Last checked at 18 Oct 2012 07:00
EVRAZ Q3 2012 PRODUCTION REPORT AND
INTERIM MANAGEMENT STATEMENT
18 October 2012 - EVRAZ plc (LSE: EVR) today released its operational results for the third quarter of 2012 and Interim Management Statement.
Q3 2012 OPERATIONAL HIGHLIGHTS and RECENT DEVELOPMENTS:
·; Consolidated crude steel production decreased by 3% compared to Q2 2012 mainly due to lower production at EVRAZ Vitkovice Steel in the Czech Republic and EVRAZ Highveld in South Africa.
·; Despite reduced crude steel output total production volumes of steel products increased by 2% mostly due to greater use of purchased third parties slabs.
·; Coking coal production increased by 20% and steam coal production by 27% compared to Q2 2012 in absence of any longwall repositionings at the coal mines.
·; Prices for most steel product groups reduced due to ongoing uncertainty in global steel markets and decreasing prices of iron ore and coking coal.
·; In EVRAZ's two largest product groups (semi-finished and construction products) average selling prices for semi-finished products in Russia decreased by 13% quarter-on-quarter whilst prices for construction products remained flat.
·; In Q4 2012 we expect to be subject to usual seasonal trends, including slowdown in the construction activity in Russia.
·; EVRAZ continues to expect its net leverage ratio to increase at the end of 2012 versus 30 June 2012 (but within the limits set by our covenants).
·; On 4 October 2012 EVRAZ announced that it had agreed the terms of the acquisition of an indirect controlling interest in the Raspadskaya coking coal company through the purchase of the remaining 50% interest in Corber Enterprises Limited ("Corber"), which it did not previously hold. Corber holds 82% of the share capital of Raspadskaya. As consideration for the acquisition, EVRAZ will (i) issue 132.7 million new shares representing 9.9% of the existing issued share capital of EVRAZ; (ii) issue 33.9 million new warrants to subscribe for 33.9 million new shares representing 2.53% of the existing issued share capital of EVRAZ, and (iii) pay an amount, in cash, of US$1,949.80 for each of 103,600 ordinary Corber shares, payable in four equal instalments in Q1, Q2, Q3 2013 and Q1 2014. Completion of the deal is expected in Q4 2012.
·; In October EVRAZ announced the purchase of two scrap yards in Colorado that will become part of EVRAZ Recycling, a division of EVRAZ North America.
·; In October EVRAZ temporarily shut the steel production at EVRAZ Vitkovice Steel in the Czech Republic due to low demand and to optimise the raw materials inventory.
STEEL
Product, '000 tonnes | Q3 2012
| Q3 2011
| Q3 2012/ Q3 2011, change | Q2 2012
| Q3 2012/ Q2 2012, change |
Coke (saleable) | 367 | 324 | 13.4% | 429 | (14.5)% |
Pig iron | 3,006 | 2,865 | 4.9% | 2,889 | 4.1% |
Pig iron (saleable) | 67 | 29 | 128.5% | 27 | 149.0% |
Crude steel | 3,909 | 4,024 | (2.9)% | 4,035 | (3.1)% |
Steel products, net of re-rolled volumes* | 3,658 | 3,697 | (1.1)% | 3,594 | 1.8% |
Semi-finished products ** | 979 | 793 | 23.5% | 803 | 21.9% |
Finished products | 2,679 | 2,904 | (7.8)% | 2,791 | (4.0)% |
Construction products | 1,345 | 1,351 | (0.4)% | 1,249 | 7.7% |
Railway products | 392 | 517 | (24.2)% | 500 | (21.6)% |
Flat-rolled products | 569 | 609 | (6.5)% | 648 | (12.1)% |
Tubular products | 219 | 238 | (8.2)% | 211 | 3.5% |
Other steel products | 153 | 188 | (18.7)% | 183 | (16.2)% |
Note. Numbers in this table and the tables below may not add to totals due to rounding. Percent changes based on numbers prior to rounding.
* Total volume of steel products in the tables excludes those re-rolled at other EVRAZ's mills. These 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
In Q3 2012, EVRAZ's overall production of crude steel decreased by 3% against both Q2 2012 and Q3 2011, mainly due to decreased steel production levels at EVRAZ steel mills in the Czech Republic and South Africa as described below.
