Environmental Protection

Severstal is committed to controlling the environmental impact of steelmaking, both in accordance with international standards and in compliance with the environmental laws and regulations in Russia that govern air emissions, waste water discharges and solid waste handling and disposal. Russian law gives both the federal government and local government authorities the power to enact environmental protection laws and issue regulations under such laws.

On September 7, 2001 Severstal was the first Russian metal and steel company to receive a certificate of compliance with the international standard ISO 14001 for its environmental protection and management from Bureau Veritas Quality International, an international certification agency. This certificate is important for Severstal’s export trading operations, as it is one of the main requirements for suppliers of steel products in the international steel markets. Severstal’s management believes that the awarding of this certificate reflects Severstal’s efforts to manage environmental risks and comply with environmental standards. Environmental measures taken by Severstal include the introduction of a closed-cycle water supply system, the absence of lump waste (such as pig iron chippings) and a threefold reduction in effluents discharged in the atmosphere over the past 10 years.

During the last three years, management believes that there have been no material incidents or accidents relating to the Severstal Group where hazardous substances have leaked into the surrounding land, groundwater, rivers or air.

The Severstal Group is in material compliance with the requirements of the environmental protection authorities in all areas of its operations. In the last three years the Severstal Group has not been subject to any material legal proceedings or disputes with the environmental protection authorities.

In 2003, Severstal spent US$ 14.7 million on environmental matters as compared to US$ 8.7 million in 2002 and US$ 8.9 million in 2001. Atmospheric emissions for Russian Steel and Metalware’s Cherepovets Steel Plant were 45 kilograms per ton of rolled steel in 1999, compared to 40 kilograms per ton of rolled steel in 2005. In 2005, Russian Steel and Metalware spent more than US$65 million on environmental matters.

In 2005, Severstal North America spent US$3.25 million on capitalised environmental matters as compared to US$2.0 million in 2004. Severstal North America has planned an aggregate of approximately US$55 million in capital expenditure in connection with matters related to environmental control during 2007 and 2008.