Q2 2017 production report

RNS Number : 4465L
Evraz Plc
19 July 2017
 

EVRAZ Q2 2017 PRODUCTION REPORT

19 July 2017 - EVRAZ plc (LSE: EVR; "EVRAZ" or the "Group") today released its operational results for the second quarter of 2017.

 

Q2 2017 vs Q1 2017 OPERATIONAL HIGHLIGHTS:

 

·    Consolidated crude steel output fell by 9.5% quarter-on-quarter to 3.3 million tonnes in Q2 2017, primarily due to planned capital repairs at EVRAZ ZSMK's oxygen steelmaking converter no. 5 and blast furnace no. 2, as well as planned capital repairs at EVRAZ DMZ' oxygen-converter plant.

·    Production of steel products, net of re-rolled volumes, decreased by 8.0% quarter-on-quarter to 3.0 million tonnes as a result of reduced output of semi-finished products amid planned capital repairs at EVRAZ ZSMK.

·    The share of finished steel products in consolidated volumes rose to 63.8% in Q2 2017, up from 55.6% in Q1 2017, due to lower output of semi-finished products in Russia and Ukraine.

·    Production of construction products increased by 10.5% quarter-on-quarter, as demand for construction products improved with the beginning of construction season.

·    Production of railway products was down 1.9% due to changed product mix on Russian facilities, which was partially offset by higher output in North America (up 10.1% quarter-on-quarter) due to marginally increased demand for rails driven by Class I railroads finalised destocking.

·    Output of flat products rose by 8.4% quarter-on-quarter, mostly following planned maintenance outage at EVRAZ Palini e Bertoli in Q1 2017 as well as due to strengthening demand in North America.

·    Consolidated raw coking coal output increased by 7.9% following a planned longwall repositioning at the Raspadskaya mine in Q1 2017. In addition, open-pit mining operations were started at the site of the Raspadskaya-Koksovaya mine to produce deficit OS (semi-hard) coking coal grade.

 

STEEL

Product, '000 tonnes

Q2
2017

Q1 2017

Q2 2017/ Q1 2017, change

H1

2017

H1

2016

H1 2017/ H1 2016, change

Coke (saleable)

171

118

44.9%

289

457

-36.8%

Pig iron

2,793

2,894

-3.5%

5,687

5,557

2.3%

Pig iron (saleable)

195

44

343.2%

239

188

27.1%

Crude steel

3,328

3,679

-9.5%

7,007

6,739

4.0%

Steel products, gross*

3,211

3,522

-8.8%

6,733

6,461

4.2%

Steel products, net of re-rolled volumes

2,994

3,255

-8.0%

6,249

6,134

1.9%

Semi-finished products**

1,084

1,446

-25.0%

2,530

2,439

3.7%

Finished products

1,910

1,809

5.6%

3,719

3,695

0.6%

Construction products

970

878

10.5%

1,848

2,075

-10.9%

Railway products

410

418

-1.9%

828

751

10.3%

Flat-rolled products***

206

190

8.4%

396

279

41.9%

Tubular products

167

166

0.6%

333

308

8.1%

Other steel products

157

157

0.0%

314

282

11.3%

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 mills. However, such volumes are eliminated as inter-company sales for the purposes of EVRAZ' consolidated operating results.

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

*** Includes production volumes of EVRAZ Palini e Bertoli (65 thousand tonnes in Q2 2017 and 116 thousand tonnes in H1 2017), which resumed operations in 2016 after suspending them in August 2013.

