PJSC Magnitogorsk Iron and Steel Works (MMK) PJSC Magnitogorsk Iron and Steel Works: MMK Group Trading Update for Q1 2021 14-Apr-2021 / 08:57 CET/CEST Dissemination of a Regulatory Announcement that contains inside information according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group. The issuer is solely responsible for the content of this announcement.
| MMK Group trading update for Q1 2021 14 april 2021 Magnitogorsk, Russia | PJSC Magnitogorsk Iron & Steel Works ("MMK", or the "Group") (MICEX-RTS: MAGN; LSE: MMK), one of the world's largest steel producers, is pleased to announce its Trading Update for Q1 2021. |
| HIGHLIGHTS Q1 2021 VS Q4 2020 | Pig iron output increased by 2.0% quarter-on-quarter (q-o-q) to 2,572 thousand tonnes, driven by the continuing high steel demand. | | | Steel output remained broadly flat q-o-q at 3,300 thousand tonnes, reflecting favourable market conditions. MMK Group's sales of finished products totalled 2,904 thousand tonnes, down 4.6% q-o-q due to the build-up of metal products inventories ahead of the construction season. The Group's sales of premium products fell by 14.1% to 1,154 thousand tonnes due to the restocking ahead of the construction season and a decrease in Steel Turkey segment's sales. MMK Coal's coal concentrate production amounted to 815 thousand tonnes, down 2.6% q-o-q due to convention loading restrictions and preparation of faces for re-mounting. | | | HIGHLIGHTS Q1 2021 VS Q1 2020 | Pig iron output increased by 9.2% q-o-q due to the absence of overhauls in blast furnace operations during the quarter. Steel output increased by 9.2% q-o-q, which was due to the absence of overhauls at converter facilities and completion of modernisation of Hot-Rolling Mill 2500. MMK Group's sales of finished products increased by 5.8% year-on-year (y-o-y) driven by the high utilisation rate of Mill 2500 after the modernisation. Premium products sales dropped by 11.8% y-o-y due to a change in thick plate order mix at Mill 5000 and an increase in intragroup sales of cold-rolled products on the back of the reconstruction of reverse Cold-Rolling Mill 1700. | | | Production of coal concentrate remained flat year-on-year at 815 thousand tonnes. | | | MARKET OVERVIEW | Global steel products market: In Q1 2021, global prices continued to rise due to the undersupply in key regions. By late March, prices for flat products hit their record highs in the USA and the EU since 2008, and in Turkey since 2011. In March, the authorities of the Tangshan municipality, the largest steel production centre in China, presented a plan to reduce production at most local steel plants by the end of 2021. Fears of a decline in metal product supply have given a new impetus to price growth in both the Chinese domestic market and in exports. Russian steel products market: Prices for flat products continued to grow in Q1 2021 fuelled by high global prices for metal products, fluctuations in the rouble exchange rate and higher raw materials prices. There has been a correction in the rebar market, following the growth in late Q4 2020. Closer to the end of Q1 2021, prices for rebars began to recover due to renewed growth in scrap prices and improved demand ahead of the construction season. Global iron ore market: Average values of the 62% Fe iron ore index remained high in Q1 2021 (USD 165 - USD 170 per tonne CFR China). China's consumer demand for iron ore was low since the beginning of the year, with restrictions imposed in Tangshan in March further subduing demand for the raw materials and minimising the risks of physical shortages of iron ore in China in 2021. Russian iron ore market: In the first quarter, demand for raw