15 Jul 2008 09:00
15 July 2008
Press-release Novolipetsk Steel (NLMK) Q2 2008 Trading Update
Novolipetsk Steel (LSE: NLMK) today announces the following regular trading update for Q2 2008.
1. Production and Sales1
NLMK Q2 2008 sales volumes:
| million, t |
| Q2 2008 | Q1 2008 | Q2 2007 |
| Q2 2008/ Q1 2008 | Q2 2008 / Q2 2007 |
|
|
| ||||||
| Pig iron |
| 0.153 | 0.266 | 0.115 |
| -42.5% | 33.7% |
| Slabs |
| 1.063 | 0.738 | 0.819 |
| 43.9% | 29.7% |
| Hot-rolled steel2 |
| 0.511 | 0.454 | 0.448 |
| 12.5% | 14.0% |
| Cold-rolled steel |
| 0.418 | 0.376 | 0.361 |
| 11.0% | 15.7% |
| Hot dip galvanized steel |
| 0.121 | 0.096 | 0.123 |
| 25.6% | -1.1% |
| Pre-painted steel |
| 0.099 | 0.080 | 0.087 |
| 24.7% | 14.6% |
| Dynamo steel | 0.095 | 0.075 | 0.097 |
| 25.7% | -2.3% | |
| Transformer steel |
| 0.042 | 0.036 | 0.035 |
| 18.5% | 22.6% |
Dansteel A/S Q2 2008 sales volumes:
| million, t |
| Q2 2008 | Q1 2008 | Q2 2007 |
| Q2 2008/ Q1 2008 | Q2 2008 / Q2 2007 |
|
|
| ||||||
| Heavy plates |
| 0.153 | 0.136 | 0.120 |
| 12.3% | 27.2% |
VIZ-Stal Q2 2008 sales volumes:
| million, t |
| Q2 2008 | Q1 2008 | Q2 2007 |
| Q2 2008/ Q1 2008 | Q2 2008 / Q2 2007 |
|
|
| ||||||
| Transformer steel |
| 0.047 | 0.047 | 0.048 |
| 0.1% | -2.1% |
| Dynamo steel |
| 0.003 | 0.004 | 0.006 |
| -25.7% | -50.6% |
Stoilensky GOK Q2 2008 sales volumes:
| million, t |
| Q2 2008 | Q1 2008 | Q2 2007 |
| Q2 2008/ Q1 2008 | Q2 2008 / Q2 2007 |
|
|
| ||||||
| Iron ore concentrate |
| 2.829 | 3.000 | 2.932 |
| -5.7% | -3.5% |
| Sinter ore |
| 0.381 | 0.418 | 0.435 |
| -8.9% | -12.4% |
Altai-koks Q2 2008 sales volumes:
| million, t |
| Q2 2008 | Q1 2008 | Q2 2007 |
| Q2 2008/ Q1 2008 | Q2 2008 / Q2 2007 |
|
|
| ||||||
| Coke (dry) |
| 0.961 | 0.865 | 0.976 |
| 11.2% | -1.5% |
Maxi-Group3 Q2 2008 sales volumes:
| million, t |
| Q2 2008 | Q1 2008 | Q2 2007 |
| Q2 2008/ Q1 2008 | Q2 2008 / Q2 2007 |
|
|
| ||||||
| Billet |
| 0.173 | 0.121 | 0.231 |
| 42.2% | -25.1% |
| Rebar |
| 0.271 | 0.262 | 0.145 |
| 3.4% | 86.3% |
| Wire rod |
| 0.033 | 0.066 | 0.000 |
| -50.2% | |
| Metalware |
| 0.055 | 0.027 | 0.097 |
| 101.1% | -43.3% |
| Scrap4 |
| 0.905 | 0.473 | 0.670 |
| 91.4% | 35.1% |
Steel Invest & Finance (SIF) 5, 6 Q2 2008 sales volumes:
| million, t |
| Q2 2008 | Q1 2008 | Q2 2007 |
| Q2 2008/ Q1 2008 | Q2 2008 / Q2 2007 |
|
|
| ||||||
| Semi-finished products |
| 0.141 | 0.157 | 0.117 |
| -10.3% | 19.8% |
| Heavy plate |
| 0.211 | 0.172 | 0.176 |
| 22.4% | 19.6% |
| Hot-rolled steel2 |
| 0.486 | 0.530 | 0.496 |
| -8.4% | -2.0% |
| Cold-rolled steel |
| 0.161 | 0.112 | 0.170 |
| 43.5% | -5.2% |
| Pre-painted steel |
| 0.291 | 0.240 | 0.158 |
| 21.3% | 84.5% |
| Longs |
| 0.060 | 0.065 | 0.058 |
| -6.9% | 2.9% |
1 Q2 2008 production and sales data is indicative and subject to amendments
2 Including hot-rolled pickled steel
3 Maxi-group companies were included into the Group since December 2007
4 Including sales to Maxi-Group
5 Excluding sales of third party products by the network of metal service centres
6 SIF is an affiliated company with 50% NLMK share
2. Realized prices
Realized prices are calculated by dividing sales revenue by sales volume. Such calculations do not differentiate between particular product types and grades within a product sub-category. Realized prices are not indicative of actual contract prices and can only serve as an approximation. All information on Q2 2008 prices is preliminary and subject to change.
