Evraz Regulatory News (EVR)

EVRAZ Q2 2020 TRADING UPDATE

30 July 2020 - EVRAZ plc (LSE: EVR; "EVRAZ" or the "Group") today released its trading update for the second quarter of 2020.

Q2 2020 vs Q1 2020 HIGHLIGHTS

· In Q2 2020, EVRAZ' consolidated crude steel output fell by 5.1% QoQ, mainly due to capital repairs and gas pause at EVRAZ ZSMK in June as well as capital repairs at EVRAZ NTMK in May.

· Total sales of steel products rose by 4.9% QoQ. Sales of semi-finished products increased by 19.5% QoQ following change in the product mix in favour of slab and billets resulted from decline in demand for finished products during the COVID-19 pandemic.

· Sales of finished products fell by 6.9% amid weak market demand in Russia and North America as well as due to lower production volumes in Russia following scheduled capital repairs.

· Total raw coking coal production decreased by 26.8% QoQ, driven by weaker demand for coal on global markets. Production at the Razrez Raspadsky open pit and at Mezhegeyugol has been suspended until favourable market conditions are restored. The decline was also due the move of the longwall at the Alardinskaya mine.

· External sales volumes of coking coal products dropped by 14.6% QoQ, caused by lower shipments to Europe amid unfavourable market conditions.

· External sales of iron ore products jumped by 25.6% QoQ amid higher shipments to the domestic market in Q2 2020.

· Sales of vanadium products fell by 22.6% QoQ mainly due to lower steel utilisation rates as well as general decrease of vanadium demand following COVID 19 restrictions. The regional sales and product mix was changed to serve the more active Chinese oxide market during Q2 2020.

Note. Numbers in this table and the tables below may not add up to totals due to rounding.

1 The Q1 2020 data have been adjusted

2 The H1 2019 data have been adjusted

3 In tonnes of pure vanadium

STEEL SEGMENT

Total production volumes

Note. Numbers in this table and the tables below may not add up to totals due to rounding.1 Including EVRAZ Palini e Bertoli which was sold in Q4 2019.2 From Coal segment3 In tonnes of pure vanadium

In Q2 2020, pig iron production remained almost flat QoQ at the Russian mills.

Crude steel output decreased by 4.1% QoQ, mainly due to capital repairs and gas pause at EVRAZ ZSMK in June as well as capital repairs at EVRAZ NTMK in May.

Total output of steel products fell by 4.5% QoQ mainly due to lower crude steel availability at EVRAZ NTMK and EVRAZ ZSMK. EVRAZ Caspian Steel reduced production by 3.9% QoQ due to lower demand from customers.

Output of iron ore products fell by 3.8% QoQ, mainly due to a decrease in primary concentrate production volumes and the degree of fluxing at mining operations of EVRAZ ZSMK (former Evrazruda). 

Total sales volumes

Note. Numbers in this table and the tables below may not add to totals due to rounding.

1 Includes tonnes of pig iron

2 EVRAZ Palini e Bertoli was sold in Q4 2019

3In tonnes of pure vanadium

In Q2 2020, external sales of steel products increased by 7.9% QoQ. Sales of semi-finished products climbed by 23.4% QoQ, due to a change in the product mix to higher slab and billets sales volumes and a decrease in the volumes of finished products due to market conditions during the COVID-19 pandemic.

Sales of finished products dropped by 7.6% QoQ due worsening market conditions during the pandemic as well as lower production volumes amid scheduled capital repairs at EVRAZ ZSMK and EVRAZ NTMK.

Sales of iron ore products surged by 25.6% QoQ amid higher shipments to the domestic market in Q2 2020.

Sales of vanadium products fell by 22.6% QoQ mainly due to lower steel utilisation rates as well as general decrease of vanadium demand following COVID 19 restrictions. The regional sales and product mix was changed to serve the more active Chinese oxide market during Q2 2020.

Average selling prices

1 Includes prices for pig iron

2 US$/kgV

During Q3 2020, pig iron production volumes are expected to decrease following ramp-up of blast furnace no.6, which will replace blast furnace no.5 at EVRAZ NTMK in July-August.

Iron ore pellets production volumes are expected to remain flat, while sinter production is expected to decrease due to capital repairs at EVRAZ KGOK's sinter plant in July - September 2020.

