Other Risks

Equipment failures or production curtailments or shutdowns

TMK production capacities are subject to the risk of equipment failures due to unanticipated events, such as fires, explosions and adverse weather conditions. Manufacturing processes depend on critical pieces of steelmaking and pipe-making equipment. Such equipment may, on occasion, be out of service as a result of unanticipated failures could require the Company to close part of the relevant production facility or cause to reduce production on one or more of production lines. Any interruption in production capability may require TMK to make significant and unanticipated capital expenditures to affect relevant repairs, which could have a negative effect on the Company’s profitability and cash flows. TMK currently maintains insurance against losses that may arise in case of property damage, accidents and transportation of goods. The Company also maintains corporate product liability and directors and officers’ liability insurance policies. Nevertheless, any recoveries under insurance coverage that may be obtained in the future may not offset the lost revenues or increased costs resulting from a disruption of operations.

Insurance against all potential risks and losses

TMK does not carry insurance against all potential risks and losses that may arise in connection with the quality of the Company’s products, property damage, work-related accidents and occupational illnesses, natural disasters and environmental contamination. TMK currently maintains no business interruption insurance. Losses or liabilities arising from these or other events could increase TMK costs and could adversely affect the Company’s business, financial position and operating results.

Ability to effect staff alterations and shortages of skilled labor

TMK Russian subsidiaries are in many regions the largest employers in the cities in which they operate, such as Volzhsky, Taganrog, Kamensk-Uralsky and Polevskoy. While the Company does not have any specific legal social obligations or responsibilities with respect to these regions, the ability to effect alterations in the number of TMK employees may nevertheless be subject to political and social considerations. Any inability to make planned reductions in the number of employees or other changes to operations in such regions could have an adverse effect on the Company’s results of operations and prospects.

Competition for skilled labor in the steel pipe industry remains relatively intense, and labor costs continue to increase moderately, particularly in the CIS, Eastern Europe and the United States. TMK expects the demand and, hence, costs for skilled engineers and operators will continue to increase, reflecting the significant demand from other industries and public infrastructure projects. Continual high demand for skilled labor and continued increases in labor costs could have a material adverse effect on the Company’s business, financial position and results of operations.

Furthermore, any work stoppages, strikes or other laborrelated developments could have an adverse effect on our business, financial position and results of operations.

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