Novolipetsk Steel

Q2 2021 and 6M 2021 NLMK GROUP TRADING UPDATE

RNS Number : 0499F
Novolipetsk Steel
13 July 2021
 

Press release

13 July 2021

Q2 & 6M 2021 NLMK Group Trading Update

NLMK Group (LSE: NLMK, MOEX: NLMK) in Q2 2021 increased its sales by 11% qoq to 4.3 m t supported by a 5% qoq production growth. Sales to the Russian market increased by 8% qoq to 1.8 m t (+26% yoy).

Q2 2021 highlights:

· Steel output increased by 5% qoq to 4.6 m t (+19% yoy) due to NLMK equipment ramp-up after the overhaul.

· Sales increased by 11% qoq to 4.3 m t (-1% yoy) amid an increase in sales to the Russian market (+8% qoq; +26% yoy), as well as an increase in the supply of slabs and pig iron to export markets. Sales of semi-finished products to third parties increased by 57% qoq mainly due to the shipment of slabs; sales of finished products increased by 1% qoq to 2.7 m t (+12% yoy) amid a recovery in demand in key markets.

· Sales in the 'home' markets totalled 2.8 m t (+1% qoq; +19% yoy).

· Sales in export markets increased by 20% qoq to 1.4 m t (-30% yoy).

6M 2021 highlights:

· Steel output increased by 11% yoy to 9 m t.

· Sales totalled 8.2 m t (-7% yoy) with an increase in slab shipments to NLMK USA amid a strong consumption trend in the region.

· Sales in the 'home' markets increased by 3% yoy to 5.5 m t, mainly due to shipments to the Russian market (+9% yoy).

· Sales in export markets decreased by 23% yoy to 2.6 m t due to the high base effect. Volumes in H1 2020 were redistributed in favour of exports due to weak demand in Russia during quarantine restrictions.

 

 

Investor relations contact:

Dmitriy Kolomytsyn, CFA

+7 (495) 504 0 504

[email protected]

Media relations contact:

Maria Simonova

+7 (915) 322 62 25

[email protected]

 

 

 

 

* Hereinafter, Q2 2021 and 6M 2021 output and sales figures are preliminary and can be updated. Hereinafter, NLMK Group steel output and sales on 'home' markets are shown taking into account NBH performance. Product sales are shown without taking into account NBH performance. Sales to NLMK Group's 'home' markets are understood to be sales by NLMK Group companies in the regions where the products are produced in Russia, the EU, and the US.
 

NLMK Group's Q2 2021 operating performance

Steel output increased by 5% to 4.6 m t (+19% yoy) with NLMK equipment ramp-up after the overhaul. 

Sales reached 4.3 m t (+11% qoq; -1% yoy) due to an increase in the export of slabs to Middle Eastern and EU markets.

Sales mix : the share of semi-finished products increased qoq against the backdrop of an increase in the supply of pig iron, billets and slabs to third parties by 57% qoq. Sales of finished products amounted to 2.7 m t (+1% qoq, +12% yoy, Appendix 2 ).

Sales in the 'home' markets reached 2.8 m t (+1% qoq; +19% yoy). Sales to the Russian market increased by 8% qoq to 1.8 m t (+26% yoy) with the start of the construction season. Sales in the US increased by 17% qoq amid increased shipments of NLMK slabs with a corresponding growth of rolled steel capacity utilization rates. In the EU, sales decreased by 28% qoq (-18% yoy) due to the upgrade of the NLMK La Louvière hot strip mill (a Strategy 2022 project, Appendix 14).

Sales in export markets increased by 20% qoq to 1.4 m t (-30% yoy).

 

NLMK Group's 6M 2021 operating performance

Steel output increased by 11% yoy with the completion of the overhauls at NLMK Lipetsk's BOF operations.

Sales amounted to 8.2 m t (-7% yoy) following the redistribution of slab supplies to NLMK USA amid a strong consumption trend in the region.

