliccylinder sector.

Earthmoving machine world demand in

2006 was 11% higher than 2005, with

Europe growing at a faster pace (+17%

vs. 2005) due to high investments in the

construction sector. Expected growth

rate for 2007 and 2008 is around 5%

worldwide, with European growth rate

at 3%. In this healthy scenario, Tenaris

has joined forces with Stelmi Italia,

establishing a framework agreement for

the authorized distribution of precision

seamless steel tubes, skived and roller

burnished for the production of hydrau-

lic cylinders in Europe.

With a yearly production of 20,000 tons

and a world presence in 36 countries,

Stelmi Italia has had its manufacturing

facility in Milan since 1976. It is the

European leader in production of skived

and roller burnished tubes for hydraulic

cylinders. It also produces hard chrome

plated steel bars for the hydraulic and

pneumatic sector. Qualitative excellence

achieved by employing innovative tech-

nologies and high performance steels;

customer service characterized by stric-

tly respecting delivery time and a strong

global orientation, with 75% of the

production devoted to export, are ele-

ments at the heart of the corporate

commercial strategy.

Based on the contract signed last year,

Stelmi Italia receives cold drawn tubes

for hydraulic cylinders from Tenaris,

performs skiving and/or roller burni-

shing operations and sells them to small

end users and other distributors for pro-

duction of construction, agricultural,

forestry, mining and highway equip-

ment, and for a wide variety of other

mobile and material handling equip-

ment in the European territory.

“We chose Stelmi Italia for the common

commercial vision in addition to their

production capacity, their product qua-

lity and their leading technology. Our

partnership brings a great growth

potential to both companies, which is

witnessed by the 50% increase in volu-

me we have registered since last year.” -

explains Alfredo Meazza, Sales Director

Industrial End Users.

Luca Ceriani, Stelmi Italia Managing

Director expands: “The collaboration

with Tenaris is built on the strong foun-

dation of sharing our commercial stra-

tegy supported by significant industrial

investments. Stelmi Italia is investing in

a new production site that will allow us

to double our production capacity rea-

ching 100,000 mt of skived and roller

burnished tubes per month. The com-

mercial synergy coming from the esta-

blished Tenaris brand in tubes for

hydraulic cylinders along with ours in

the chrome plated steel bar field has

allowed us to strengthen our presence in

Europe.”

The collaboration doesn’t stop at cur-

rent markets and industrial capabilities.

Plans for covering Argentina and fast-

growing markets such as USA, India and

China are under evaluation.

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Tenaris News 9Tenaris News 9

Tubes to Lift up Palfinger’s Hydraulic Systems

Tenaris is the partner supplier of highperformance tubes for hydraulic cylinders tothe Austrian crane constructor. A dedicatedlogistics system was recently set up.

Established in 1932, Palfinger has for

many years been among the leading

international manufacturers of

hydraulic lifting, loading and handling

systems. As a multinational group with

its headquarters in Salzburg, Austria, it

has production and assembly sites in

Europe, in North and South America as

well as in Asia. With a total revenue of

585 Million Euro and a market share of

30 percent, Palfinger is world market

leader in truck-loading knuckle-boom

cranes and hookloaders. The company

is also a leading worldwide producer of

transportable forklifts as well as forestry

and recycling cranes and possesses unri-

valled European technology as a market

leader in railway applications in the

high-tech sector.

The relationship with Tenaris dates

back to 2001, when Palfinger was look-

ing for a global player able to supply

high quality tubes for their hydraulic

systems. In 2003, Tenaris met their

technical and quality requirements and,

since then, Tenaris has increased its

product supply from 3,000 tons in 2005

to 6,000 tons in 2007. Tenaris provides

full length cold drawn tubes (according

to specification TN008-00, Series DP,

steel PHC 355/ 460) and hot rolled tubes

(according to EN 10297-1 E355/ E470)

to Palfinger’s main plant in Tenevo

(Bulgary) and to the nearby stock yard

in Cherven Brjag, as well as to their

other facilities in Lengau (Austria) and

Maribor (Slovenia).