materials was quite strong both in the domestic and in key export markets. Since Q4 2020, iron ore exports from Russia to Europe and Turkey have been growing, with the rapid increase in prices in these markets further contributing to soaring prices for Russian consumers. Global coking coal market: The global market remained volatile in the first quarter due to China's ongoing ban on coal imports from Australia. Prices for alternative supplies to China consolidated around USD 200 - USD 220 per tonne, while prices for Australian imports returned to USD 110 - USD 120 per tonne FOB amid the ongoing glut in available raw materials. The likelihood that the ban will be lifted soon is no longer assessed as high by market players. Russian coking coal market: Prices in the Russian market grew by more than 50% in Q1 2021. This strong rise was driven by the low base effect of former prices. There are no any drivers for price changes for coking coal on the Russian market, which could lead to significant price fluctuations in Russia before the end of 2021. Russian metal scrap market: Scrap prices in the Russian market peaked in early 2021, but then declined due to the introduction of an increased duty on scrap exports from Russia. However, this decline was short-lived, with seasonality and high prices for metal products preventing scrap prices from falling significantly. |
MMK GROUP'S CONSOLIDATED RESULTS | thousand tonnes | Q1 2021 | Q4 2020 | % | Q1 2021 | Q1 2020 | % | | Crude steel production | 3,300 | 3,312 | - 0.4 | 3,300 | 3,022 | 9.2 | | Pig iron production | 2,572 | 2,521 | 2.0 | 2,572 | 2,355 | 9.2 | | Coal concentrate production | 815 | 837 | - 2.6 | 815 | 814 | 0.2 | | Iron ore production | 631 | 638 | - 1.0 | 631 | 658 | - 4.0 | | Finished products sales,including: | 2,904 | 3,045 | - 4.6 | 2,904 | 2,745 | 5.8 | | Slabs and billets | 53 | 0 | - | 53 | 0 | - | | Long products | 268 | 297 | - 9.8 | 268 | 357 | - 24.7 | | Flat hot-rolled products | 1,428 | 1,404 | 1.7 | 1,428 | 1,080 | 32.2 | | Premium products, including: | 1,154 | 1,343 | - 14.1 | 1,154 | 1,308 | - 11.8 | | Thick plate (Mill 5000) | 165 | 202 | - 18.3 | 165 | 231 | - 28.6 | | Flat cold-rolled products | 184 | 226 | - 18.4 | 184 | 245 | - 24.7 | | Downstream products, including: | 805 | 916 | - 12.1 | 805 | 833 | - 3.4 | | Tinplate | 43 | 38 | 14.9 | 43 | 42 | 4.1 | | Galvanised steel | 439 | 460 | - 4.6 | 439 | 443 | - 1.1 | | Polymer-coated steel | 150 | 200 | - 24.8 | 150 | 140 | 7.3 | | Band | 35 | 42 | - 15.2 | 35 | 32 | 11.4 | | Formed section | 26 | 36 | - 28.0 | 26 | 44 | - 41.9 | | Pipe | 12 | 24 | - 48.4 | 12 | 13 | - 3.3 | | Metalware | 97 | 111 | - 12.2 | 97 | 108 | - 9.8 | | Other metal products | 2 | 6 | - 72.0 | 2 | 11 | - 84.8 | | Share of premium products | 39.7% | 44.1% | | 39.7% | 47.7% | |
CONSOLIDATED PRICES FOR METAL PRODUCTS | USD/tonne | Q1 2021 | Q4 2020 | % | Q1 2021 | Q1 2020 | % | | Average price per tonne: | 713 | 575 | 24.0 | 713 | 591 | 20.6 | | Slabs and billets | 568 | - | - | 568 | - | - | | Long products | 633 | 493 | 28.4 | 633 | 497 | 27.4 | | Flat hot-rolled products | 638 | 514 | 24.1 | 638 | 520 | 22.7 | | Premium products, including: | 832 | 657 | 26.6 | 832 | 675 | 23.3 | | Thick plate (Mill 5000) | 667 | 593 | 12.5 | 667 | 688 | - 3.1 | | Flat cold-rolled products | 731 | 573 | 27.6 | 731 | 602 | 21.4 | | Downstream products, including: | 889 | 691 | 28.7 | 889 | 692 | 28.5 | | Tinplate | 736 | 672 | 9.5 | 736 | 773 | - 4.8 | | Galvanised steel | 853 | 659 | 29.4 | 853 | 651 | 31.0 | | Polymer-coated steel | 1,121 | 852 | 31.6 | 1,121 | 827 | 35.6 | | Band | 798 | 600 | 33.0 | 798 | 663 | 20.4 | | Formed section | 863 | 621 | 39.0 | 863 | 760 | 13.6 | | Pipe | 706 | 538 | 31.2 | 706 | 555 | 27.2 | | Metalware | 820 | 627 | 30.8 | 820 | 659 | 24.4 | | Other metal products | 1,100 | 777 | 41.6 | 1,100 | 692 | 59.0 |