Sales mix : sales of semi-finished products to third parties decreased by 23% yoy with the resumption of slab deliveries to NLMK USA. Shipments of NBH slabs totalled 0.93 m t (-23% yoy). Sales of finished rolled products grew by 5% yoy to 5.4 m t (Appendix 2). 

Sales on 'home' markets increased by 3% to 5.5 m t, supported by sales growth in Russia and the United States (Appendix 14).

Sales in export markets decreased by 23% to 2.6 m t due to the high base in the same period last year (non-traditional export markets).

 

 

 

 

GLOBAL PRICES IN Q2 2021

Average raw material prices

· Australian coking coal prices strengthened by 6% qoq (+12% yoy) amid stock replenishment in India, Japan and South Korea. By the end of the reporting period, quotations for Australian coal grew significantly against the backdrop of speculative demand from traders from the United States to resell coal to China. With the continued ban on coal imports from Australia, coking coal prices in China increased by 17% qoq (+98% yoy) due to increased steel production and limited supplies from Mongolia. Coal prices in Russia increased by 27% qoq (+34% yoy) with increased demand from China.

· The increase in prices for iron ore raw materials by 18% qoq (+113% yoy) was supported by record high volumes of steel production in China, the recovery of steelmaking in other regions and the limited supply of iron ore from Brazil.

· Scrap prices in the US and the EU improved by 8% qoq (+87% yoy) with an increase in global steel prices. The seasonal increase in scrap generation offset the trend. Dollar-denominated prices in Russia grew by 4% qoq (+84% yoy). The moderate price growth trend in Russia is associated with the seasonal growth of scrap collection in the domestic market and current export duties.

 

Average steel product prices

· Quotations for steel products grew in all key regions. In the US and the EU, end demand for steel was high, stocks remained lean.

· In Russia, dollar-denominated prices for uncoated flat rolled products increased by 36% qoq (+114% yoy), and by 13% qoq (+78% yoy) for rebar.

· Slab export price (FOB Black Sea) increased by 29% qoq (+154% yoy), the increase was supported by high demand and prices for finished products in international markets.

· Average flat steel prices in the US grew by 28 % qoq (+179 % yoy). In June 2021, prices for hot-rolled products reached an all-time-high, approaching $1,900/t.

· In the EU, dollar-denominated prices for flat rolled products set a record since 2008 with an increase of 44% qoq (+155% yoy).

 

 

 

 

SEGMENTAL PERFORMANCE

NLMK RUSSIA FLAT PRODUCTS[1]

Q2 2021  performance

Steel output increased by 7% qoq to 3.6 m t supported by equipment ramp-up after the overhaul. Year-on-year, steel output increased by 13% (Appendix 9).

Sales of the segment grew by 18% qoq, reaching 3.5 m t (+3% yoy) due to shipments of slabs and pig iron to export markets. The increase in the slab supply is associated with an increase in steel output and the sale of some of the inventory volumes in the Black Sea ports, which have stockpiled by the end of the previous quarter due to adverse weather conditions (Appendix 2).

Sales mix: Sales of semi-finished products to third parties increased by 61% qoq to 1 m t, due mainly to sales growth in export markets. Slab shipments to the Group companies and NBH reached 1.1 m t (+24% qoq; +89% yoy).

Shipments of finished rolled products decreased by 5% qoq to 1.4 m t (-8% yoy) against the backdrop of a decrease in the supply of hot-rolled and cold-rolled products during planned overhauls of rolling equipment (Appendix 3).

Sales markets: shipments in Russia increased by 7% qoq to 1.3 m t (+16% yoy) due to a seasonal increase in demand (Appendix 3).

Exports increased by 24% qoq to 2.3 m t (-3% yoy), due mainly to the positive slab supply trend.

 

6M 2021 performance

Steel output grew by 6% yoy to 6.9 m t with the completion of the NLMK Lipetsk steelmaking operations upgrade (Appendix 9).