 

RUSSIA and KAZAKHSTAN

 

Product, '000 tonnes

Q2 2017

Q1 2017

Q2 2017/ Q1 2017, change

H1
2017

H1
2016

H1 2017/ H1 2016, change

Coke (saleable)

75

69

8.7%

144

191

-24.6%

Pig iron

2,537

2,663

-4.7%

5,200

5,020

3.6%

Pig iron (saleable)

90

37

143.2%

127

175

-27.4%

Crude steel

2,762

2,980

-7.3%

5,742

5,444

5.5%

Steel products, gross

2,558

2,806

-8.8%

5,364

5,104

5.1%

Steel products, net of re-rolled volumes

2,493

2,769

-10.0%

5,262

5,009

5.1%

Semi-finished products

1,178

1,536

-23.3%

2,714

2,408

12.7%

Finished products

1,315

1,232

6.7%

2,547

2,600

-2.0%

Construction products

859

759

13.2%

1,617

1,768

-8.5%

Railway products

311

328

-5.2%

639

570

12.1%

Other steel products

145

145

0.0%

290

262

10.7%

 

In Q2 2017, production of crude steel and steel products (net of re-rolled volumes) decreased quarter-on-quarter by 7.3% and 10.0%, respectively, due to planned capital repairs at EVRAZ ZSMK's oxygen steelmaking converter no. 5 in April-June and blast furnace no. 2 in June.

 

The decrease in steel product volumes was primarily caused by reduced output of semi-finished products (down 23.3% quarter-on-quarter), which was partly offset by higher output of construction products (up 13.2% quarter-on-quarter), driven by stronger demand for rebars and channels.

 

Output of railway products, including rails, was down slightly quarter-on-quarter due to lower volumes at EVRAZ ZSMK in the view of changed product mix. However, volumes increased half-on-half, mainly due to higher volumes at EVRAZ ZSMK amid more favourable demand for rails and wheels in 2017.

 

Average selling prices

US$/tonne (ex works)

Q2
2017

Q1
2017

H1
2017

H1
2016

Coke

172

212

189

83

Pig iron

251

262

255

141

Steel products

 

 

 

 

Semi-finished products

352

344

347

210

Construction products

499

530

514

348

Railway products

646

621

633

442

Other steel products

501

503

502

357

 

Overall, steel selling prices in Q2 2017 followed divergent trends according to global benchmarks.

 

In Q3 2017, crude steel output is expected to increase by roughly 3% due to the completion of capital repairs at EVRAZ ZSMK's blast furnace no. 2 in Q2 2017. Production of finished products is expected to fall as a result of a gas pause at EVRAZ ZSMK in August, as well as capital repairs of the rail mills at EVRAZ NTMK in August-September and at EVRAZ ZSMK in August.

 

 

NORTH AMERICA

 

Product, '000 tonnes

Q2 2017*

Q1 2017

Q2 2017/ Q1 2017, change

H1 2017

H1

2016

H1 2017/ H1 2016, change

Crude steel

457

-8.3%

876

734

19.3%

Steel products, net of re-rolled volumes

467

462

-1.1%

929

895

3.8%

Construction products

61

68

-10.3%

129

135

-4.4%

Railway products

98

89

10.1%

187

181

3.3%

Flat-rolled products

141

139

1.4%

280

271

3.3%

Tubular products

167

166

0.6%

333

308

8.1%

* Q2 2017 production volumes are preliminary

 

Crude steel production decreased by 8.3% quarter-on-quarter as a result of a planned outage at the Regina mill in order to install upgrades to the rolling mill, which were part of the previously announced investment projects.

 

Construction products output declined by 10.3% quarter-on-quarter due to strong import pressure.

 

Railway products production increased by 10.1% quarter-on-quarter, driven by marginally better demand as Class I railroads finalised destocking.

 

Production of flat-rolled products increased by 1.4% quarter-on-quarter as a result of strengthening demand.

 

Production of tubular products remained almost unchanged quarter-on-quarter. Line pipe demand continued to be impacted by uncertainty, while oil country tubular goods (OCTG) experienced a healthy demand recovery combined with gaining share in Western Canada.

