January 17, 2020

Severstal reports Q4 & FY2019 operational results

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 and FY2019.

Q4 2019 GROUP HIGHLIGHTS

  • Hot metal output declined 4% q/q in Q4 2019 to 2.36 mln tonnes (Q3 2019: 2.46 mln tonnes) due to short-term maintenance works at blast furnace facilities in Q4 2019. Crude steel production declined 10% to 2.71 mln tonnes (Q3 2019: 3.03 mln tonnes) affected by short-term maintenance works at the BOF and EAF facilities and lower EAF production in Q4 2019 following the sale of the Balakovo mini-mill in the previous quarter.
  • Consolidated steel product sales declined 6% q/q to 2.65 mln tonnes in Q4 2019 (Q3 2019: 2.83 mln tonnes). The Company increased the share of steel export shipments to 41% (Q3 2019: 33%) responding to a seasonal slowdown in domestic demand.
  • The share of high value-added (HVA) products within the sales portfolio remained at 45% (Q3 2019: 45%), supported by higher sales of hot rolled thick plate and cold rolled coil products and declining volumes of long and hot rolled coil sales.
  • Coking coal concentrate sales volumes from Vorkutaugol declined 1% q/q due to a decrease in run-of-mine production q/q.
  • Iron ore pellet sales grew 14% to 2.81 mln tonnes (Q3 2019: 2.46 mln tonnes) reflecting higher production of pellets at Karelsky Okatysh. Iron ore concentrate sales volumes declined 17% to 1.60 mln tonnes (Q3 2019: 1.93 mln tonnes) driven by a decline in iron ore volumes at Karelsky Okatysh.

FY2019 GROUP HIGHLIGHTS

  • Hot metal output increased 4% y/y to 9.49 mln tonnes in 2019 (FY2018: 9.15 mln tonnes) driven by improved efficiency arising from maintenance works and higher quality raw materials. Crude steel production in 2019 declined 2% to 11.85 mln tonnes (FY2018: 12.04 mln tonnes), as higher aggregate productivity levels were offset by lower EAF production in H2 2019 following the sale of the Balakovo mini-mill.
  • Coking coal concentrate sales volumes from Vorkutaugol surged 38% y/y, as a result of planned production growth.
  • Iron ore concentrate sales volumes increased 14% y/y to 6.26 mln tonnes (FY2018: 5.51 mln tonnes) predominantly reflecting production volumes growth at Karelsky Okatysh and the Yakovlevskiy mine. • The share of HVA products remained high at 45% in FY2019 (FY2018: 46%), reflecting higher sales of thick plate, as well as galvanised and colour-coated products following the launch of new product lines, which reached full utilisation in the beginning of 2019.
  • In 2019 the share of domestic shipments reached 65% (FY2018: 61%) due to more attractive pricing in the Russian market.

SUMMARY OF KEY PRODUCTION, SALES VOLUMES

Production, thousands of tonnes

Q4 2019

Q3 2019

Change, %

 2019

 2018

Change, %

Crude Steel (Russian Steel)

2,714

3,032

(10%)

11,847

12,039

(2%)

Hot metal (Russian Steel)

2,361

2,458

(4%)

9,486

9,146

4%

Sales volumes, thousands of tonnes

Q4 2019

Q3 2019

Change, %

 2019

 2018

Change, %

Coking coal concentrate

1,331

1,351

(1%)

4,671

3,374

38%

Iron ore pellets

2,810

2,461

14%

11,002

10,997

0%

Iron ore concentrate

1,595

1,931

(17%)

6,255

5,510

14%

Total steel products (Consolidated)

2,651

2,834

(6%)

11,154

11,176

0%

Total steel products (Russian Steel)

2,663

2,847

(6%)

11,201

11,220

0%

High value added steel products, %

Q4 2019

Q3 2019

Change, %

 2019

 2018

Change, %

Severstal (Consolidated)

45%

45%

0 ppts

45%

46%

(1 ppts)

Severstal Russian Steel

45%

45%

0 ppts

45%

46%

(1 ppts)

 

SEVERSTAL’S CONSOLIDATED SALES (NET OF INTERCOMPANY SALES

Sales volumes, thousands of tonnes

Q4 2019

Q3 2019

Change, %

 2019

 2018

Change, %

Coal:

435

330

32%

1,685

1,671

1%

Coking coal concentrate

77

66

17%

408

359

14%

Steam coal

358

264

36%

1,277

1,312

(3%)

Iron ore:

2,175

1,443

51%

6,960

7,405

(6%)

Iron ore pellets

1,825

1,380

32%

5,995

6,578

(9%)

Iron ore concentrate

350

63

n/a

965

827

17%

Semi-finished products

208

89

134%

487

695

(30%)

Rolled products:

2,016

2,292

(12%)

8,932

8,719

2%

Hot - rolled coil

1,072

1,168

(8%)

4,382

3,895

13%

Hot - rolled plate

255

244

5%

957

852

12%

Cold - rolled coil

234

226

4%

977

1,286

(24%)

Galvanised and metallic coated coil

205

238

(14%)

934

835

12%

Colour coated coil

83

122

(32%)

448

391

15%

Long products

167

294

(43%)

1,234

1,460

(15%)

Downstream products:

427

453

(6%)

1,735

1,762

(2%)

Metalware products

150

147

2%

563

560

1%

Large diameter pipes

80

100

(20%)

383

440

(13%)

Other tubes, pipes, formed shapes

197

206

(4%)

789

762

4%

 

Q4, H2 & FY 2019 ESG (ENVIRONMENTAL, SOCIAL, GOVERNANCE) HIGHLIGHTS

  • The health and safety of all our employees and contractors is an absolute priority for Severstal as we remain committed to reaching zero fatalities across all our operations.
  • The LTIFR for FY 2019 stood at 0.61, decreasing by 36% y/y (FY2018: 0.95), surpassing our set target of 0.84 for 2019 by 27%. The total number of incidents in 2019 decreased to 55 from 81 in 2018.
  • Tragically, there were three fatal incidents in H2 2019 including two members of our staff and one contractor. We are investigating each of these cases in detail and taking preventative measures to ensure that similar incidents do not take place in the future.
  • The overall level of employee engagement in safety issues has increased in 2019; this is confirmed by the results of our Accident Prevention System (APS) audits, which demonstrate that both Russian Steel and Severstal Metiz exceeded their set targets, achieving engagement levels of 3.9 and 2.8 out of 5 respectively. Vorkutaugol also met its target engagement level of 3.0.

Health and Safety

Q4 2019

Q3 2019

Change, %

2019

2018

Change, %

LTIFR*

0.60

0.45

33%

0.61

0.95

(36%)

 

  • At Severstal Russian Steel, the total emissions of air pollutants decreased by 8% in 2019 to 277,492 tonnes (2018: 301,695 tonnes). The level of emissions of air pollutants per tonne of steel products was reduced by 7% to 23.4 kg per tonne of steel in 2019 (2018: 25.1 kg per tonne), due to decreased consumption intensity of coke fines while sintering following reconstruction of solid fuel preparation unit at Sinter plant 3. The overall reduction in total emissions is also related to the sale of Mini-Mill Balakovo in 2019 and its inclusion into the calculations scope for H1 2019 only (leading to 8,300 tonnes reduction in pollutants).
  • At Severstal Resources, the total emissions of air pollutants fell by 3% in 2019 to 213,291 tonnes (2018: 220,016 tonnes). This decrease primarily reflects reduced emissions levels at Vorkutaugol due to higher volumes of methane utilised at the mines’ boiler units.

Environment**

Q4 2019

Q3 2019

Change, %

2019

2018***

Change, %

Atmospheric emission of pollutants, thousand tonnes (Russian Steel)

61.8

73.2

(16%)

277.5

301.7

(8%)

Atmospheric emission of pollutants, thousand tonnes (Severstal Resources)

54.4

58.7

(7%)

213.3

220.0

(3%)

Specific atmospheric emission of pollutants, kg per tonne of steel****

23.8

24.2

(2%)

23.4

25.1

(7%)

 

Notes to this section: 

* LTIFR refers to Lost Time Injury Frequency Rate of Severstal staff, the number of lost time injuries occurring in a workplace per 1 million hours worked.

** Emissions data is calculated in accordance with Russian regulations and is reported to the relevant Russian authorities on an annual basis and reviewed by them.

***Minor changes in data for H1 2018 took place due to a review of methodology and scope of emissions measurement at Karelsky Okatysh and Olcon.

**** Steel production at Cherepovets Steel Mill and Severstal Long Product Mill Balakovo (the latter for Jan - Jul 2019)