Production volumes of steel products increased by 2% because more slabs produced in Russia in Q3 2012 were sold to market and therefore included in the total steel volumes, while in Q2 2012 significant volumes of slabs were shipped to North America and Europe for further re-rolling and therefore were excluded from the total steel volumes. This reduction in the intragroup supply of semis was compensated by purchases of third party semis by EVRAZ mills in North America and Europe.
The production of semi-finished products increased by 24% compared to Q3 2011 and by 22% compared to Q2 2012. Consolidated production of finished steel goods decreased by 8% compared to the same period last year and by 4% compared to the previous quarter of this year due to lower output of flat-rolled products in Russia and Europe and lower production of rails in Russian and American mills. Finished products accounted for 73% of the consolidated output of steel products, a decrease from 79% in Q3 2011 and 78% in Q2 2012.
RUSSIA
Product, '000 tonnes | Q3 2012
| Q3 2011
| Q3 2012/ Q3 2011, change | Q2 2012
| Q3 2012/ Q2 2012, change |
Coke (saleable) | 135 | 128 | 5.4% | 139 | (3.1)% |
Pig iron | 2,695 | 2,540 | 6.1% | 2,487 | 8.4% |
Pig iron (saleable) | 45 | 18 | 147.2% | 22 | 101.9% |
Crude steel | 2,931 | 2,909 | 0.7% | 2,819 | 4.0% |
Steel products, net of re-rolled volumes | 2,721 | 2,639 | 3.1% | 2,574 | 5.7% |
Semi-finished products | 1,122 | 915 | 22.6% | 949 | 18.2% |
Finished products | 1,599 | 1,724 | (7.3)% | 1,625 | (1.6)% |
Construction products | 1,127 | 1,089 | 3.5% | 1,037 | 8.7% |
Railway products | 277 | 396 | (30.1)% | 366 | (24.4)% |
Flat-rolled products | 74 | 102 | (27.2)% | 84 | (11.8)% |
Other steel products | 120 | 137 | (11.9)% | 138 | (12.5)% |
In Q3 2012 pig iron output increased by 6% compared to the same period last year and by 8% compared to Q2 2012 as overall repair downtime at EVRAZ's blast furnaces was shorter in Q3 2012 than in comparable periods. Crude steel production volumes remained flat year-on-year and increased by 4% in Q3 2012 compared to the previous quarter.
Production of construction products increased by 4% compared to Q3 2011 and by 9% vs. Q2 2012 reflecting growing demand for long steel products in Russia.
As the EVRAZ ZSMK's rail mill has been closed for modernisation since 20 April 2012, production of railway products, mainly rails, decreased by 30% vs. Q3 2011 and by 24% vs. Q2 2012. The modernised rail mill is expected to resume production, as scheduled, in Q4 2012.
It is expected that in Q4 2012 crude steel production in Russia will be negatively affected by scheduled repairs of converter No 4 at EVRAZ NTMK and of converter No 4 at EVRAZ ZSMK.
The completion of the PCI project at EVRAZ ZSMK has been delayed until Q2 2013 due to revisions in the project design documentation.
UKRAINE
Product, '000 tonnes | Q3 2012
| Q3 2011
| Q3 2012/ Q3 2011, change | Q2 2012
| Q3 2012/ Q2 2012, change |
Coke (saleable) | 232 | 196 | 18.6% | 290 | (20.0)% |
Pig iron | 227 | 209 | 8.3% | 239 | (4.9)% |
Pig iron (saleable) | 22 | 11 | 98.5% | 5 | 366.9% |
Crude steel | 208 | 215 | (3.5)% | 251 | (17.1)% |
Steel products | 162 | 186 | (13.0)% | 215 | (24.5)% |
Semi-finished products | 49 | 47 | 3.8% | 98 | (50.2)% |
Finished products | 113 | 139 | (18.6)% | 117 | (2.9)% |
Construction products | 88 | 118 | (25.1)% | 92 | (3.8)% |
Other steel products | 25 | 22 | 16.5% | 25 | 0.3% |
In Q3 2012, crude steel production decreased by almost 4% compared to Q3 2011 and by 17% compared to Q2 2012 due to the scheduled maintenance in the converter shop which began in mid-September and which will continue to the end of October. The maintenance in the converter shop resulted in higher saleable volumes of pig iron compared to Q2 2012 and reduction of production volumes of steel products by 13% and 25% against Q3 2011 and Q2 2012 respectively.