Salesof the Segment decreased by 5% yoy to 6.5 m t against the backdrop of planned repairs at the rolling shops, and the increase in the average slab delivery period as shipments resumed to NLMK USA (Appendix 2).

Sales structure: sales of finished rolled products decreased by 6% yoy to 2.8 m t due to planned repairs of hot and cold rolling mills in H1 2021.

Sales of semi-finished products to third parties decreased by 29% yoy to 1.7 m t due mainly to a drop in export shipments of pig iron. Sales of semi-finished products to the Group companies and NBH increased by 30% yoy to 2.0 m t due to an increase in slab shipments to the United States (Appendix 3).

Sales markets: deliveries in Russia decreased by 1% yoy to 2.4 m t due to a reduction in the sales of slabs and hot rolled products due to planned repairs in the BOF Shop and HSM upgrade in Q1-Q2 2021. The decrease was almost completely offset by an increase in the sales of cold rolled products to 0.5 m t (+15% yoy) (Appendix 3).

Exports decreased by 8% yoy to 4.1 m t, due to the high base of the same period last year, when sales were redistributed to export markets due to weak demand in Russia during quarantine restrictions.

 

 

 

 

NLMK RUSSIA LONG PRODUCTS[2]

Q2 2021 performance

Steel output decreased by 2% qoq to 0.8 m t (Appendix 9). Year-on-year, steel output increased by 27%, which was due to the low base effect amid the reduction of the production programme due to the pandemic.

Sales increased by 11% qoq to 0.8 m t (+38% yoy) due to an increase in shipments to the Russian market (+10% qoq; +54% yoy), as well as amid increased sales of long products to the markets of China and Europe. Sales of finished products reached 0.7 m t (+7% qoq; +42% yoy) (Appendix 4).

Sales markets: export sales amounted to 0.3 m t (+11% qoq; +11% yoy). The volume of sales in Russia increased by 10% qoq to 0.6 m t (+54% yoy). The share of the Russian market was 69% (0 p.p. qoq; +7 p.p. yoy).

Scrap: scrap sales increased by 91% qoq to 1.5 m t (+45% yoy) due to the seasonal replenishment of scrap stocks. The Group companies accounted for 99% of total scrap sales (Appendix 4).

 

 

6M 2021 performance

Steel output increased by 23% yoy to 1.6 m t against the backdrop of a low base last year, when the production programme was reduced due to the COVID-19 pandemic.

Sales grew by 34% yoy to 1.6 m t with an uptick in activity in the construction sector (Appendix 4).

Sales markets: the Russian market accounted for 69% (+3 p.p. yoy). The volume of steel product sales in Russia increased by 40% yoy to 1.1 m t. Export sales increased by 22% yoy to 0.5 m t.

Scrap: scrap sales increased by 30% yoy to 2.4 m t with the growth of steel output in the Long Products Segment (Appendix 4).

 

 

 

MINING AND PROCESSING OF RAW MATERIALS

Q2 2021 performance

Iron ore raw materials output increased by 5% qoq to 5.1 m t (+4% yoy) with an increase in equipment productivity and higher demand for raw materials at NLMK Lipetsk (Appendix 12).

Iron ore sales grew by 8 % qoq to 5.2 m t (+6 % yoy), following the increase in production.

Sales to third parties increased to 277,000 t (-39% yoy) with an increase in the production of iron ore raw materials and the sale of some of the previous quarter volumes accumulated in the ports.

 

6M 2021 performance

Iron ore raw materials output increased by 5% yoy to 10 m t (Appendix 12

Iron ore raw materials sales increased by 5% yoy to 10 m t, following the increase in production (Appendix 5).

Sales of iron ore raw materials to third parties decreased by 43% yoy to 0.3 m t due to the growth of NLMK Lipetsk's  demand for raw materials.

 

 

 

NLMK USA

Q2 2021 performance

Segment sales increased by 17% qoq to 0.5 m t (+52% yoy) due to an increase in the supply of NLMK slabs and the corresponding recovery of rolled steel production utilization rates in a strong market (Appendix 6).

