3rd Quarter 2015 Production Results

RNS Number : 4586C
Evraz Plc
16 October 2015
 

EVRAZ Q3 2015 PRODUCTION REPORT

16 October 2015 - 

 

Q3 2015 vs Q2 2015 HIGHLIGHTS:

·      Consolidated crude steel output reached 3.5 million tonnes, improving 3% QoQ on the back of completed repair works at Russian steel mills.

·      Production of steel products, net of re-rolled volumes, was largely unchanged.

·      The share of finished steel products within consolidated volumes grew to 69% in Q3 2015 from 65% in Q2 2015 due to seasonal pickup in demand for construction products in Russia and improved demand for linepipe in North America.

·      Production volumes of railway products were 22% down due to maintenance at the Russian EVRAZ ZSMK rail mill and at EVRAZ North America rail mill in Pueblo coupled with seasonality in North America rail demand.

·      Consolidated raw coking coal output and production of coking coal concentrate increased by 36% and 17% respectively due to resumption of full-scale mining at Yuzhkuzbassugol and Raspadskaya on the back of improving domestic demand in Russia.

 

STEEL

Product, '000 tonnes

Q3 2015

Q2 2015

Q3 2015/ Q2 2015, change

9m 2015**

9m 2014**

9m 2015/ 9m 2014, change

Coke (saleable)

207

286

-27.5%

778

833

-6.6%

Pig iron

2,982

2,811

6.1%

8,924

9,230

-3.3%

Pig iron (saleable)

189

165

14.7%

425

229

85.2%

Crude steel

3,494

3,382

3.3%

10,790

11,651

-7.4%

Steel products, gross*

3,388

3,317

2.1%

10,507

11,248

-6.6%

Steel products, net of re-rolled volumes

3,154

3,119

1.1%

9,835

10,335

-4.8%

Semi-finished products ***

993

1,089

-8.8%

3,436

2,987

15.1%

Finished products

2,161

2,030

6.5%

6,398

7,349

-12.9%

Construction products

1,291

1,128

14.5%

3,602

3,854

-6.5%

Railway products

329

423

-22.1%

1,152

1,453

-20.7%

Flat-rolled products

188

167

12.7%

562

794

-29.2%

Tubular products

213

165

29.4%

633

786

-19.4%

Other steel products

140

148

-5.6%

450

462

-2.6%

Note. Numbers in this table and the tables below may not add to totals due to rounding.

 

*     Gross volume of steel products in the tables includes those re-rolled at other EVRAZ's mills. However, such volumes are eliminated as intercompany sales for purposes of EVRAZ's consolidated operating results.

** Includes production volumes of EVRAZ Vitkovice Steel disposed of in April 2014 and of EVRAZ Highveld Steel and Vanadium (EHSV) which are not consolidated starting from April 2015 due to business rescue proceedings

*** Consolidated production volumes of semi-finished products are preliminary as Q3 2015 intra-group re-rolling volumes are yet to be finalised.

 

RUSSIA and KAZAKHSTAN

Product, '000 tonnes

Q3 2015

Q2 2015

Q3 2015/ Q2 2015, change

9m 2015

9m 2014

9m 2015/ 9m 2014, change

Coke (saleable)

74

96

-23.4%

247

292

-15.4%

Pig iron

2,733

2,553

7.0%

8,030

7,977

0.7%

Pig iron (saleable)

166

142

16.8%

356

210

69.3%

Crude steel

2,820

2,697

4.6%

8,573

8,820

-2.8%

Steel products, gross

2,632

2,562

2.7%

8,062

8,161

-1.2%

Steel products, net of re-rolled volumes

2,552

2,500

2.1%

7,848

7,980

-1.7%

Semi-finished products

1,084

1,092

-0.7%

3,591

3,381

6.2%

Finished products

1,468

1,408

4.3%

4,257

4,599

-7.4%

Construction products

1,103

991

11.3%

3,076

3,155

-2.5%

Railway products

234

281

-16.9%

773

1,055

-26.8%

Other steel products

131

135

-3.3%

408

390

4.8%

 

In Q3 2015, production of pig iron and crude steel grew by 7% and 5% respectively, as in Q2 2015 production was affected by capital repair works at EVRAZ ZSMK's blast furnace 3 and EVRAZ NTMK's blast furnace 6.