| + 24.0% Q-o-Q AVERAGE SELLING PRICE | Average selling prices for Q1 2021 grew by 24.0% q-o-q in Q1 2021 to USD 713 per tonne, driven by a significant increase in global prices for metal products amid global supply constraints. Prices grew by 20.6% y-o-y driven by favourable pricing conditions in the global steel markets. |
MMK GROUP'S PERFORMANCE ACROSS CORE SEGMENTS STEEL SEGMENT RUSSIA | thousand tonnes | Q1 2021 | Q4 2020 | % | Q1 2021 | Q1 2020 | % | | Crude steel production | 3,300 | 3,312 | - 0.4 | 3,300 | 3,022 | 9.2 | | Pig iron production | 2,572 | 2,521 | 2.0 | 2,572 | 2,355 | 9.2 | | Finished products sales,including: | 2,853 | 2,933 | - 2.7 | 2,853 | 2,597 | 9.8 | | Slabs and billets | 53 | 0 | - | 53 | 0 | - | | Long products | 268 | 297 | - 9.8 | 268 | 357 | - 24.7 | | Flat hot-rolled products | 1,570 | 1,505 | 4.3 | 1,570 | 1,095 | 43.3 | | Premium products, including: | 961 | 1,131 | - 15.0 | 961 | 1,145 | - 16.1 | | Thick plate (Mill 5000) | 165 | 202 | - 18.3 | 165 | 231 | - 28.6 | | Flat cold-rolled products | 184 | 226 | - 18.4 | 184 | 245 | - 24.7 | | Downstream products, including: | 612 | 703 | - 13.0 | 612 | 670 | - 8.6 | | Tinplate | 43 | 38 | 14.9 | 43 | 42 | 4.1 | | Galvanised steel | 270 | 298 | - 9.1 | 270 | 311 | - 13.1 | | Polymer-coated steel | 126 | 150 | - 16.1 | 126 | 109 | 15.3 | | Band | 35 | 42 | - 15.2 | 35 | 32 | 11.4 | | Formed section | 26 | 36 | - 28.0 | 26 | 44 | - 41.9 | | Pipe | 12 | 24 | - 48.4 | 12 | 13 | - 3.3 | | Metalware | 97 | 111 | - 12.2 | 97 | 108 | - 9.8 | | Other metal products | 2 | 6 | - 72.1 | 2 | 11 | - 85.1 | | Share of premium products | 33.7% | 38.5% | | 33.7% | 44.1% | |
| - 2.7% Q-o-Q sales of finished products - 9.8% Q-o-Q sales of long products + 4.3% Q-o-Q sales of hot-rolled products - 15.0% Q-o-Q sales of premium products - 18.3% Q-o-Q sales of Mill 5000 products - 18.4% Q-o-Q sales of cold-rolled products + 14.9% Q-o-Q sales of tinplate - 9.1% Q-o-Q sales of galvanised steel - 16.1% Q-o-Q SALES OF POLYMER-COATED STEEL | Sales of finished steel products in Q1 2021 decreased by 2.7% q-o-q to 2,853 thousand tonnes mainly due to the build-up of metal products inventories ahead of the construction season. The 9.8% y-o-y increase in sales was due to the completion of modernisation of Hot-Rolling Mill 2500. Sales of long products in Q1 2021 were down by 9.8% q-o-q to 268 thousand tonnes due to the restocking ahead of the construction season. Sales declined by 24.7% y-o-y driven by the scheduled repairs to rolling equipment and an increase in inventories ahead of the construction season. In Q1 2021, sales of hot-rolled products grew by 4.3% q-o-q to 1,570 thousand tonnes as a result of the growing export sales supported by favourable situation on global markets. The 43.3% y-o-y increase in sales was driven by the production growth at Hot-Rolling Mill 2500 after its modernisation. Sales of premium products in Q1 2021 decreased by 15.0% to 961 thousand tonnes due to the restocking ahead of the construction season and an increased share of export sales of thick plates from Mill 5000 with longer selling periods. The share of sales of premium products in the portfolio was 33.7%. Sales decreased by 16.1% y-o-y, reflecting the change in order mix for Mill 5000 thick plates and higher intragroup sales of cold-rolled products amid the reconstruction of the reverse Cold-Rolling Mill 1700. Mill 5000 sales decreased by 18.3% q-o-q to 165 thousand tonnes due to an increase in the share of export orders