The table below shows NLMK Q2 2008 average prices:
|
|
| USD per tonne, (FCA)7 | |||||
|
|
| Q2 2008 | Q1 2008 | Q2 2007 |
| Q2 2008/ Q1 2008 | Q2 2008 / Q2 2007 |
| Pig iron |
| 558.5 | 380.0 | 281.0 |
| 47.0% | 98.8% |
| Slabs |
| 714.3 | 501.3 | 455.5 |
| 42.5% | 56.8% |
| Hot-rolled steel |
| 860.3 | 609.6 | 596.4 |
| 41.1% | 44.2% |
| Cold-rolled steel |
| 903.7 | 680.2 | 651.6 |
| 32.9% | 38.7% |
| Hot dip galvanized steel |
| 1 181.1 | 954.7 | 981.6 |
| 23.7% | 20.3% |
| Pre-painted steel |
| 1 425.2 | 1 245.1 | 1 258.9 |
| 14.5% | 13.2% |
| Dynamo steel |
| 951.3 | 814.6 | 723.6 |
| 16.8% | 31.5% |
| Transformer steel |
| 3 870.1 | 3 680.4 | 3 428.0 |
| 5.2% | 12.9% |
Q2 2008 average prices for DanSteel A/S products are as follows:
|
|
| Euro per tonne, (FCA) 7 | |||||
|
|
| Q2 2008 | Q1 2008 | Q2 2007 |
| Q2 2008/ Q1 2008 | Q2 2008 / Q2 2007 |
| Heavy plates |
| € 783.1 | € 759.5 | € 740.4 |
| 3.1% | 5.8% |
VIZ-Stal Q2 2008 average prices:
|
|
| USD per tonne, (FCA)7 | |||||
|
|
| Q2 2008 | Q1 2008 | Q2 2007 |
| Q2 2008/ Q1 2008 | Q2 2008 / Q2 2007 |
| Transformer steel |
| 4 059.2 | 3 836.1 | 3 495.3 |
| 5.8% | 16.1% |
| Dynamo steel |
| 1 084.8 | 1 016.3 | 919.8 |
| 6.7% | 17.9% |
Q2 2008 average prices for Stoilensky GOK products:
|
|
| USD per tonne, (FCA)7 | |||||
|
|
| Q2 2008 | Q1 2008 | Q2 2007 |
| Q2 2008/ Q1 2008 | Q2 2008 / Q2 2007 |
| Iron ore concentrate |
| 78.8 | 76.5 | 65.3 |
| 3.0% | 20.7% |
| Sinter ore |
| 51.4 | 38.2 | 26.2 |
| 34.7% | 96.4% |
Altai-Koks Q2 2008 average product prices:
|
|
| USD per tonne, (FCA)7 | |||||
|
|
| Q2 2008 | Q1 2008 | Q2 2007 |
| Q2 2008/ Q1 2008 | Q2 2008 / Q2 2007 |
| Coke (dry) |
| 278.5 | 252.8 | 126,7 |
| 10.2% | 119.8% |
Q2 2008 average prices for Maxi-Group products:
|
|
| USD per tonne, (FCA)7 | |||||
|
| Q2 2008 | Q1 2008 | Q2 2007 |
| Q2 2008/ Q1 2008 | Q2 2008 / Q2 2007 | |
| Billet |
| 928.7 | 534.0 | 473.6 |
| 73.9% | 96.1% |
| Rebar |
| 984.7 | 630.2 | 683.8 |
| 56.3% | 44.0% |
| Wire rod |
| 936.5 | 615.0 | 585.9 |
| 52.3% | 59.8% |
| Metalware |
| 1182.3 | 851.0 | 678.5 |
| 38.9% | 74.3% |
| Scrap |
| 438.9 | 289.6 | 241.9 |
| 51.5% | 81.4% |
7 Excluding freight charge
3. Management comments
The sharp increase in slab and rolled products sales volumes in Q2 2008 is mainly attributable to the change in export contracts transition to an FOB supply basis in Q1 2008 . As a result of this transition, there was increased inventory of metal products at ports in Q1 2008 from NLMK's production site. These products, as well as Q2 deliveries, were sold in Q2 2008. The production volume of products, delivered from NLMK's production site, amounted 2.5 million tonnes in Q2 2008, which corresponds to the Q1 2008 level.
The strong increase in pricing for NLMK's metal products reflects the global steel market trends. In Q2 2008, all the products delivered by NLMK saw prices continuing to rise. This trend could primarily be observed in pig iron, slabs and hot-rolled steel due to high demand worldwide.