On a recent visit to the Italian facility,

Ralf Fontanelle, and Torsten Fisher,

from Global Strategic Purchasing at

Palfinger, took the chance to visit the

production sites and discuss product

supply with Alfredo Meazza, Sales

Director Industrial End Users, Alberto

Pessina, Product and Sales Manager

Tubes for Hydraulic Cylinders and

Marc Rennings, Country Manager

Germany and Scandinavia. As

Fontanelle states: “The extension sys-

tem of our telescopic cranes and hook-

loaders is made of fine-grained steel

from Tenaris. As innovation is a pillar

of both companies’ corporate strategy,

we’re here to discuss current tubular

supply and possibilities to use alterna-

tive products able to reduce the weight

of the system while reaching increased

lifting loads, a key feature in this kind of

application.”

On the basis of the strong business part-

nership and considering Palfinger’s needs

and Tenaris’s capabilities, a supply agree-

ment has also been agreed. The logistics

framework regulates the customer’s fore-

cast, which is provided once per year and

is updated monthly to reserve mill capac-

ity and to settle purchasing orders. The

agreement also defines lead times, ship-

ping quantities, terms of deliveries, tran-

sit times, packaging, marking and how

any variation will be communicated

between both parties.

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10 Tenaris News10 Tenaris News

Focus onResearch & DevelopmentR&D centres collaborate with world-recognizedinstitutes for continued product and processimprovements and development of newcustomized solutions.

One of Tenaris main commitments is to

investing in the development of new

products and in the continued optimiza-

tion of its industrial processes and pro-

ducts. In order to pursue this goal, every

year Tenaris reviews its Product

Development Plan, in particular all

R&D activities that will be carried out

the following year.

In the industrial sector Tenaris R&D

activities focus on tubes for the fol-

lowing applications:

• hydraulic cylinders;

• hollows for gas cylinders;

• structural;

• mechanical products for oil&gas

applications like perforating guns and

for non-oil applications like drilling

rods or bushings.

For the hydraulic cylinder market,

Tenaris R&D is developing tubes with

improved fatigue resistance and tough-

ness, where their testing capabilities per-

mit structural integrity in different ser-

vice conditions to be assessed, through

full-scale fatigue and burst testing. The

effect of different surface treatments

(like nitriding) has also been evaluated.

In the gas cylinders sector Tenaris R&D

programs include the development of

high strength steel with improved stress

corrosion resistance cracking.

In the automotive industry, Tenaris is

focusing, above all, on tubes and com-

ponents for airbag inflators. The tubes

used for these components must be

absolutely free of injurious defects, sati-

sfying strict dimensional and surface

appearance requirements and be able to

receive high stresses at extremely eleva-

ted strain rates. In recent years, Tenaris

has developed new steels to satisfy this

demand, such as Tenaris UHSS 145 and

now UHSS 160 grade, a low carbon

alloy tubing, fully DOT compliant, with

ultra high strength properties and out-

standing ductile behaviour at low tem-

perature.

Today, through its component centre in

Mexico, Tenaris is working side by side

with important clients to maximize the

advantages of these developments, in

order to manufacture new component

designs.

All product development and R&D

activities are coordinated centrally in

Dalmine, Italy and carried out at

various locations: in laboratories,

metallurgical and engineering depart-

ments in Tenaris mills in Argentina,

Italy, Romania and Mexico; in the

Tenaris R&D centers, like CINI (Centro

de Investigación Industrial) in Argentina

and Dalmine R&D facility in Italy, and

in some external institutes like

the world recognized CSM (Centro

Sviluppo Materiali) based in Rome,

Italy and TWI (The Welding Institute)

in UK, along with several prestigious

Universities like the Politecnico di

Milano and the Vancouver University.

“The entire Product development and

R&D organization, by means of con-

stant dialogue with our clients, has

brought significant improvements to

Tenaris products and processes,”

explains Edgardo Lopez, Product

Development Global Leader for

Mechanical and Automotive

Applications. “They have proven to be

valuable resources to solve customer’s

application problems, to develop new

products and identify cost-effective solu-

tions. Even if each centre has its own

specializations, all of them are integra-

ted in Tenaris and contribute to iden-

tifying, for example, optimum process

conditions for steel making and casting

of high carbon steel, or the right heat

treatment conditions for further compo-

nent manufacturing processes and

higher service performance, or the

actual load service conditions in several

components. The latter allows an opti-

mum material design and complex

material characterization, like fatigue

thresholds and fracture mechanics para-

meters in dynamic conditions.”