 

Average selling prices

US$/tonne (ex works)

Q2
2017

Q1
2017

H1
2017

H1
2016

Construction products

635

594

614

512

Flat-rolled products

814

742

776

624

Tubular products

1,015

980

998

982

 

Prices for most steel products increased in Q2 2017, reflecting prevailing scrap and other inputs increases, reduced pressure from imports and positive demand fundamentals.

 

In Q3 2017, crude steel output is expected to increase by 5-10% quarter-on-quarter, as EVRAZ Regina's availability returns to normal levels after the prolonged planned outage in Q2 2017. Tubular product volumes are expected to experience a modest quarter-on-quarter increase in volume; flat rolled products and construction products are expected to remain essentially unchanged from Q2 2017 levels; and railway product volumes are expected to decrease slightly as a result of an annual maintenance outage in the rail mill during September and of a customary seasonal slowdown in orders expected in the third quarter.

 

UKRAINE

 

Product, '000 tonnes

Q2 2017

Q1 2017

Q2 2017/ Q1 2017, change

H1 2017

H1 2016

H1 2017/ H1 2016, change

Coke (saleable)

96

50

92.0%

146

266

-45.1%

Pig iron

257

232

10.8%

489

537

-8.9%

Pig iron (saleable)

106

7

n/a

113

14

n/a

Crude steel

147

241

-39.0%

388

560

-30.7%

Steel products

120

203

-40.9%

323

455

-29.0%

Semi-finished products

58

139

-58.3%

197

263

-25.1%

Finished products

62

63

-1.6%

125

192

-34.9%

Construction products

50

52

-3.8%

102

172

-40.7%

Other steel products

12

12

0%

24

20

20.0%

 

In Q2 2017, saleable coke volumes increased by 92.0% quarter-on-quarter in response to higher domestic demand and increased pig iron output.

 

Pig iron production went up 10.8% amid increased blast furnace productivity, with saleable pig iron increase due to reduced billet production (which had a lower margin in the product mix).

 

Production of crude steel and steel products decreased by 39.0% and 40.9% quarter-on-quarter, respectively, (they were also down half-on-half) after cutting production of low-margin semi-finished products in February-May and capital repairs at EVRAZ DMZ' oxygen-converter plant and rolling mill no. 1.

 

Average selling prices

US$/tonne (ex works)

Q2
2017

Q1
2017

H1
2017

H1
2016

Coke (saleable)

230

274

245

125

Pig iron

322

314

321

196

Steel products

 

 

 

 

Semi-finished products

353

335

340

254

Construction products

474

456

465

357

Other steel products

667

604

636

484

 

Overall, prices moved in line with global benchmarks. In Q2 2017, changes in saleable coke prices primarily reflected lower coal prices.

 

In Q3 2017, pig iron production is expected to increase following repairs at EVRAZ DMZ' rolling mill no. 1 and oxygen-converter plant in Q2 2017, accompanied by expected higher blast furnace productivity in Q3 2017. Consequently, output of crude steel and steel products (billets) is expected to increase quarter-on-quarter.

 

  

IRON ORE

 

Product, '000 tonnes

Q2
2017

Q1
2017

Q2 2017/ Q1 2017, change

H1
2017

H1
2016

H1 2017/ H1 2016, change

Iron ore products*

4,536

4,984

-9.2%

9,520

9,844

-3.3%

* Includes production of sinter, pellets and other iron ore products

 

In Q2 2017, production of iron ore decreased by 9.2% quarter-on-quarter, mainly due to lower volumes of sinter amid capital repairs at EVRAZ ZSMK's sintering machines no. 1 and no. 2. The reduced output of pellets was also partly caused by the accidental outage of EVRAZ KGOK's indurating machine no. 2 in June.

 

 

Average selling prices

US$/tonne (ex works)

Q2

2017

Q1

2017

H1

2017

H1

2016

Pellets (Russia)

66

84

74

36

 

Prices for pellet moved in line with global benchmarks.