Given that the converter shop maintenance is expected to continue until the end of October, steel production is expected to decrease by approximately 17% in Q4 2012 compared to Q3 2012.
NORTH AMERICA
Product, '000 tonnes
| Q3 2012*
| Q3 2011
| Q3 2012/ Q3 2011, change | Q2 2012
| Q3 2012/ Q2 2012, change |
Crude steel | 611 | 599 | 2.1% | 616 | (0.8)% |
Steel products, net of re-rolled volumes | 664 | 675 | (1.6)% | 678 | (2.1)% |
Construction products | 78 | 81 | (3.4)% | 79 | (1.9)% |
Railway products | 115 | 121 | (4.7)% | 134 | (13.9)% |
Flat-rolled products | 252 | 236 | 7.1% | 254 | (0.5)% |
Tubular products | 219 | 238 | (8.2)% | 211 | 3.5% |
* Q3 2012 production volumes are preliminary
In Q3 2012, EVRAZ's North American steel output remained flat as our North American steel mills have continued to operate at high utilisation levels.
Rail production decreased by 14% compared to Q2 2012 due to scheduled annual maintenance at the Pueblo rail mill in September 2012. It decreased by 5% year-on-year, because, besides the regular maintenance of the rail mill in September 2011, crude steel production at EVRAZ Pueblo is limited and in Q3 2011 available crude steel volumes were shifted to production of construction products from rail production.
Production of tubular goods decreased by 8% compared to the same period last year as a result of a market slowdown leading in particular to temporary idling of the Camrose DSAW mill. Spiral weld pipe production was lower vs Q3 2011mainly due to a switch from 36 inch to 30 inch pipe in 2012 that resulted in a 9,000 tonnes decrease in production volumes. In Q3 2012 tubular goods production grew up 4% against the Q2 2012 volumes that were impacted by a Canadian National railroad strike and a labour dispute in Camrose in May 2012.
In Q4 2012 the rail mill is expected to be fully utilised as rail demand remains strong. Flat-rolled production is expected to grow slightly vs Q3 2012. Spiral pipe capacity in Canada is expected to be fully utilised under existing contracts. Overall demand for OCTG drilling activity remains stable with some slight signs of temporary weakness, while the seamless market is expected to remain solid in the near term.
EUROPE
Product, '000 tonnes | Q3 2012
| Q3 2011
| Q3 2012/ Q3 2011, change | Q2 2012
| Q3 2012/ Q2 2012, change |
Crude steel | 81 | 181 | (55.1)% | 197 | (58.6)% |
Steel products | 237 | 270 | (12.4)% | 267 | (11.3)% |
Construction products | 26 | 32 | (19.5)% | 0 | n/a |
Flat-rolled products | 207 | 216 | (4.1)% | 243 | (14.7)% |
Other steel products | 4 | 22 | (83.8)% | 23 | (84.7)% |
Production of crude steel at EVRAZ Vitkovice Steel (EVS) in Q3 2012 decreased by 55% compared to Q3 2011 and by 59% compared to Q2 2012 as the steel plant did not operate in July-August 2012 due to scheduled yearly maintenance. Meanwhile, production of steel products decreased by only 12% and 11% respectively as the plate mill used purchased slabs for its operations.
Production of flat-rolled products decreased by 4% vs. Q3 2011 and by 15% vs. Q2 2012 in response to weakening plate demand in the European markets, as well as a two week scheduled maintenance of the plate mills in the Czech Republic and Italy in August 2012.
The EVS heavy section mill, which was temporarily closed in February due to weak demand in Europe, resumed operations in July as a result of margin and price improvement.
On 11 October the crude steel production at EVRAZ Vitkovice Steel was temporarily closed due to low demand and the company's plan to reduce its inventory. The rolling mill and heavy section mills will remain open as the company has open orders through the end of 2012.
Q4 2012 crude steel production plans will be driven by market demand.
