Evraz Regulatory News (EVR)

EVRAZ Q2 2013 PRODUCTION REPORT

16 July 2013 - EVRAZ plc (LSE: EVR) today releases its operational results for the second quarter of 2013.

Q2 2013 OPERATIONAL HIGHLIGHTS:

·; Consolidated crude steel production was flat in Q2 2013 vs. Q1 2013 and the Company's key steelmaking facilities in Russia and North America continued operating at high utilisation rates

·; Output of steel products increased by 3% mostly driven by strong demand for construction products in Russia and growth of output of rails in Russia at the modernised EVRAZ ZSMK rail mill. Share of finished steel products improved to 77% in Q2 2013 vs. 74% in Q1 2013

·; The PCI project at EVRAZ NTMK became fully operational early in Q2 2013

·; Output of iron ore products was largely flat in Q2 2013 with the main focus on cost-cutting and implementation of operational efficiency initiatives

·; Yuzhkuzbassugol's raw coking coal output grew by 6% as Yerunakovskaya-VIII and other mines achieved robust performance, while Raspadskaya decreased output by 25% vs. Q1 2013 due to suspension of mining at the Raspadskaya mine and repositioning of longwall at the MUK-96 mine

·; Average selling prices for most key steel product groups softened in line with the global steel market

STEEL

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's mills. However, such volumes are eliminated as intercompany sales for purposes of EVRAZ's consolidated operating results.

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

The Q2 2013 overall production of crude steel remained flat quarter-on-quarter, as higher output in Russia was largely offset by lower output at other operations.

Consolidated production of finished steel goods increased by 7% vs. Q1 2013 mostly driven by stronger construction and railway products' output in Russia. As a result, the share of finished steel products as a percentage of total production of steel products, net of re-rolled volumes, improved to 77% in Q2 2013 compared to 74% in Q1 2013.

RUSSIA

In Q2 2013, pig iron output from the Russian steelmaking facilities (EVRAZ NTMK and EVRAZ ZSMK) decreased by 2% compared to Q1 2013 due to planned week-long maintenance works at blast furnaces at both plants and a 20-day repair of a sintering machine at EVRAZ ZSMK. Meanwhile, in the reporting quarter the production of pig iron increased by 8% vs. Q2 2012 thanks to the halving of downtime at blast furnaces.

In Q2 2013, the crude steel production improved by 2% vs. Q1 2013 due to increasing steel output at a modernised electric arc furnace (EAF) at EVRAZ ZSMK. The growth of crude steel output in Q2 2013 vs. Q2 2012 largely tracked the increased volumes of pig iron.

The production of coke saleable to third parties grew in the reporting quarter by 25% due to a lower internal consumption of coke in blast furnaces at EVRAZ NTMK after the commissioning of PCI project at the end of 2012 and which reached the designed parameters in April 2013. The implementation of the PCI project provides for the reduction in consumption of coke from 405 kg to 315 kg per tonne of pig iron and a decrease in consumption of natural gas from 130 m3/t to 75 m3/t of pig iron on the back of usage of 133 kg PCI coal per tonne of pig iron.

In Q2 2013, gross production of steel products rose by 3% vs. the previous quarter, and the volume of steel products, net of volumes re-rolled into finished products within the Russian steel mills, increased by 4%. The output of finished products increased by 12% and was driven by the higher volumes both of construction products (+8%) due to strong demand in the Russian construction market and of railway products (+45%) as a result of continuing gradual ramp-up of the rail mill at EVRAZ ZSMK. The solid growth in output of finished products contributed to the improvement in the product mix of the Russian steelmaking plants.

In the reporting quarter, following successful laboratory tests, the head hardened rails from the new rail mill were delivered to the Russian Railways for life cycle tests. The new rails will have to withstand at least 100 million tonnes of cargo transported on them. The process of certification is expected to be completed by the end of 2013, which would pave the way for commercial sales of head hardened rails starting from 2014.

In Q2 2013 the works on the PCI project at EVRAZ ZSMK continued, while the schedule of implementation of the project was revisited and extended to decrease planned capital expenditure requirements in the current year.

Production of flat-rolled products decreased by 19% vs. Q1 2013 and by 39% vs. Q2 2012 following the closure of the plate rolling mill at EVRAZ ZSMK in June 2013, being a part of ongoing cost saving initiatives as a result of the current market environment.

In Q3 2013, there are a series of maintenance works scheduled at one of EVRAZ NTMK's blast furnaces and at Russian steel mills' converter shops which will reduce the crude steel output by approximately 125 thousand tonnes.

In Q2 2013, average selling prices for steel products somewhat softened reflecting the continuing downward trend in the global steel, iron ore and coking coal markets. At the same time, however, domestic demand from the Russian construction industry was robust with average monthly volumes of rebars consumption reaching all-time highs. Prices for railway products also softened. At the same time the launch of the new rail mill at EVRAZ ZSMK provided support to the average selling price for this product group. In addition, the negative price trends in railway products were partially offset by the lower cost of purchases of scrap.

