SVST.L Regulatory News (SVST)

Severstal reports Q4 2014 and FY 2014 operational results

Moscow, Russia - January 26, 2015 - PAO Severstal (MICEX-RTS: CHMF; LSE: SVST), one of the world's leading vertically integrated steel and steel-related mining companies, today announces its operational results for Q4 2014 and FY 2014.

Q4 2014 GROUP HIGHLIGHTS 

· In terms of steel production volumes, Q4 2014 was broadly in line with Q3 2014 despite seasonality: crude steel production increased 1% q/q to 2.89 mln tonnes, while hot metal production was up 2% q/q to 2.32 mln tonnes. That said, growing efficiency of our converters comes from a wider use of higher Fe content pellets, which allows us to partially replace expensive scrap.

· Consolidated sales of steel products slightly decreased 1% q/q due to marginal change to the product mix and short-term maintenance at one of the rolling mills.

· Share of high value-added products in the sales portfolio remained around historical record levels of 52% (Q3 14: 53%) reflecting our strategic focus on downstream development and despite the increase in the output of semi-finished products post the completion of repairs at one of the converters at the end of Q3 2014.

· Steel assets continued to run at near to full capacity in Q4, with the Balakovo mini-mill ramping-up further.

· Coking coal concentrate sales volumes at Vorkutaugol increased 25% q/q to almost 1.47 mln tonnes.

· Iron ore pellets sales remained broadly flat q/q at 2.75 mln tonnes (Q3 2014: 2.74 mln tonnes).

· Whilst average selling prices for all products declined in USD terms, they are up q/q in RUB. Moreover, despite seasonally low market, domestic RUB-nominated prices continue to catch up with the export USD-nominated parity since the beginning of 2015 as well.

SUMMARY OF KEY PRODUCTION, SALES VOLUMES AND SELLING PRICES DATA

SEVERSTAL RESOURCES

●Iron ore pellets sales remained broadly flat q/q at 2.75 mln tonnes (Q3 2014: 2.74 mln tonnes) despite seasonally softer demand in Q4 with maintenance works generally under way at steel works across Russia. Specifically, Severstal has marginally increased internal pellets consumption q/q, further reducing CherMK's need in scrap for the steelmaking process. Moreover, Severstal saw strong demand on export markets in Q4 2014.

● As previously announced, Severstal idled one of the open pits at Olkon focusing on the least costly deposits and preserving desirable captive iron ore concentrate production mixed with purchases from external suppliers. As a result, iron ore concentrate sales volumes in Q4 decreased 14% q/q.

● Coking coal concentrate sales volumes increased 14% q/q. Consolidated figures were impacted by PBS Coals sales volumes still reflected in the Q3 results. Nevertheless, coking coal concentrate sales volumes at Vorkutaugol increased 25% q/q. This marks a successful turnaround achieved at the Vorkutaugol with 11 new coalfaces being commissioned across all the five mines in 2014 and run-of-mine coal (ROM coal) volumes surpassing average 2013 levels.

● Following the capacities increase at Pechorskaya beneficiation plant, Severstal continued to process all the amounts of raw coking coal for the second consecutive quarter.

● Steam coal sales at Vorkutaugol were up 34% q/q reflecting seasonally high domestic demand coupled with the low base effect of Q3 2014 due to engineering works constraints at several coal faces.

●Notwithstanding Severstal's successful efforts to increase RUB-nominated prices, in dollar terms and due to the global iron ore benchmark decline, the Company's average selling prices for both iron ore pellets and iron ore concentrate decrease 25% q/q and 27% q/q, respectively. Coking coal concentrate average selling price decline of 19% q/q is purely a function of RUB devaluation partially offset by RUB-nominated prices upgrades by the company.

SEVERSTAL RUSSIAN STEEL

● Severstal Russian Steel (RSD) steel products sales decreased 3% q/q to 2.65 mln tonnes due to seasonal factors as well as marginal change to the product mix coupled with short-term maintenance at one of the mills.

●Our Balakovo mini-mill continues its production ramp-up with total sales of long products increasing 17% q/q.

●On a separate note, RSD recorded 6% q/q increase in downstream products sales volumes. Sales of large diameter pipes (LDPs) increased 23% q/q (following significant 125% q/q increase in Q3) as Izhora Pipe Mill (part of Severstal Russian Steel) successfully proceeded with the South Stream first tender deliveries. Moreover, in Q4 Severstal continued supplying LDPs for the Power of Siberia and the Southern Corridor pipelines, which enabled the Izhora Pipe Mill to run at a high utilization rate.

● Q4 2014 steel products USD-nominated prices primarily reflected the sharp RUB devaluation during the respective quarter. Nevertheless, RSD was able to increase domestic RUB-nominated sales prices partially compensating for the RUB devaluation effect. Moreover, despite seasonally low market, domestic RUB-nominated prices continue to catch up with the export USD-nominated parity since the beginning of 2015.

SEVERSTAL'S CONSOLIDATED SALES (NET OF INTERCOMPANY SALES)

1) All production data is reported in metric tonnes;

2) Sales prices are stated on EXW basis;

3) Segmental data includes intercompany sales;

4) Semi-finished products include pig iron, slabs, billets, ingots, steel casting and forgings;

5) Metalware sales volumes and metalware average selling prices include Severstal Metiz, Cherepovets Steel Mill, Severstal Distribution and Severstal Invest data;

6) Large diameter pipes include all pipes with a diameter between 820 and 1420 mm;

7) Group and RSD volumes and average selling prices for 2013 were restated due to a change in recognized revenues, based on a re-classification of products.

8) Group volumes and average selling prices for 2013 reflect adjustments made in connection with the presentation of the discontinued operation.

9) On 19 August 2014, Severstal announced that it has completed the sale of PBS Coals Inc., a metallurgical coal producer located in Pennsylvania, USA, to Corsa Coal Corp., a Canadian public company. In regard to the sale and in full accordance with IFRS standards Severstal continues to report operational results of PBS Coals Inc. till 19 August 2014 - disposal date, which are included in the Group's Q3 2014 and 2014 consolidated operational results

Investor Relations

Vladimir Zaluzhsky

T: +7 (495) 926-77-66 ext. 6375

vladimir.zaluzhsky@severstal.com

Public Relations

Elena Kovaleva

T: +7 (495) 926-77-66 ext. 6447

elena.kovaleva@severstal.com

Severstal's financial communications agent - Hudson Sandler

Andrew Hayes / Maria Ignatova / Alex Brennan

T: +44 (0) 20 7796 4133

PАО Severstal is one of the world's leading vertically integrated steel and steel related mining companies, with assets in Russia, Ukraine, Latvia, Poland, Italy and Liberia. Severstal is listed on the Moscow Stock Exchange with GDRs being traded on the London Stock Exchange. Severstal reported revenue of $9,434 million* and EBITDA of $1, 818 million* in 2013. Severstal's crude steel production in 2014 reached 11.3 million tonnes. www.severstal.com

* These amounts reflect adjustments made in connection with the presentation of the discontinued operation.

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