STEEL, NORTH AMERICA SEGMENT

Production and sales volumes

1 The Q1 2020 data have been adjusted

2 The H1 2019 data have been adjusted

In Q2 2020, crude steel production was 12.1% lower QoQ, mainly attributable to falling demand across North American steel markets amid the COVID-19 pandemic and uncertainty driven by oil prices turmoil. In addition, production was affected by the shutdown of Regina Steel, which extended into early Q2 2020 with the advancement of a planned maintenance outage following the March 2020 cyber-attack.

Total output of steel products decreased by 5.1%, mainly driven by reduced demand for flat-rolled products from distributors adjusting to swift market changes brought on by the pandemic during the period and rapid deterioration of the energy markets in North America halting OCTG demand.

Canadian mills increased production by 7.3% QoQ due to higher large diameter (LD) and line pipe (LP) production following downtime in March triggered by the cyberattack and improved operational performance. This was partially offset by lower Canadian OCTG production due to the fall in market demand in wake of sharply reduced oil prices. Lower rig counts in Western Canada resulted in sharp reductions in demand, and the idling of pipe mills in Calgary, Red Deer and Camrose in Q2 2020.

US mills decreased production by 10.7% QoQ due to declined flat-rolled orders at EVRAZ Portland and OCTG orders at Pueblo Seamless. Similar to the Canadian OCTG mills, Pueblo Seamless volumes were also affected by oil price reductions, which resulted in the idling of the Seamless mill in early Q2 2020.

Semi-finished product sales fell by 39.8% following successful fulfilment of a contract with a key customer.

Flat-rolled product sales dropped by 31.1% QoQ as a result of weakening market demand.

Sales volumes of tubular products climbed by 4.5% QoQ, driven by the Canadian LD and LP production increases during the period relative to Q1 2020. Railway and construction products demand remained stable QoQ.

Prices for construction products decreased 4.7% QoQ, driven by lower scrap costs. Prices for tubular products rose driven primarily by a mix of orders, while prices for flat-rolled products remained unchanged on average.

Average selling prices

* The Q1 2020 data have been adjusted

In Q3 2020, significant uncertainty remains around production and sales volumes for all product groups due to continued turmoil in the oil & gas markets and the slow economic recovery during the resurgent COVID-19 pandemic, leaving North American customers cautious in purchasing strategies.

COAL SEGMENT

Production volumes

In Q2 2020, overall raw coking coal output fell by 26.8% QoQ, primarily due to weaker market demand as well as lower production at the Razrez Raspadsky open pit and Mezhegeyugol, following the decision to suspend output due to unfavourable market conditions as well as the completion of a mining at longwall at the Raspadskaya mine.

Production at Yuzhkuzbassugol went down by 28.5% QoQ mainly due to the longwall move at the Alardinskaya mine.

Output of coking coal concentrate rose by 1.9% QoQ as Raspadskaya coal washing plant processed additional volumes of raw coal from the stockpiles in order to offset lower production at Yuzhkuzbassugol coal washing plants.

Sales volumes

In Q2 2020, external sales volumes of coking coal products declined by 14.6% QoQ. Raw coking coal sales volumes fell by 30.4% QoQ, following lower shipments to Europe due to unfavourable market conditions. Coking coal concentrate sales volumes decreased by 10.2% QoQ, attributable to lower shipments and partly offset by stable demand in Russia and on the Chinese spot market.

Average selling prices

In Q2 2020, coking coal selling prices moved in line with global benchmarks.

In Q3 2020, raw coal production is expected to increase QoQ due to the completion of the longwalls move at the Esaulskaya, Alardinskaya, Osinnikovskaya and Uskovskaya mines in Q2 2020.

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.

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EVRAZ is a vertically integrated steel, mining and vanadium business with operations in Russia, Kazakhstan, the US, Canada and Czech Republic. EVRAZ is among the top steel producers in the world based on crude steel production of 14 million tonnes in 2019. A significant portion of the Group's internal consumption of iron ore and coking coal is covered by its mining operations. The Group's consolidated revenues for the year ended 31 December 2019 were US$11,905 million, and consolidated EBITDA amounted to US$2,601 million.