 

Quarterly production of steel products increased mostly due to higher volumes of construction products (+11%) reflecting stronger demand during peak domestic construction season. Output of construction products in the nine months of 2015 vs. the same period of 2014 declined only by 2.5%.

 

Production of semi-finished steel products was largely unchanged in Q3 2015 over Q2 2015. When comparing the first nine months of this year to the same period last year, semi-finished goods demonstrated growth due to reallocation of part of the production volumes to export markets.

 

Production of railway products in Q3 2015, in particular rails, was down by 17% over Q2 2015 as a result of the scheduled capital repair of the EVRAZ ZSMK electric arc furnace and rail mill in Q3 2015. The 9M 2015 to 9M 2014 decrease in railway product output is attributable to lower consumption in the CIS countries caused by a decrease in new construction and overhaul of railway infrastructure.

 

Lower prices are in line with global benchmarks.

 

In Q4 2015, steel production is expected to remain at the level of Q3 2015 and production of semi-finished products for exports may increase due to low season in Russia.

 

Average selling prices

USD/tonne (ex works)

Q3 2015

Q2 2015

9m 2015

9m 2014

Coke

108

136

112

126

Pig iron

189

205

198

307

Steel products





Semi-finished products

241

278

276

417

Construction products

365

419

400

604

Railway products

527

611

553

779

Other steel products

381

462

421

604

 

 

NORTH AMERICA

Product, '000 tonnes

Q3 2015

Q2 2015

Q3 2015/ Q2 2015, change

9m 2015

9m 2014

9m 2015/ 9m 2014, change

Crude steel

432

431

0.3%

1,340

1,471

-8.9%

Steel products, net of re-rolled volumes

567

530

6.9%

1,712

1,909

-10.3%

Construction products

71

58

22.7%

204

254

-19.9%

Railway products

95

141

-32.4%

379

398

-4.8%

Flat-rolled products

188

167

12.7%

497

471

5.4%

Tubular products

213

165

29.4%

633

786

-19.4%

* Q3 2015 and 9m 2015 production volumes are preliminary

 

In Q3 2015, crude steel production remained unchanged compared to Q2 2015 as an increase in steel production for construction products was partially offset by a decline in rail production.

 

Railway products declined 32% in Q3 2015 when compared to the previous quarter due to the combined effect of approximately three weeks of maintenance outages at the EVRAZ Pueblo rail mill and a seasonal slowdown in rail purchases.

 

Production of flat-rolled products increased 13% over Q2 2015 as plate demand returned to more normal levels. Additionally, Q3 production benefited from no maintenance outages in comparison with a 17-day maintenance outage in Portland and eight days of planned outages mostly related to maintenance activities at EVRAZ Regina during Q2 2015.

 

Production of tubular products increased 30% QoQ on the back of higher linepipe volumes to fulfill increased demand from oil and natural gas transmission companies. Additionally, EVRAZ OCTG mills in Red Deer and Calgary and the seamless pipe facility in Pueblo which resumed production at the end of Q2 2015 continued operating at low levels throughout the quarter.

 

When comparing the first nine months of 2015 with the same period in the previous year, crude steel and steel products declined by 9% and 10% respectively. Key drivers for these declines were the idling of seamless and OCTG facilities, subdued flat products demand, and selective reduction in rod & bar volumes to eliminate low margin products. During the first nine months of 2015 we also carried out significant maintenance projects as described in the preceeding paragraphs in this report and in the first quarter and second quarter operating reports.

 

Third party sales of flat-rolled products increased as volumes previously consumed by EVRAZ North America's OCTG and hollow structural shapes mills were directed to third party sales.

 

Tubular goods output in the first nine months of 2015 declined as low oil and natural gas prices resulted in reduced exploration and production activity which in turn dampened OCTG consumption. This decline was partially offset by increased output of large diameter linepipe, a segment where we expect to continue seeing volume growth.

 

Prices for most steel products continued to decline during Q3 2015 reflecting prevailing scrap and other inputs declines.

 

During Q4 2015 we expect a return of rail production to normalised levels. During Q4 2015 we are also planning to reduce utilisation of the large diameter mill in Regina to approximately 70% of its capacity during October and November to accommodate work related to the new large diameter mill project announced previously.