with longer selling periods. The 28.6% y-o-y decrease in sales was caused by a change in the order mix. Sales of cold-rolled products in Q1 2021 were down by 18.4% q-o-q to 184 thousand tonnes, due to an increase in intragroup sales. The 24.7% y-o-y decrease in sales was due to an increase in intragroup sales and the reconstruction of the reverse Cold-Rolling Mill 1700. The increase in tinplate sales in Q1 2021 by 14.9% to 43 thousand tonnes was due to the completion of scheduled equipment repairs. The 4.1% y-o-y increase in tinplate sales reflects higher equipment performance driven by the changes in order mix. Sales of galvanised steel in Q1 2021 decreased by 9.1% q-o-q to 270 thousand tonnes, driven by the build-up of inventories in the distribution network ahead of the construction season. Sales of galvanised steel were down by 13.1% y-o-y. Sales of coated steel in Q1 2021 decreased by 16.1% q-o-q to 126 thousand tonnes due to pre-season build-up of inventories and a more attractive pricing environment for galvanised steel. Sales were up 15.3% y-o-y, reflecting the low 2020 base amid the spread of the pandemic. |
STEEL SEGMENT TURKEY | thousand tonnes | Q1 2021 | Q4 2020 | % | Q1 2021 | Q1 2020 | % | | Finished products sales,including: | 196 | 220 | - 10.9 | 196 | 167 | 17.0 | | Flat hot-rolled products | 3 | 7 | - 58.9 | 3 | 4 | - 31.5 | | Premium products, including: | 193 | 213 | - 9.3 | 193 | 163 | 18.2 | | Flat cold-rolled products | - | - | - | - | - | - | | Downstream products, including: | 193 | 213 | - 9.3 | 193 | 163 | 18.2 | | Galvanised steel | 168 | 163 | 3.5 | 168 | 132 | 27.4 | | Polymer-coated steel | 25 | 50 | - 50.8 | 25 | 31 | - 20.8 | | Share of premium products | 98.5% | 96.8% | | 98.5% | 97.5% | | | Intersegment sales from Steel segment Russia | 145 | 108 | 34.8 | 145 | 19 | 648.5 |
| - 10.9% Q-o-Q SALES OF FINISHED PRODUCTS | The sales of finished products in the Turkish steel segment in Q1 2021 decreased by 10.9% q-o-q to 196 thousand tonnes, reflecting the shortage of semi-finished hot-rolled stock amid unscheduled repairs by key third-party contractors and challenging weather conditions in Russia and in Turkey in the first quarter, which increased the delivery time of sea cargo. A 17.0% y-o-y increase in sales reflects a low 2020 base amid the spread of the pandemic and lockdown restrictions. |
COAL MINING SEGMENT | thousand tonnes | Q1 2021 | Q4 2020 | % | Q1 2021 | Q1 2020 | % | | Coking coal mining | 1,282 | 1,246 | 2.9 | 1,282 | 1,238 | 3.6 | | Coking coal processing | 1,356 | 1,404 | - 3.4 | 1,356 | 1,442 | - 5.9 | | Mined | 1,177 | 1,208 | - 2.6 | 1,177 | 1,358 | - 13.3 | | Purchased | 114 | 159 | - 28.2 | 114 | 84 | 35.1 | | Toll | 65 | 37 | 74.7 | 65 | - | - | | Coking coal concentrate | 815 | 837 | - 2.6 | 815 | 814 | 0.2 |
| + 2.9% Q-o-Q COKING COAL PRODUCTION - 2.6% Q-o-Q COKING COAL CONCENTRATE PRODUCTION | Coking coal production in Q1 2021 increased by 2.9% q-o-q to 1,282 thousand tonnes. Coking coal production decreased by 3.6% y-o-y due to the challenging mining and geological conditions at the Chertinskaya-Koksovaya mine. Coking coal concentrate production in Q1 2021 decreased by 2.6% q-o-q due to convention loading restrictions and preparation of faces for re-mounting. The output of coal concentrate remained flat year-on-year. |
MMK GROUP'S SUSTAINABILITY PERFORMANCE (ESG) | HIGHLIGHTS | On 21 January 2021, BSI issued a report confirming the reliability of MMK's statement on its greenhouse gas emissions. This is the first BSI verification among Russian and other CIS companies to the latest version of ISO 14064-1:2018. In March 2021, the ISS international rating agency changed its ESG Corporate Rating outlook for MMK from "D+" to "C". The rating upgrade reflects the Group's continued strong performance and commitment to UN corporate responsibility and sustainability initiatives. |