SOUTH AFRICA
Product, '000 tonnes
| Q3 2012
| Q3 2011
| Q3 2012/ Q3 2011, change | Q2 2012
| Q3 2012/ Q2 2012, change |
Pig iron | 84 | 116 | (27.1)% | 163 | (48.3)% |
Crude steel | 78 | 120 | (35.3)% | 153 | (49.3)% |
Steel products | 65 | 111 | (40.9)% | 124 | (47.3)% |
Semi-finished products | 0 | 16 | n/a | 3 | n/a |
Finished products | 65 | 95 | (31.1)% | 121 | (46.1)% |
Construction products | 27 | 32 | (17.4)% | 41 | (34.8)% |
Flat-rolled products | 35 | 55 | (36.5)% | 66 | (47.5)% |
Other steel products | 4 | 8 | (49.9)% | 14 | (72.4)% |
In Q3 2012 production of crude steel and steel products at EVRAZ Highveld Steel and Vanadium decreased compared to last year and to the previous quarter as a result of a four-week industrial action initiated by Highveld's largest union NUMSA. An agreement has been reached between EVRAZ Highveld and NUMSA, and the steelworks re-commenced operations on 13 August 2012.
It is expected that the steelworks will return to full production in October and the output of crude steel and steel products will increase compared to Q3 2012.
MINING
IRON ORE
Product, '000 tonnes | Q3 2012
| Q3 2011
| Q3 2012/ Q3 2011, change | Q2 2012
| Q3 2012/ Q2 2012, change |
Iron ore products | 5,158 | 5,436 | (5.1)% | 5,258 | (1.9)% |
Lumpy ore (Ukraine) | 559 | 724 | (22.8)% | 735 | (23.9)% |
Concentrate, saleable (Russia) | 1,569 | 1,734 | (9.5)% | 1,427 | 9.9% |
Sinter (Russia) | 1,128 | 1,009 | 11.8% | 1,130 | (0.1)% |
Pellets (Russia) | 1,397 | 1,465 | (4.7)% | 1,528 | (8.6)% |
Fines ore (South Africa) | 153 | 186 | (18.0)% | 132 | 15.8% |
Lumpy ore (South Africa) | 352 | 317 | 11.1% | 307 | 14.7% |
Overall production of saleable iron ore products by the Company decreased by 5% compared to Q3 2011 and was flat compared to Q2 2012.
Sukha Balka produced 23% and 24% less lumpy ore compared to Q3 2011 and Q2 2012 respectively due to production being scaled down as a result of a skip conveyor repositioning at the Yubileynaya mine that started in mid-September and is expected to continue until mid-November. Production of lumpy ore is expected to remain almost flat in Q4 2012 compared to Q3 2012.
Production of saleable concentrate in Russia increased by 10% in Q3 2012 compared to the previous quarter as a result of higher iron ore production. Pellets production decreased by 5% compared to Q3 2011 and by 9% compared to Q2 2012 due to kiln repair at EVRAZ KGOK iron ore processing plant.
COAL
Product, '000 tonnes | Q3 2012
| Q3 2011
| Q3 2012/ Q3 2011, change | Q2 2012
| Q3 2012/ Q2 2012, change |
Raw coking coal (mined) | 2,313 | 1,237 | 86.9% | 1,935 | 19.5% |
Raw steam coal (mined) | 892 | 889 | 0.3% | 700 | 27.3% |
Coking coal concentrate (production) | 1,627 | 1,391 | 17.0% | 1,575 | 3.3% |
Steam coal concentrate (production) | 132 | 338 | (61.0)% | 190 | (30.7)% |
Equity investments - Raspadskaya* | |||||
Coking coal (mined) | 1,378 | 1,212 | 13.7% | 1,843 | (25.3)% |
* Reported numbers are for 100% production. As at 30 September 2012 EVRAZ held a 41% effective interest in the Raspadskaya coal company.
Coking coal
In Q3 2012, raw coking coal production at Yuzhkuzbassugol increased by 87% compared to Q3 2011 and by 20% compared to Q2 2012 due to the absence of longwall repositionings at the mines in Q3 2012. The growth of raw coking coal production led to bigger production volumes of coking coal concentrate.
Q4 2012 coking coal production is expected to decrease, largely driven by a 60-day longwall repositioning at the Osinnikovskaya mine.
Steam coal
Production of raw steam coal remained unchanged compared to the same period last year and increased by 27% vs. Q2 2012 due to the loss of a month's production volumes at the Gramoteinskaya mine in April-May as a result of a fire at the mine. Steam coal concentrate production decreased by 61% vs. Q3 2011 and by 31% vs. Q2 2012 due to larger raw coal sales.
Q4 2012 steam coal production is expected to be flat, quarter-on-quarter.