 

Average selling prices

USD/tonne (ex works)

Q3 2015

Q2 2015

9m 2015

9m 2014

Construction products

589

738

672

798

Flat-rolled products

652

727

751

962

Tubular products

1,055

1,096

1,147

1,331

 

 

UKRAINE

Product, '000 tonnes

Q3 2015

Q2 2015

Q3 2015/ Q2 2015, change

9m 2015

9m 2014

9m 2015/ 9m 2014, change

Coke (saleable)

133

190

-29.6%

531

542

-1.9%

Pig iron

249

258

-3.3%

744

755

-1.5%

Pig iron (saleable)

24

23

1.9%

69

19

262.6%

Crude steel

242

254

-4.9%

729

769

-5.2%

Steel products

189

225

-16.2%

610

651

-6.4%

Semi-finished products

63

133

-53.0%

237

318

-25.4%

Finished products

126

92

37.3%

310

333

-7.0%

Construction products

117

79

48.1%

275

281

-2.2%

Other steel products

9

13

-30.0%

35

52

-33.0%

 

The 30% reduction in saleable coke volumes in Q2 2015 vs. Q3 2014 and in the nine months of 2015 vs. the nine months of 2014 was caused by decreased orders from other Ukrainian steel producers.

 

Production of crude steel and steel products, in particular semi-finished goods, fell as a result of scheduled maintenance works at blast furnace 3 and rolling mills in Q3 2015.

 

Production of construction products, meanwhile, grew by 48% in Q3 2015 vs. Q2 2015 and declined by 2% only in the nine months this year vs. 2014 due to better seasonal demand and larger shipments to the Ukrainian, Russian and European markets in 2015.

 

In Q4 2015, production of crude steel and steel products is expected to increase compared to Q3 2015 as no maintenance works are planned.

 

Average selling prices

USD/tonne (ex works)

Q3 2015

Q2 2015

9m 2015

9m 2014

Coke (saleable)

152

175

176

167

Pig iron

223

248

247

331

Steel products





Semi-finished products

289

325

327

454

Construction products

396

436

420

574

Other steel products

609

704

616

870

 

 

SOUTH AFRICA

 

Results of EVRAZ Highveld Steel and Vanadium have been deconsolidated following introduction of business rescue proceedings at EVRAZ Highveld and Vanadium in April 2015.

 

IRON ORE

Product, '000 tonnes

Q3 2015

Q2 2015

Q3 2015/ Q2 2015, change

9m 2015

9m 2014

9m 2015/ 9m 2014, change

Sinter (Russia)

2,884

2,595

11.2%

8,316

8,461

-1.7%

Pellets (Russia)

1,615

1,629

-0.8%

4,875

4,784

1.9%

Lumpy ore (Ukraine)

721

726

-0.6%

2,115

2,154

-1.9%

 

On completion of scheduled maintenance works at EVRAZ ZSMK's sintering machine in Q2 2015, production of iron ore products (sinter plus pellets) in Russia rose by 7% QoQ and remained flat when comparing the first nine months of 2015 with the same period in the previous year.

 

Production is expected to be stable in Q4 2015.

 

In Ukraine, production of lumpy ore has been stable, and maintenance works, replacement of parts of mining equipment scheduled for Q4 2015 are not expected to significantly impact production volumes.

 

In Q3 2015, prices for iron ore products followed global benchmarks.

 

Average selling prices

USD/tonne (ex works)

Q3 2015

Q2 2015

9m 2015

9m 2014

Pellets (Russia)

36

41

41

76

Lumpy ore (Ukraine)

20

21

23

56

 

 

COAL

Product, '000 tonnes

Q3 2015

Q2 2015

Q3 2015/ Q2 2015, change

9m 2015

9m 2014

9m 2015/ 9m 2014, change

Raw coking coal (mined)

5,232

3,840

36.3%

14,539

15,089

-3.6%

Yuzhkuzbassugol

2,426

1,510

60.6%

6,563

8,204

-20.0%

Raspadskaya

2,727

2,270

20.2%

7,799

6,885

13.3%

Mezhegeyugol

79

60

32.2%

177

0

n/a

Coking coal concentrate (production)

3,666

3,123

17.4%

10,169

10,165

0.0%

 

Coking coal

 

In Q3 2015, production of coking coal concentrate was 17% up on the back of increased raw coking coal production (+36% QoQ).