| | Q1 2021 | Q4 2020 | % | Q1 2021 | Q1 2020 | % | | LTIFR | 1.20 | 0.53 | 126.4 | 1.20 | 1.09 | 10.1 | | Gross air emissions, thousand tonnes | 47.5 | 50.5 | - 5.9 | 47.5 | 42.8 | 11.0 | | Specific air emissions, kg/tonne | 14.4 | 15.2 | - 5.3 | 14.4 | 14.2 | 1.4 |
| + 10.1% Y-o-Y ltifr + 1.4% Y-o-Y SPECIFIC AIR EMISSIONS | The LTIFR for Q1 2021 increased by 10.1% y-o-y to 1.20, reflecting the increased number of accidents on the back of adverse weather conditions (icy conditions of roads). The Group continues to implement initiatives to address the root causes of accidents and improve the production safety culture. Specific air emissions in Q1 2021 increased by 1.4% y-o-y to 14.4 kg per tonne due to an increase in air emissions from power facilities as a result of the colder winter period of 2021. In Q4 2020, specific air emissions decreased by 5.3% q-o-q to 14.4 kg per tonne driven by the implementation of measures to decrease dust emissions. |
| OUTLOOK | The favourable conditions in global markets coupled with seasonal growth in demand in Russia will positively impact the Group's sales in Q2 2021. In May 2021, the reverse Cold-Rolling Mill 1700 is expected to be commissioned, which, given our 100% utilisation of premium products, will positively impact the structure of the Group's sales portfolio. The beginning of the construction season in Russia and positive dynamics of global prices for metal products amid the continued shortages in foreign markets will support the growth of prices for MMK Group's metal products in Q2 2021. CAPEX for Q2 2021 is expected to grow q-o-q, in line with the implementation schedule for projects pursued under the Group's strategy Operational excellence measures implemented under MMK's updated strategic initiatives will further boost the Group's profitability in Q2 2021. |
| ABOUT MMK MMK is one of the world's largest steel producers and a leading Russian metals company. The Group's operations in Russia include a large steel-producing unit encompassing the entire production chain, from the preparation of iron ore to downstream processing of rolled steel. MMK turns out a broad range of steel products, with a predominant share of premium products. In 2020, MMK produced 11.6 mln tonnes of crude steel and sold 10.8 mln tonnes of commercial steel products. ММK is an industry leader in terms of production costs and margins. Group revenue in 2020 totalled USD 6,395 mln, with an EBITDA of USD 1,492 mln. MMK boasts the industry's lowest debt burden. Net debt/EBITDA ratio was -0.06х at the end of 2020. The Group's investment-grade rating is confirmed by the leading global rating agencies Fitch, Moody's and S&P. MMK's ordinary shares are traded on the Moscow Exchange, while its depositary receipts are traded on the London Stock Exchange. Free float amounts to 15.7%. | Subscribe to our official MMK channel on Telegram to be the first to know about key MMK news. |
| INVESTOR RELATIONS DEPARTMENT Veronika Kryachko +7 915 380 6266 kryachko.vs@mmk.ru ESG DEPARTMENT Yaroslava Vrubel +7 982 282 9682vrubel.ys@mmk.ru COMMUNICATIONS DEPARTMENT Dmitry Kuchumov+7 985 219 2874 kuchumov.do@mmk.ru Oleg Egorov+7 903 971 8837egorov.oa@mmk.ru | | KEY UPCOMING EVENTS IN 2021 Financial calendar | | 13-14 April | Wood EM Energy & Commodities Virtual Conference | | 21 April | Q1 2021 financials | | 27 April | Integrated Annual Report 2020 | | 27-28 April | Non-deal roadshow (NDR), online |
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