6M 2021 performance

Sales totalled 0.9 m t (+8% yoy) amid recovering demand for steel in the United States compared to the same period last year (Appendix 6).

 

NLMK DANSTEEL:

Q2 2021 performance

Sales decreased by 7% qoq to 0.16 m t  (+33% yoy) against the backdrop of order book optimization, as well as the high base of Q1 2021, when a part of the volumes shipped at the end of last year was recognized (Appendix 7).

6M 2021 performance

Sales increased by 17% yoy to 0.34 m t with the recovery of steel demand in the EU (Appendix 7).

 

 

 

JOINT VENTURE - NLMK Belgium Holdings (NBH) [3]

Q2 2021 performance

Sales decreased by 34% qoq to 0.3 m t (-30% yoy) amid the planned upgrade of the NLMK La Louvière HSM (Strategy 2022 project) (Appendix 8).

6M 2021 performance

Shipments decreased by 23% yoy to 0.8 m t (Appendix 8).

 

 

Note: data to the diagrams is presented in tables in the Appendix, and is also available as a separate Excel sheet.
 

Appendices

Appendix 1. NLMK Group operating highlights

Production, m t

Q2 2021

Q1 2021

QoQ

Q2 2020

YoY

6M 2021

6M 2020

YoY

Crude steel production (w/o NBH)

8.829

7.980

11%

Crude steel production (with NBH)

8.948

8.065

11%

Capacity utilization

95%

93%

+2 p.p.

Sales, m t

 

 

 

 

 

 

 

 

Semi-finished steel 5

2.826

3.680

-23%

Finished steel

5.410

5.177

5%

Flat

4.097

4.160

-2%

Longs and metalware

1.314

1.017

29%

Total consolidated sales

11%

-1%

8.237

8.857

-7%

Sales to home markets of the Group 6

68%

61%

+7 p.p.

Sales to external markets

32%

39%

-7 p.p.

For information: slab sales to foreign subsidiaries and affiliates

2.041

1.568

30%

Segment sales

 

 

 

 

 

 

 

 

Russian Flat Products

6.524

6.902

-5%

Russian Long Products

1.558

1.163

34%

Mining

9.944

9.484

5%

NLMK USA

0.933

0.867

8%

Dansteel

0.336

0.286

17%

For information: NBH Sales

-34%

-30%

0.824

1.073

-23%

 

5 Including commercial pig iron, slabs and billets

6 Home markets: Russia for the Russian assets of NLMK Group, North America for NLMK USA, and the EU market for NLMK DanSteel and NBH

Appendix 2. NLMK Russia Flat Products sales by product

Sales, m t

Q2 2021

Q1 2021

QoQ

Q2 2020

YoY

6M 2021

6M 2020

YoY

Pig iron

0.166

0.659

-75%

Slabs incl.

3.529

3.236

9%

Slab sales to foreign subsidiaries and affiliates

2.041

1.568

30%

to NLMK USA, NLMK Dansteel

1.111

0.361

> 100%

to NBH

0.930

1.206

-23%

Hot-rolled steel

1.274

1.405

-9%

Cold-rolled steel

0.711

0.738

-4%

Galvanized steel

0.396

0.400

-1%

Pre-painted steel

0.177

0.193

-9%

Dynamo steel

0.127

0.134

-5%

Transformer steel

0.144

0.135

7%

incl. VIZ-Steel

0.085

0.078

8%

Total products

18%

3%

6.524

6.902

-5%

Coke sales from Altai-Koks

1.590

1.651

-4%

incl. to Novolipetsk

1.379

1.374

0%

 

 

 