Following scheduled longwall moves at its Yerunakovskaya VIII, Osinnikovskaya and Yesaulskaya mines, Yuzhkuzbassugol expanded coal production by 61% compared with Q2 2015. The Raspadskaya coal company mined 20% more coal having completed the longwal move at the Raspadskaya underground mine and resuming full-scale operations at the Razrez Raspadksy open pit which were curtailed in Q2 2015 in response to excessive supply of GZh and GZhO grades in the market.

Pricing in the Russian market is set quarterly. In Q3 2015, the weighted average price of coking coal concentrate in Russian rouble terms remained unchanged compared to Q2 2015. However, due to to unexpected sharp Russian rouble depreciation, when re-calculated in US dollars, the prices are lower than in the previous quarter.

 

In Q4 2015, Yuzhkuzbassugol and Raspadskaya mines will continue to work on existing longwalls.

 

Average selling prices

USD/tonne (ex works)

Q3 2015

Q2 2015

9m 2015

9m 2014

Raw coking coal

29

42

32

47

Coking coal concentrate

54

68

59

74

 

 

VANADIUM

Product, tonnes of V*

Q3 2015

Q2 2015

Q3 2015/ Q2 2015, change

9m 2015

9m 2014

9m 2015/ 9m 2014, change

Vanadium in slag (gross production)

4,140

3,834

8.0%

13,891

16,203

-14.3%

Russia

4,140

3,834

8.0%

12,102

11,107

9.0%

South Africa

0

0

n/a

1,788

5,096

-64.9%

Vanadium in final products (saleable)

3,108

3,276

-5.1%

11,583

13,870

-16.5%

* Calculated in pure vanadium equivalent

 

In Q3 2015, Vanadium slag production grew by 8% QoQ as a result of higher pig iron output at EVRAZ NTMK. The 14% decrease in the first nine months of 2015 compared to the same period of 2014 is attributable to EVRAZ Highveld's deconsolidation since April 2015.

 

Production of final vanadium products decreased QoQ affected by lower availability of feedstock for production of ferrovanadium as a result of EVRAZ Highveld's production stoppage in South Africa and due to lower production of oxides, vanadium aluminum and chemicals at EVRAZ Stratcor in the USA due to a one-month idling of the plant in April 2015 driven by lack of feedstock. The 17% decline in production of final vanadium products in the first nine months of 2015 vs. the same period last year was also a result of deconsolidation of EVRAZ Highveld's subsidiary Hochvanadium.

 

Average Q3 2015 Metal Bulletin FeV80 index of $17.90/kgV showed a decline of 15.7% vs. $21.24/kgV of the previous quarter. In the meantime Ryan's Notes index used in North America averaged $19.63/kgV in Q3 2015, declining by 8.9% from $21.54/kgV achieved in Q2 2015. The EVRAZ selling quotation followed suit.

 

Average FeV indices

USD/tonne of V

Q2015

Q2 2015

9m 2015

9m 2014

Metal Bulletin Ferro-vanadium basis 78% min, free DDP, consumer plant, 1st grade Western Europe

17,896

21,239

20.306

25.868

Ryan's Notes N.A. FeV 80% min, US ex-warehouse, duty paid

19,630

21,536

22,031

28,913

 

 

Notes:

Semi-finished products include slabs, billets, pipe blanks and other semi-finished products.

Construction products include beams, channels, angles, rebars, wire rods, wire, and other construction products.

Railway products include rails, wheels, tyres and other railway products.

Flat-rolled products include commodity plate, specialty plate and other flat products.

Tubular products include large diameter line pipes, ERW pipes and casings, seamless pipes and other tubular products.

Other steel products include rounds, grinding balls, mine uprights, strips etc. For Ukraine they also include railway products.

 

 

###

 

For further information:

 

Media Relations:


London: +44 207 832 8998

Moscow:

media@evraz.com

 


Investor Relations:


London: +44 207 832 8990

Moscow: +7 495 232 1370

ir@evraz.com


 

 

 

EVRAZ is a vertically integrated steel, mining and vanadium business with operations in the Russian Federation, Ukraine, Kazakhstan, USA, Canada, Czech Republic, and South Africa. EVRAZ is among the top steel producers in the world based on crude steel production of 15.5 million tonnes in 2014. 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 2014 were US$13,061 million, and consolidated EBITDA amounted to US$2,325 million.

 


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