16.7.2012
16 July 2012 — EVRAZ plc (LSE: EVR) today released its operational results for the second quarter of 2012.
HIGHLIGHTS Q2 2012 vs. Q1 2012:
- Consolidated crude steel production decreased by 6%, mainly due to scheduled capital repairs, maintenance work and modernisation at Russian steel mills
- The share of finished products in the consolidated steel product mix remained unchanged at 80%
- Coking coal production decreased by 7% due to a longwall repositioning at Yuzhkuzbassugol’s Uskovskaya (former Ulyanovskaya) mine
- Prices for most steel product groups were marginally flat or a little higher (except in South Africa)
STEEL
In Q2 2012, EVRAZ’s overall production of crude steel decreased by 6% against Q1 2012 and by 4% vs. Q2 2011, mainly due to lower steel production levels at EVRAZ’s Russian steel mills as described below. The steel product volumes also declined, by 6% and 8% respectively, partly driven by the scheduled modernisation of production facilities (i.e. in Russia) and partly driven by weaker demand in some markets, i.e. in Europe and South Africa. The share of finished products in the total steel products output remained unchanged – 80% in Q1 and Q2 2012 and 79% in Q2 2011.
Russia
Crude steel production volumes decreased by 11% in Q2 2012 compared to the previous quarter and by 7% compared to Q2 2011 due to the following:
- capital repairs at EVRAZ’s Russian steel mills’ blast furnaces: BF 5 at EVRAZ NTMK in April and BF 3 at EVRAZ ZSMK in June 2012,
- a temporary shutdown of one of the two electric arc furnaces (and a related shutdown for the upgrade of one of the two continuous casters at EVRAZ ZSMK) as part of the rail mill modernization project,
- the scheduled maintenance of three converters (6-7 days each) at EVRAZ ZSMK in Q2 2012.
The remaining steelmaking facilities operated at their full capacity. However, as a result of the decreased steel production described above overall Russian output of steel products decreased – by 9% compared to Q1 2012 and by 5% compared to Q2 2011.
As the EVRAZ ZSMK’s rail mill has been closed for modernisation for five months since 20 April 2012, as previously announced by the Company, production of railway products, mainly rails, was down by 18% vs. Q1 2012 and by 13% vs. Q2 2011.
Russian steel production will return to normalised levels in H2 2012 as no major repairs of production facilities are planned.
Ukraine
In Q2 2012, crude steel production increased by 29% compared to Q1 2012 and by 23% compared to Q1 2011 due to the improving efficiency of the blast furnaces operation at EVRAZ DMZ Petrovskogo as well as the completion of planned maintenance at one of the two blast furnaces in Q1 2012. This led to a 27% increase of production volumes of steel products vs. both Q1 2012 and Q1 2011, mainly exported semi-finished products while the volumes of finished goods sold were generally down due to softer demand in Ukraine and Europe.
In Q3 2012 steel production will be impacted by major maintenance work at oxygen generation unit scheduled to start in September. The maintenance will take 45 days, and crude steel production is expected to decrease by 12% compared to Q2 2012.
North America
In Q2 2012, EVRAZ’s North American steel mills have continued to operate at high utilisation levels.
As a result of a number of operational improvements at EVRAZ Pueblo in Q1 2012 (a four-day shutdown of the rail mill for clearing the finishing docks, developing a Lean process flow and ultimately increasing the finishing capacity), the rail production increased by 12% quarter-on-quarter.
Production of tubular goods increased by 7% relative to the Q1 2012 volumes and remained at nearly the same level as a year earlier supported by continuing demand for OCTG pipes and an improving demand for large diameter pipes in the North American market.
No major repairs of production facilities are scheduled in Q3 2012.
Europe
The production of crude steel at EVRAZ Vitkovice Steel (EVS) in Q2 2012 increased by 12% compared to the previous quarter in line with increased hot metal quarterly deliveries by ArcelorMittal Ostrava under a “take or pay” contract. Construction products output dropped down to zero in Q2 2012 following the shutdown in February of a loss-making heavy section mill. Production of flat-rolled products went down by 10% vs. Q1 2012 and by 20% vs. Q2 2011 in response to worsening plate demand in European markets.
The production of the steel shop at EVS will be suspended from mid-July for 30 days due to scheduled repairs at the transportation route. The operation shutdown will be used for yearly maintenance at the plant.
South Africa
Production of crude steel and steel products in Q2 2012 vs. Q1 2012 decreased by 13% and 16% respectively due to weak South African market and unstable operations at iron and steel plants. In response to losses incurred in the first half of the year, management took actions to reduce fixed costs and stabilise production to start generating a positive margin under current market conditions. These improvements assume curtailment of steel production to 45,000 tonnes per month starting June and exit from the low-margin export business in order to focus on higher margin domestic customers, optimising operating labour schedules and SG&A costs.
MINING
Iron Ore
Overall production of saleable iron ore products by the Company was flat compared with Q1 2012 and Q2 2011.
Coking Coal
In Q2 2012, raw coking coal production at Yuzhkuzbassugol decreased by 7% compared to Q1 2012 due to a longwall repositioning at the Uskovskaya (former Ulyanovskaya) mine in May 2012. It increased by 10% compared to the same period last year when the production had been negatively impacted by shutdowns of the mines to resolve operational issues associated with safety risks.
Production of coking coal concentrate decreased by 7% quarter-on-quarter due to
- reduced internal supplies of raw coal from the Yesaulskaya mine that had a longwall repositioning at the end of March to the beginning of April (the Q1 2012 concentrate production was not affected due to use of raw coal from stock), and
- the Company’s decision to stop concentrate production from (external) raw coal supplied by the Polosukhinskaya mine.
All the Yuzhkuzbassugol’s mines are to be operational in Q3 2012 with no longwall repositionings planned during this period
Steam Coal
Both Yuzhkuzbassugol’s steam coal mines, Gramoteinskaya and Kusheyakovskaya, that underwent longwall repositionings in Q1 2012, resumed operation in Q2 , which was also reflected in growth of steam coal concentrate production. There are no longwall repositionings scheduled for Q3 2012.
VANADIUM
In Q2 2012, EVRAZ’s total production of primary vanadium (vanadium slag) decreased by 11% compared to Q1 2012, due to lower iron production both in Russia and South Africa (as mentioned above). The 18% decrease in production of ferrovanadium compared to Q1 2012 and by 10% compared to Q2 2011 was driven by weaker market demand. Nitrovan® production rose by 85% compared to Q1 2012 after completion of the planned maintenance at Vametco, South Africa, in Q1 2012.
For more information see the attached press release "EVRAZ Q2 OPERATIONAL RESULTS"
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For further information:
Investor Relations:
Alexander Boreyko
Director, Investor Relations
London: +44 207 832 8990 Moscow: +7 495 232 1370
ir@evraz.com
Media Relations:
Oleg Kuzmin
VP, Corporate Communications
London: +44 207 832 8998 Moscow: +7 495 937 6871
media@evraz.com
EVRAZ is a vertically integrated steel, mining and vanadium business with operations in the Russian Federation, Ukraine, USA, Canada, Czech Republic, Italy and South Africa. EVRAZ is among the top 20 steel producers in the world based on crude steel production of 16.8 million tonnes in 2011. In 2011 EVRAZ sold 15.5 million tonnes of steel products. A significant portion of the company's internal consumption of iron ore and coking coal is covered by its mining operations. The company's consolidated revenues for the year ended 31 December 2011 were US$16,400 million and consolidated adjusted EBITDA amounted to US$2,898 million.