Appendix 3. NLMK Russia Flat Products sales by region and product

Sales, m t

Q2 2021

Q1 2021

QoQ

Q2 2020

YoY

6M 2021

6M 2020

YoY

Russian market

7%

16%

2.414

2.443

-1%

Semi-finished products

0.418

0.466

-10%

Hot-rolled steel

0.859

0.905

-5%

Cold-rolled steel

0.512

0.444

15%

Galvanized steel

0.385

0.376

2%

Pre-painted steel

0.176

0.193

-9%

Dynamo steel

0.044

0.038

14%

Transformer steel

0.021

0.020

4%

Export markets

24%

-3%

4.110

4.459

-8%

Semi-finished products

3.277

3.430

-4%

Hot-rolled steel

0.415

0.500

-17%

Cold-rolled steel

0.199

0.294

-32%

Galvanized steel

0.011

0.024

-55%

Pre-painted steel

0.001

0.001

82%

Dynamo steel

0.083

0.095

-13%

Transformer steel

0.123

0.115

7%

Total sales

18%

3%

6.524

6.902

-5%

 Appendix 4. NLMK Russia Long Products sales by product

Sales, m t

Q2 2021

Q1 2021

QoQ

Q2 2020

YoY

6M 2021

6M 2020

YoY

Billet

0.244

0.146

67%

Rebar

1.032

0.759

36%

Sections

0.010

0.040

-75%

Wire rod

0.129

0.101

27%

Metalware

0.143

0.118

22%

Total steel products

11%

38%

1.558

1.163

34%

Ferrous and non-ferrous scrap, incl.

91%

45%

2.354

1.817

30%

to NLMK Ural

0.915

0.739

24%

to NLMK Kaluga

0.661

0.437

51%

to Novolipetsk

0.748

0.598

25%

 Appendix 5. Mining Division sales

Sales, m t

Q2 2021

Q1 2021

QoQ

Q2 2020

YoY

6M 2021

6M 2020

YoY

Iron ore concentrate

10%

-2%

5.516

5.507

0%

incl. to Novolipetsk

5.348

4.980

7%

Sinter ore

33%

39%

0.619

0.505

23%

incl. to Novolipetsk

0.487

0.505

-3%

Pellets

1%

13%

3.809

3.473

10%

incl. to Novolipetsk

3.809

3.473

10%

Total iron ore

8%

6%

9.944

9.484

5%

 

 

Appendix 6. NLMK USA sales 

Sales, m t

Q2 2021

Q1 2021

QoQ

Q2 2020

YoY

6M 2021

6M 2020

YoY

Hot-rolled steel

0.589

0.420

40%

Cold-rolled steel

0.126

0.195

-35%

Galvanized steel

0.217

0.253

-14%

Total NLMK USA 8

17%

52%

0.933

0.867

8%

 

7 NLMK USA also sells non-significant volumes of merchant slabs not included into total rolled steel sales.
 

Appendix 7. NLMK DanSteel sales

Sales, m t

Q2 2021

Q1 2021

QoQ

Q2 2020

YoY

6M 2021

6M 2020

YoY

Thick plates

-7%

33%

0.336

0.286

17%

 Appendix 8. NBH (associated companies) sales

Sales, m t

Q2 2021

Q1 2021

QoQ

Q2 2020

YoY

6M 2021

6M 2020

YoY

Hot-rolled steel

0.334

0.626

-47%

Cold-rolled steel

0.013

0.016

-17%

Coated steel

0.125

0.131

-5%

Total flat steel

-52%

-53%

0.471

0.772

-39%

Semi-finished (ingots)

0.042

0.029

46%

Thick plates

0.311

0.271

15%

Total steel products

-34%

-30%

0.824

1.073

-23%

Appendix 9. NLMK Group steel output

Production, m t

Q2 2021

Q1 2021

QoQ

Q2 2020

YoY

6M 2021

6M 2020

YoY

Lipetsk site

6.887

6.470

6%

NLMK Long Products

1.566

1.269

23%

  incl. NLMK Kaluga

0.644

0.528

22%

NLMK Indiana (NLMK USA)

0.376

0.241

56%

NLMK Group (without NBH)

5%

19%

8.829

7.980

11%

for information

 

 

 

NBH, NLMK Europe (EAF)

0.119

0.085

40%

NLMK Group (with NBH)