 

In Q3 2017, sinter output is expected to decrease by roughly 2.5% quarter-on-quarter, mainly due to capital repairs of sintering machine no. 2 at EVRAZ KGOK in September. Following the accidental outage of EVRAZ KGOK's indurating machine no. 2 in Q2 2017, output of pellets should increase by roughly 5% quarter-on-quarter in Q3 2017.

 

 

COAL

 

Product, '000 tonnes

Q2 2017

Q1 2017

Q2 2017/ Q1 2017, change

H1
2017

H1
2016

H1 2017/ H1 2016, change

Raw coking coal (mined)

6,048

5,603

7.9%

11,651

11,016

5.8%

Yuzhkuzbassugol

2,761

2,502

10.4%

5,263

5,928

-11.2%

Raspadskaya

3,071

2,886

6.4%

5,957

4,883

22.0%

Mezhegeyugol

216

215

0.5%

431

206

109.6%

Coking coal concentrate (production)

3,612

3,605

0.2%

7,217

7,297

-1.1%

Yuzhkuzbassugol's coal washing plants

1,491

1,491

0.0%

2,982

3,321

-10.2%

Raspadskaya's coal washing plant

1,615

1,634

-1.2%

3,249

3,120

4.1%

EVRAZ ZSMK's coal washing plant

506

480

5.4%

986

857

15.1%

 

Production of raw coking coal increased by 7.9% following the planned longwall repositioning in Q1 2017 at the Raspadskaya mine, accompanied by stable work at the Raspadskaya mine's three longwalls.

 

In addition, open-pit mining operations were started at the site of the Raspadskaya-Koksovaya mine to produce deficit OS (semi-hard) coking coal grade.

 

Output of coking coal concentrate remained almost unchanged quarter-on-quarter due to higher production at EVRAZ ZSMK's coal washing plant.

  

Average selling prices

 

US$/tonne (ex works)

 

Q2
2017

Q1
2017

H1
2017

H1
2016

Raw coking coal

52

86

69

32

Coking coal concentrate

103

155

129

56

 

In Q2 2017, coal prices were down in line with global benchmarks.

 

In Q3 2017, raw coal production is expected to increase slightly following the longwall repositioning at the Erunakovskaya-8 mine in Q2 2017. This will be partially offset by the scheduled longwall repositioning at the Raspadskaya mine in Q3 2017.

 

 

VANADIUM

 

Product, tonnes of V*

Q2 2017

Q1 2017

Q2 2017/ Q1 2017, change

H1 2017

H1 2016

H1 2017/ H1 2016, change

Vanadium slag, gross production (Russia)

4,795

4,553

5.3%

9,348

8,267

13.1%

Vanadium in final products (saleable)

2,641

3,291

-19.8%

5,932

6,606

-10.2%

* Calculated in pure vanadium equivalent

 

In Q2 2017, output of saleable vanadium products decreased by 19.8% quarter-on-quarter, primarily due to the discontinuation of Nitrovan production as a result of Vametco's divestment in April.

 

 

Average FeV indices

US$/kgV

Q2
2017

Q1
2017

H1
2017

H1
2016

 

 

 

 

 

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

27.01

25.31

26.14

16.52

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

27.10

27.24

27.18

18.38

 

Sale prices for vanadium products followed market trends.

 

In Q2 2017, the Metall Bulletin FeV80 index averaged US$27.01/kgV, up 7% from US$25.31/kgV in Q1 2017. Meanwhile, the Ryan's Notes index, used in North America, averaged US$27.10/kgV in Q2 2017, down 1% from US$27.24/kgV in the previous quarter.

 

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. They also include railway products for Ukraine.

 

 

 

 

 

 

 

###

 

For further information:

 

Media Relations:

London: +44 207 832 8998                               Moscow: +7 495 937 6871

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 Italy. EVRAZ is among the top steel producers in the world based on crude steel production of 13.5 million tonnes in 2016. 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 2016 were US$7,713 million, and consolidated EBITDA amounted to US$1,542 million.

 


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