Severstal reports Q4 & FY 2017 operational results

Q4 2017 GROUP HIGHLIGHTS

• Hot metal output increased 5% to 2.34 mln tonnes (Q3 2017: 2.23 mln  tonnes) compared with the previous quarter, and crude steel production was up 2% at 3.01 mln tonnes (Q3 2017: 2.94 mln tonnes).

• Consolidated steel product sales declined 2% to 2.78 mln tonnes compared with the previous quarter (Q3 2017: 2.86 mln tonnes) after significant stock sell-off in Q3. Meanwhile, the Company replenished stocks of steel products at  its export subsidiaries in Q4. Semi-finishedproduct volumes growth was driven by Mill-2000 maintenance works and increased demand for billets in Q4.

• The Company increased export sales volumes to 42% (Q3 2017: 35%). The  share of high value-added (HVA) products within the sales portfolio remained high at 47% (Q3 2017: 49%) driven by the continued destocking of large diameter pipes (LDP).

• Coking coal concentrate sales volumes from Vorkutaugol declined 10% impacted by the long-wall repositioning at the Komsomolskaya mine and the normalisation of production volumes of “Concentrate K” coal after an uptick in  Q3.

• Iron ore pellet sales increased 39% and totalled 3.30 mln tonnes (Q3 2017: 2.38 mln tonnes) due to the realisation of a significant share of finished goods in transit in Q4, shifted from the previous quarter. Iron ore concentrate sales increased 6% q/q to 1.14 mln tonnes (Q3 2017: 1.08 mln tonnes). Iron ore concentrate sales improvement in Q4 reflects the consolidation of the Yakovlevskiy mine.

• In Q4 2017 raw material prices were high: HCC prices were mainly supported by supply disruptions at Dalrymple Bay (Australia) and Chinese restocking ahead of the heating season. Iron ore prices recovered as a result of higher steel margins in China and improved demand for higher quality iron ore. Global export steel prices remained high on the back of Chinese production restrictions in  the November-March heating season and decreased exports. Though Russian steel demand softened due to seasonal factors, Russian export prices followed global trends and are expected to increase in Q1 2018. Industry experts anticipate Russian steel demand to continue growing in 2018 by 3−4%.

• In 2018, Severstal Resources anticipates an increase in production volumes of additional 40kt of pellets at Karelsky Okatysh and additional 370kt of  coking coal concentrate at Vorkutaugol. Yakovlevskiy mine iron ore output is  estimated to be c.1.3 million tonnes for 2018. Severstal Russian Steel production volumes growth will be positively impacted by a new ladle furnance (+75kt of crude steel) and a new HDG (+400kt) and colour-coating (+200kt) unit.