VANADIUM
Product, tonnes of V*
| Q3 2012
| Q3 2011
| Q3 2012/ Q3 2011, change | Q2 2012
| Q3 2012/ Q2 2012, change |
Vanadium in slag (gross production) | 4,528 | 4,804 | (5.7)% | 5,343 | (15.2)% |
Russia | 3,618 | 3,201 | 13.0% | 3,683 | (1.8)% |
South Africa | 911 | 1,603 | (43.2)% | 1,660 | (45.1)% |
Vanadium in final products (saleable) | |||||
Ferrovanadium | 3,297 | 4,317 | (23.6)% | 3,769 | (12.5)% |
Produced at own facilities | 1,671 | 1,535 | 8.9% | 1,899 | (12.0)% |
Processed at 3rd parties' facilities | 1,626 | 2,782 | (41.6)% | 1,871 | (13.1)% |
Nitrovan® | 782 | 819 | (4.6)% | 763 | 2.4% |
Oxides, vanadium aluminium and chemicals | 443 | 302 | 46.9% | 329 | 34.5% |
* Calculated in pure vanadium equivalent.
In Q3 2012, EVRAZ's total production of primary vanadium (vanadium slag) decreased by 6% compared to Q3 2011 and by 15% compared to Q2 2012, negatively affected by the four-week union industrial action at EVRAZ Highveld Steel and Vanadium.
Production of ferrovanadium decreased by 24% compared to Q3 2011 and by 13% compared to Q2 2012 due to the scheduled maintenance at EVRAZ Nikom plant in the Czech Republic and reduced raw materials (slag) availability as a result of the industrial action at EVRAZ Highveld.
AVERAGE SELLING PRICES
USD/tonne (ex works) unless otherwise stated | Q3 2012 | Q2 2012 | Q3 2011 |
Steel products | |||
Russia | |||
Coke | 189 | 201 | 222 |
Pig iron | 340 | 465 | 494 |
Steel products | |||
Semi-finished products | 443 | 510 | 537 |
Construction products | 680 | 683 | 761 |
Railway products | 908 | 909 | 914 |
Flat-rolled products | 577 | 628 | 707 |
Other steel products | 714 | 728 | 833 |
Ukraine | |||
Coke | 201 | 222 | 311 |
Pig iron | 349 | 465 | 498 |
Steel products | |||
Semi-finished products | 505 | 547 | 623 |
Construction products | 634 | 660 | 706 |
Other steel products | 883 | 924 | 1,103 |
Europe | |||
Steel products | |||
Construction products | 877 | n/a | 906 |
Flat-rolled products | 715 | 775 | 942 |
North America | |||
Steel products | |||
Construction products | 804 | 890 | 944 |
Railway products | 933 | 1,031 | 1,040 |
Flat-rolled products | 986 | 1,086 | 1,188 |
Tubular products | 1,486 | 1,566 | 1,540 |
South Africa | |||
Steel products | |||
Semi-finished products | 742 | 465 | 642 |
Construction products | 712 | 673 | 838 |
Flat-rolled products | 740 | 738 | 926 |
Other steel products | 615 | 673 | 961 |
Mining products | |||
Iron ore | |||
Lumpy ore (Ukraine) | 61 | 67 | 84 |
Concentrate, saleable (Russia) | 82 | 94 | 115 |
Sinter (Russia) | 89 | 98 | 121 |
Pellets (Russia) | 95 | 94 | 133 |
Fines ore (South Africa) | 9 | 16 | 22 |
Coal | |||
Raw coking coal | 65 | 79 | 104 |
Raw steam coal | 27 | 30 | 37 |
Coking coal concentrate | 129 | 135 | 224 |
Steam coal concentrate | 59 | 55 | 85 |
Vanadium products (USD/t of V) | |||
Vanadium in final products | |||
Ferrovanadium | 24,527 | 25,405 | 27,811 |
Nitrovan® | 28,615 | 29,815 | 30,333 |
Oxides, vanadium aluminium and chemicals | 30,944 | 34,524 | 34,635 |
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.
###
For further information:
Investor Relations:London: +44 207 832 8990 Moscow: +7 495 232 1370
ir@evraz.com
Media Relations:Oleg KuzminVP, Corporate CommunicationsLondon: +44 207 832 8998 Moscow: +7 495 937 6871media@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 20 steel producers in the world based on crude steel production of 16.8 million tonnes in 2011. In 2011 EVRAZ sold 15.5 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 2011 were US$16,400 million and consolidated EBITDA amounted to US$2,898 million. The H1 2012 consolidated revenue was US$7,619 million and the H1 2012 EBITDA was US$1,175 million.