Severstal reports Q4 & FY 2016 operational results
Moscow, Russia – 20 January 2017 – 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 Q4
2016 & FY 2016.
Q4 2016 GROUP HIGHLIGHTS
- Hot metal output remained largely flat, decreasing 1% to 2.36 mln tonnes
(Q3 2016: 2.39 mln tonnes) against the previous quarter, mainly due to
short-term maintenance works at BF#5 and BF#4 at Cherepovets Steel Mill
- Crude steel production decreased 2% to 2.92 mln tonnes (Q3 2016: 2.98 mln
tonnes). Crude steel output at CherMK was impacted by scheduled short-term
maintenance of continuous caster #4 and the billet caster.
- Despite lower crude steel output, consolidated steel product sales
increased 5% q/q to 2.78 mln tonnes compared to the previous quarter (Q3 2016:
2.65 mln tonnes). During Q4, the Company sold-off stocks (accumulated during
the previous quarter) in response to higher domestic demand for hot-rolled and
long products. An uptick in semi-finished product sales was influenced by
stronger demand in export markets and higher availability of production
capacity in comparison with Q3 when Severstal accumulated steel inventories to
standard levels after planned maintenance works.
- Reflecting the above, the share of domestic steel products sales volumes in
the sales mix increased to 62% (Q3 2016: 60%).
- The refurbishment of the four-stand cold rolling mill at CherMK was
completed in May 2016. This resulted in mill capacity increase by 200,000
tonnes per annum. Meanwhile, in Q4 cold-rolled coil sales volumes increased 15%
q/q, following the increase of 5% q/q achieved in Q3.
- Despite improved cold rolled coil sales, the share of high value-added
(HVA) products in the sales portfolio decreased marginally to 40% (Q3 2016:
42%) mainly impacted by growth of semi-finished product sales and a seasonal
decline in galvanised and colour-coated product sales.
- The Severnaya mine, where operations remain suspended following the
accident in February 2016, will be sealed off to avoid the risk of airflow
causing further underground fire and explosions in the mine. The decision was
made by the Technical Commission, comprising representatives of AO Vorkutaugol
and the Russian authorities. Experts are now considering a safe method for
sealing off the mine for the foreseeable future as well as the extraction of
its resources through the adjacent Komsomolskaya mine, which is currently
expected to start in 2020. Meanwhile the Company has completed compensation
payments to all those affected.
- Spot hard coking coal prices continued to grow in October and peaked in
November. HCC prices started to decline in response to returning Chinese supply
with the relaxation of its 276 days policy. This trend is expected to continue
in 2017, whilst remaining sensitive to changing Chinese policy. During Q4, iron
ore prices surged more than 20% because of increasing demand, relatively high
steel production and speculative futures trading. Steel prices in China were
driven up 25% by high raw material prices compressing the margins of Chinese
steel producers. Capacity cuts in China and pollution control initiatives also
improved the outlook for the steel supply-demand balance. Russian HRC export
prices replicated the dynamics of Chinese export prices. Russian HRC domestic
prices in rouble terms have also increased despite significant rouble
appreciation in Q4.