Average selling prices

NORTH AMERICA

In Q2 2013, crude steel production at EVRAZ's North American operations decreased by 2% compared to Q1 2013 due to unplanned maintenance works at EVRAZ Pueblo and inventory optimisation of finished tubular goods.

The increase in the output of construction products by 22% in Q2 2013 vs. Q1 2013 was due to a faultless operation of the rod & bar mill.

In Q2 2013, the output of railway products was affected by fine tuning of the equipment to accommodate the order of the Russian Railways and by the deficit of steel for production of rails.

The decrease in output of flat-rolled products in Q2 2013 by 3% vs. Q1 2013 was driven by reduced demand in tubular and plate markets and stock optimisation programmes launched at North American facilities.

The output of tubular products decreased by 12% quarter-on-quarter due to lower drilling activity in Western Canada and in the US as well as due to increased imports to the North American market. In response to the market conditions the Company adjusted crews and undertook initiatives to optimise work-in-progress and finished goods stockpiles.

In Q3 2013, the Company expects to increase output of steel products to meet the improved market demand in flat and tubular products. Output of tubular products will grow as the ramp-up of Portland Spiral mill progresses, OCTG demand in Western Canada picks up, as well as thanks to a new line pipe order at Camrose.

In Q2 2013, prices for construction, railway and flat-rolled products reflected relatively robust local market demand, while prices for tubular products continued to be pressured by imports and high inventory levels at distributors.

Average selling prices

UKRAINE

In Q2 2013, pig iron and crude steel production increased by 10% and 9% respectively vs. Q1 2013 due to more efficient operation of blast furnaces. However, production of steel products was flat as part of crude steel in the form of ingots was stockpiled for the period of scheduled 45-day maintenance at one of the rolling mills in Q3 2013.

In Q3 2013, maintenance works are scheduled at two blast furnaces with lower crude steel output to be compensated by re-rolling of accumulated ingots.

Prices for construction and semi-finished products remained largely stable in Q2 2013 compared to Q1 2013 thanks to the solid demand in the Russian and other export markets.

Average selling prices

EUROPE

After resuming operations in Q1 2013, the EVRAZ Vitkovice Steel (EVS) steelmaking shop was again temporarily suspended for a month in April 2013, which resulted in a 29% decrease in production of crude steel. However, the EVS rolling mills remained operational throughout Q2 2013 and demonstrated better performance in construction products following the completion of repairs on the heavy section mill in mid-March 2013. Moreover the output of flat-rolled products increased by 11% in Q2 2013 vs. Q1 2013 and amounted to 142 thousand tonnes.

From July 2013 the EVS steelmaking shop has been idled again for annual maintenance and summer holiday, as well as in response to market conditions.

In Q2 2013, EVRAZ Palini e Bertoli in Italy reduced its output of flat-rolled products to 92 thousand tonnes from 100 thousand tonnes in Q1 2013 as a result of subdued demand in the market.

The prices for steel products of EVRAZ Europe recorded a minor decrease in Q2 2013 reflecting the continuing uncertainty in the European economy.

Average selling prices

SOUTH AFRICA

In Q2 2013, output of pig iron and crude steel at EVRAZ Highveld Steel and Vanadium decreased by 9% vs. Q1 2013, due to high electricity tariffs and some operational issues in the blast furnace process.

The output of finished products rose by 9% compared to Q1 2013, mainly due to the increased output of flat-rolled products that increased by 18%, quarter-on-quarter, on the back of recovering demand for plate and coil in South Africa.

Prices on various product groups demonstrated divergent trends in Q2 2013 vs. Q1 2013, while the pricing for the key product group - flat-rolled products remained stable.

Average selling prices

MINING

IRON ORE

Overall production of saleable iron ore products by the Company increased by 2% in Q2 2013 compared to Q1 2013 and by 1% compared to Q2 2012.

In Q2 2013, production of saleable iron ore products in Russia remained broadly unchanged with the reduction of mined volumes of the Irba mine at Evrazruda being almost fully compensated by enhanced performance of EVRAZ KGOK and EVRAZ VGOK.

From 1 July 2013 the Company has permanently shut down the Irba mine, which was deemed to be a high cost operation uneconomic in the current environment. This initiative is part of a wider strategic plan targeting the closure and/or disposal of less efficient operations and the development of promising mines where the Company believes it is feasible to improve productivity and sustainably achieve economies of scale at a reasonably low cost. In the mid-term the Company expects that the loss of output from closed mines should be broadly offset by additional volumes from modernised operations. The measures undertaken should result in lowered cash costs for the Company and support economically efficient vertical integration in the longer run.