Also, high demand caused DanSteel A/S to increase production of heavy plates.
Transformer steel production at VIZ-Stal in Q2 2008 remained at the level of Q1 2008. Both of NLMK Group's transformer steel production facilities, NLMK and VIZ-Stal, were fully loaded. Market trends for rolled products drove the prices for VIZ-Stal products higher.
Despite the fact that the bulk of Stoilensky GOK's output was supplied in Q1 and Q2 at fixed prices, the decrease of the USD to RUR exchange rate, as well as redistribution of product sales volumes to the third party sales markets drove the prices increase for iron ore concentrate and sinter ore. Iron ore concentrate supplies were slightly reduced due to a decrease of NLMK pig iron production and sales.
Altai-Koks increased coke sales volumes due to growing demand in core sales markets, especially Russia, including NLMK, and other CIS countries. Shortages in the coal market caused the increase in average prices for coal concentrate and significant growth of coke production costs. Moreover, in Q2 2008, the high-quality coking coal market was tight and this undersupply caused a certain decrease in coke produced by Altai-Koks. A number of contracts for coke supply are signed quarterly.This, coupled with a lower quality of coke, did not allow Altai-koks to fully capitalize on the coke price growth.
Maxi-Group increased scrap and billet production volumes in Q2 2008 due to seasonally higher self-sufficiency in scrap. Larger wire rod supplies for metalware production in Q2 2008 caused an increase in metalware sales and a slowdown of wire rod sales dynamics. The price increases for Maxi-Group products is in line with global industry trends for price growth of long products.
The Q2 2008 increase in sales volumes of Steel Invest & Finance as compared to Q1 2008 was a result of increased production of high-value added products. Starting from Q2 2008, Duferco Clabecq SA switched to three-shift working that ensured an increase in production and sales volumes of thick plates. Improved market conditions, including the US market, resulted in increased sales volumes of cold rolled and coated steel products. Additional factors that contributed to sales volumes growth, as compared to the corresponding period of the last year, was the acquisition of Sharon Coating LLC (former Winner Steel INC) in June 2007 as well as the growth of coated steel sales volumes.
4. Outlook
We note that increases in the prices of basic raw materials drove steel prices in H1 2008. We expect a flattening of steel prices in Q3 2008. There is a possibility of price softening in domestic and export steel markets by the end of 2008.
We expect that the Group's Q2 2008 financial results will exceed the level of the previous quarter as well as the level of Q2 2007. According to our preliminary estimates, revenues will grow by up to 70% year-on-year, and EBITDA could exceed the 2007 level by 60%.