All product development activities are coor-

dinated centrally in Dalmine, Italy and car-

ried out at various locations.

REGIONAL OFFICES

ARGENTINABuenos Aires

AutomotiveAdrian Filaafila@siderca.com(54) 3489 435332 tel(54) 3489 435366 fax

IndustrialRuben Fidalgorfidalgo@tenaris.com(54) 11 4018 3214 tel(54) 11 4018 1250 fax

CANADATorontoGeorge Nogalognogalo@tenaris.com(416) 216 4617 tel(416) 214 2043 fax

CHINABeijingDavid Crooksdcrooks@tenaris.com(86) 10 6437 6744 tel(86) 10 6437 6746 fax

EUROPEAutomotiveRicardo Peruginirperugini@tenaris.com(39) 35 560 3351 tel(39) 35 560 2454 fax

FRANCESergio Robertsrobert@tenaris.com(39) 35 560 2159 tel(33) 35 565 768 fax

GERMANYMünchenMarc Renningsmrennings@tenaris.com(49) 089 5908 2111 tel(49) 089 5908 1369 fax

JAPANKawasakiTakeshi Esumitesumi@nkktubes.co.jp(81) 44 328-3444 tel(81) 44 328-3458 fax

KOREASeoulLeandro Ramoslramos@tenaris.com(82) 2 798 3385 tel(82) 2 798 3392 fax

ITALYDalmine

DistributionMarco Genelettimgeneletti@dalmine.it(39) 035 560 3403 tel(39) 035 560 25768 fax

PRODUCT AND SALES MANAGERS

Hollows for Gas CylindersStefano Capponiscapponi@dalmine.it(39) 035 560 3189 tel(39) 035 378 098 fax

Mechanical TubesPietro Bragugliapbraguglia@tenaris.com(39) 035 5603856 tel(39) 035 560 2336 fax

Plumbing, Gas and Water PipesGianfranco Meregalligmeregalli@dalmine.it(39) 035 560 3926 tel(39) 035 560 2454 fax

Structural TubesAlessandro Giacobbedalgia@dalmine.it(39) 035 560 2332 tel(39) 035 560 2336 fax

Tubes for Hydraulic CylindersAlberto Pessinaapessina@dalmine.it(39) 035 560 2164 tel(39) 035 560 2336 fax

Tubes for AirbagsScott Stephenssstephens@tenaris.com(1) 713 336 7369 tel(1) 866 260 0854 fax

Tubes for - Transmission Parts- Trailer AxlesAlberto Gallandagalland@tenaris.com(52) 229 989 1111 tel(52) 229 989 2404 fax

www.tenaris.com

MEXICOVeracruz

AutomotiveAlberto Gallandagalland@tenaris.com(52) 229 989 1111 tel(52) 229 989 2404 fax

IndustrialVictor Palenciavpalencia@tamsa.com.mx(52) 55 5282 9943 tel(52) 55 5282 9966 fax

ROMANIAZalau

AutomotiveJuan Muhalajmuhala@tenaris.com(40) 260 603 062 tel(40) 260 610 743 fax

IndustrialAndras Baloghabalogh@tenaris.com(40) 260 603 223 tel(40) 260 610 743 fax

SCANDINAVIAMarc Renningsmrennings@tenaris.com(49) 089 5908 2111 tel(49) 089 5908 1369 fax

SPAINSergio Robertsrobert@tenaris.com(39) 35 560 2159 tel(33) 35 565 768 fax

UKCoseleyKevin Whitehousekwhitehouse@tenaris.com(44) 1902 665288 tel(44) 1902 665263 fax

USAHouston

AutomotiveScott Stephenssstephens@tenaris.com(1) 713 336 7369 tel(1) 866 260 0854 fax

DistributionPablo Penappena@tenaris.com(1) 713 3367328 tel(1) 713 7674444 fax

IndustrialAlvaro Dominguezadominguez@tenaris.com(1) 713 767 4416 tel(1) 713 336 7310 fax

Industrial & Automotive Services