EVRAZ Sukha Balka increased production of lumpy ore by 12% in Q2 2013 compared to Q1 2013 due to lower downtime in the reporting quarter and by 5% compared to the same period last year due to a productivity increase at the Yubileynaya mine as a result of a de-bottlenecking initiative at the end of 2012.

The output of iron ore products at the Mapochs mine of EVRAZ Highveld grew quarter-on-quarter and year-on-year due to improved utilisation rates of production facilities.

The prices for the key iron ore product groups of the Company - pellets and sinter in Russia - increased in the second quarter to $95 and $87 per tonne respectively, reflecting a rebound in global iron ore prices from Q1 2013, while prices for saleable concentrate remained unchanged.

Average selling prices

COAL*

* 2012 data for Raspadskaya is on a pro-forma basis, as Raspadskaya is being consolidated in the results of EVRAZ from 16 January 2013.

Coking coal

In Q2 2013, raw coking coal production decreased by 9% compared to Q1 2013 but increased by 15% vs. Q2 2012, while the results of key coal mining assets of the Company - Yuzhkuzbassugol and Raspadskaya varied greatly. The output of raw coking coal at Yuzhkuzbassugol increased by 6% compared to Q1 2013 and by 36% compared to Q2 2012 due to a number of reasons, including the smooth ramp-up of the Yerunakovskaya VIII mine, which was commissioned at the end of February 2013 and produced 356 thousand tonnes of coking coal in Q2 2013 (compared to 146 thousand tonnes in Q1 2013) and is expected to reach the nameplate capacity by 2014. On top of this, the Alardinskaya mine has operated at a higher capacity since the beginning of the year, and the Uskovskaya mine demonstrated stable performance in the reporting period while it was closed for a longwall repositioning in Q2 2012. The increased output by the above-mentioned mines fully compensated for loss of production due to suspension of mining at the Osinnikovskaya mine following an accident in March 2013.

Meanwhile, in Q2 2013 raw coal production by the Raspadskaya coal company decreased by 25% compared to Q1 2013 mainly due to temporary suspension of mining works at the Raspadskaya underground mine in May-June 2013 and the scheduled repositioning of a longwall at the underground mine MUK-96. The mining operations at the Raspadskaya underground mine were pre-emptively suspended due to excessive concentration of carbon monoxide in certain areas. Having completed the required actions to rectify the situation, Raspadskaya has been open again since 5 July 2013.

Production of coking coal concentrate increased by 3% vs. Q1 2013 and by 28% vs. Q2 2012 due to the higher production of raw coking coal by the Yerunakovskaya VIII mine and the commencement of processing of some raw coking coal of KS grade mined at the Alardinskaya mine.

Commencing mid-June 2013, the Uskovskayamine has been undergoing alongwall repositioning that will last approximately 45 days. In addition, a longwall repositioning is planned at one of the two seams at the Alardinskaya mine since the middle of September.

The blended average selling prices for coking coal concentrate decreased from $100/t to $90/t in Q2 2013 vs. Q1 2013 due to the challenging situation in the global coal markets and softening domestic demand.

Steam coal

The Kusheyakovskaya mine resumed production of raw steam coal following completion of longwall repositioning from December 2012 and throughout Q1 2013. The Gramoteinskaya mine remained suspended.

The changes in production of the steam coal concentrate in the reporting period tracked the volumes of output of raw steam coal.

In Q3 2013 the Kusheyakovskaya mine is expected to remain operational.

Average selling prices

VANADIUM

* Calculated in pure vanadium equivalent.

In Q2 2013, EVRAZ's total production of primary vanadium (vanadium in slag) increased by 2% compared to Q1 2013 and also to Q2 2012, mainly as a result of improved vanadium extraction yields at EVRAZ Highveld Steel and Vanadium following plant maintenance and reduction of unprocessed stock.

Production of finished vanadium products remained broadly flat quarter-on-quarter as a result of better slag availability in South Africa. 

The decrease in production of ferrovanadium in Q2 2013 compared to Q2 2012 is mainly attributable to lower volumes processed at third parties' facilities, while the Company's own plants operated at full capacity in Q1 and Q2 2013.

Production of oxides, vanadium aluminum and chemicals decreased in Q2 2013 compared to Q1 2013 due to shortage of feedstock at EVRAZ Stratcor operations.

Average selling prices

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. For Ukraine they also include railway products, for Europe - slabs and cut shapes; for South Africa - rails.

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For further information:

Media Relations:

Vsevolod Sementsov

VP, Corporate Communications

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

media@evraz.com

Investor Relations:

Sergey Belyakov

Director, 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, USA, Canada, Czech Republic, Italy and South Africa. EVRAZ is among the top steel producers in the world based on crude steel production of 15.9 million tonnes in 2012. In 2012 EVRAZ sold 15.3 million tonnes of steel products. 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 2012 were US$14,726 million, and consolidated EBITDA amounted to US$2,012 million.