Severstal reports Q3 & 9M 2017 operational results

PAO Severstal (MICEX-RTS: CHMF; LSE: SVST), one of the world’s leading vertically integrated steel and steel-related mining companies, today announces its operational results for Q3 & 9M 2017.

Hot metal output remained almost unchanged at 2.23 mln tonnes (Q2 2017: 2.24 mln tonnes) compared with the previous quarter, whereas crude steel production was up 4% at 2.94 mln tonnes (Q2 2017: 2.83 mln tonnes). Crude steel output at CherMK in Q2 2017 was lower due to planned maintenance works at converter #1.

Consolidated steel product sales continued to grow in Q3, up 4% q/q to 2.86 mln tonnes, following 9% q/q growth in the previous quarter (Q2 2017: 2.75 mln tonnes). During Q3, the Company continued to sell stocks of HVA products accumulated in previous periods in response to increased demand and the ongoing construction season in Russia. Semi-finished product sales were impacted by inventory level normalisation following maintenance works at converter #1 in Q2.

The share of domestic sales volumes within the sales mix increased to 65% (Q2 2017: 60%). Improved domestic demand in Q3 was driven by the ongoing construction season. The share of high value-added (HVA) products within the sales portfolio increased significantly, to 49% (Q2 2017: 44%), driven by a destocking of large diameter pipes, cold-rolled, HDG and colour-coated products.

Coking coal concentrate sales volumes from Vorkutaugol increased 11% driven by an increase in production volumes following the planned long-wall repositioning at the Vorkutinskaya and Komsomolskaya mines in
H1 2017.

Iron ore pellet sales decreased 17% and totalled 2.38 mln tonnes (Q2 2017: 2.88 mln tonnes) despite the increase in production volumes q/q. This was due to higher share of finished goods in transit and accumulation of stocks at the end of Q3, following Q2 sell-off. The Company expects an uptick in pellet sales volumes in subsequent periods.

Raw material prices were supported by strong steel demand in China during Q3. Export steel prices started to recover, and Russian domestic steel prices followed global trends, but with a time lag. Industry experts
anticipate Russian domestic steel demand to increase 5% for 2017. On October 6, 2017 the EU Commission imposed definitive anti-dumping duties against Russian, Ukrainian, Iranian and Brazilian steelmakers. As a
result of Severstal’s track record of balanced and cautious European sales, the Company got the lowest duty rate among all exporting companies under the investigation, which is even lower than 5.3% for the
current price level. The ruling has some slight negative financial effects which are estimated to be immaterial versus our annual earnings and which are fully offset by the ability for us to continue serving
our European customers.