5%

19%

8.948

8.065

11%

 

 

 

Appendix 10. NLMK Group steel product output (without NBH)

Production, m t

Q2 2021

Q1 2021

QoQ

Q2 2020

YoY

6M 2021

6M 2020

YoY

Merchant pig iron

0.248

0.764

-68%

Merchant slabs

2.530

2.778

-9%

Flat steel

4.200

4.219

0%

Merchant billets

0.199

0.137

45%

Long products

1.176

0.980

20%

Metalware

0.145

0.121

20%

Total products

5%

0%

8.497

8.999

-6%

Appendix 11. NLMK Russia Flat Products steel product output

Production, m t

Q2 2021

Q1 2021

QoQ

Q2 2020

YoY

6M 2021

6M 2020

YoY

Merchant pig iron

0.248

0.764

-68%

Merchant slabs

3.640

3.140

16%

Hot-rolled steel

1.348

1.425

-5%

Cold-rolled steel

0.731

0.747

-2%

Galvanized steel

0.402

0.421

-5%

Pre-painted steel

0.188

0.221

-15%

Dynamo steel

0.118

0.128

-8%

Transformer steel

0.142

0.134

6%

Total steel products

11%

3%

6.818

6.980

-2%

Appendix 12. Output of main raw materials

Production, m t

Q2 2021

Q1 2021

QoQ

Q2 2020

YoY

6M 2021

6M 2020

YoY

Coke

2%

-2%

2.782

2.886

-4%

Novolipetsk

1.205

1.211

0%

Altai-Koks

1.577

1.675

-6%

Iron ore

5%

4%

9.908

9.479

5%

Iron ore concentrate

5.642

5.466

3%

Sinter ore

0.592

0.515

15%

Pellets

3.674

3.498

5%

Scrap

74%

46%

1.173

0.883

33%

 

 

 

Appendix 13. NLMK Group steel product sales (without NBH)

Sales, m t

Q2 2021

Q1 2021

QoQ

Q2 2020

YoY

6M 2021

6M 2020

YoY

Semi-finished

32%

-17%

2.826

3.680

-23%

Pig iron

0.163

0.659

-75%

Slabs

2.419

2.875

-16%

Billet

0.244

0.146

67%

Flat steel

-1%

5%

4.097

4.160

-2%

Plate

0.338

0.286

18%

Hot-rolled steel

1.861

1.825

2%

Cold-rolled steel

0.837

0.933

-10%

Galvanized steel

0.613

0.653

-6%

Pre-painted steel

0.177

0.193

-9%

Transformer steel

0.144

0.135

7%

Dynamo steel

0.127

0.134

-5%

Long products

7%

42%

1.314

1.017

29%

Long

1.171

0.900

30%

Metalware

0.143

0.118

22%

Total steel products

11%

-1%

8.237

8.857

-7%

 

Appendix 14. NLMK Group home and export steel product sales (with NBH)

Sales, m t

Q2 2021

Q1 2021

QoQ

Q2 2020

YoY

6M 2021

6M 2020

YoY

Home

1%

19%

5.504

5.347

3%

Russia

3.492

3.214

9%

USA

0.933

0.867

8%

EU

1.078

1.266

-15%

Export

20%

-30%

2.612

3.377

-23%

Total steel products

7%

-4%

8.116

8.723

-7%

 

 

 

 

[1]NLMK Russia Flat Products companies include NLMK Lipetsk, VIZ-Steel, and Altai-Koks. Export sales are calculated including the corresponding share of trading companies.

[2]NLMK Russia Long Product companies include NLMK Ural, NLMK Metalware, NLMK Kaluga, and scrap collecting facilities. Export sales of long products are calculated taking into account the corresponding share of trading companies' sales.

[3]NBH assets include producers of plate NLMK Clabecq (Belgium), NLMK Verona (Italy) and producers of strip products NLMK La Louvière (Belgium) and NLMK Strasbourg (France).

 

 

 

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