REG - Evraz Plc - 3rd Quarter 2015 Production Results <Origin Href="QuoteRef">EVRE.L</Origin>

EvrazAnnouncement

16/10/2015 07:00

RNS Number : 4586C
Evraz Plc
16 October 2015
EVRAZ Q32015 PRODUCTION REPORT
16October 2015-EVRAZ plc (LSE: EVR) today releases its operational results for the third quarter of 2015.
Q32015 vs Q22015 HIGHLIGHTS:
 Consolidated crude steel output reached 3.5 million tonnes, improving 3% QoQ on the back of completed repair works at Russian steel mills. 
 Production of steel products, net of re-rolled volumes, was largely unchanged.
 The share of finished steel products within consolidated volumes grew to 69% in Q32015 from 65% in Q22015 due to seasonal pickup in demand for construction products in Russia and improved demand for linepipe in North America.
 Production volumes of railway products were 22% down due to maintenance at the Russian EVRAZ ZSMK rail mill and at EVRAZ North America rail mill in Pueblo coupled with seasonality in North America rail demand.
 Consolidated raw coking coal output and production of coking coal concentrate increased by 36% and 17% respectively due to resumption of full-scale mining at Yuzhkuzbassugol and Raspadskaya on the back of improving domestic demand in Russia.
STEEL
Product, '000 tonnes 
Q3 2015
Q2 2015
Q32015/ Q22015, change
9m 2015**
9m 2014**
9m2015/ 9m2014, change
Coke (saleable)
207
286
-27.5%
778
833
-6.6%
Pig iron
2,982
2,811
6.1%
8,924
9,230
-3.3%
Pig iron (saleable)
189
165
14.7%
425
229
85.2%
Crude steel
3,494
3,382
3.3%
10,790
11,651
-7.4%
Steel products, gross*
3,388
3,317
2.1%
10,507
11,248
-6.6%
Steel products, net of re-rolled volumes
3,154
3,119
1.1%
9,835
10,335
-4.8%
Semi-finished products ***
993
1,089
-8.8%
3,436
2,987
15.1%
Finished products
2,161
2,030
6.5%
6,398
7,349
-12.9%
Construction products
1,291
1,128
14.5%
3,602
3,854
-6.5%
Railway products
329
423
-22.1%
1,152
1,453
-20.7%
Flat-rolled products
188
167
12.7%
562
794
-29.2%
Tubular products
213
165
29.4%
633
786
-19.4%
Other steel products
140
148
-5.6%
450
462
-2.6%
Note. Numbers in this table and the tables below may not add to totals due to rounding.
*  Gross volume of steel products in the tables includes those re-rolled at other EVRAZ's mills. However, such volumes are eliminated as intercompany sales for purposes of EVRAZ's consolidated operating results.
** Includes production volumes of EVRAZ Vitkovice Steel disposed of in April 2014 and of EVRAZ Highveld Steel and Vanadium (EHSV) which are not consolidated starting from April 2015 due to business rescue proceedings 
*** Consolidated production volumes of semi-finished products are preliminary as Q32015 intra-group re-rolling volumes are yet to be finalised.
RUSSIA and KAZAKHSTAN
Product, '000 tonnes 
Q3 2015
Q2 2015
Q32015/ Q22015, change
9m 2015
9m 2014
9m2015/ 9m2014, change
Coke (saleable)
74
96
-23.4%
247
292
-15.4%
Pig iron
2,733
2,553
7.0%
8,030
7,977
0.7%
Pig iron (saleable)
166
142
16.8%
356
210
69.3%
Crude steel
2,820
2,697
4.6%
8,573
8,820
-2.8%
Steel products, gross
2,632
2,562
2.7%
8,062
8,161
-1.2%
Steel products, net of re-rolled volumes
2,552
2,500
2.1%
7,848
7,980
-1.7%
Semi-finished products
1,084
1,092
-0.7%
3,591
3,381
6.2%
Finished products
1,468
1,408
4.3%
4,257
4,599
-7.4%
Construction products
1,103
991
11.3%
3,076
3,155
-2.5%
Railway products
234
281
-16.9%
773
1,055
-26.8%
Other steel products
131
135
-3.3%
408
390
4.8%
In Q32015, production of pig iron and crude steel grew by 7% and 5% respectively, as in Q22015 production was affected by capital repair works at EVRAZ ZSMK's blast furnace 3 and EVRAZ NTMK's blast furnace 6.
Quarterly production of steel products increased mostly due to higher volumes of construction products (+11%) reflecting stronger demand during peak domestic construction season. Output of construction products in the nine months of 2015 vs. the same period of 2014 declined only by 2.5%.
Production of semi-finished steel products was largely unchanged in Q32015 over Q22015. When comparing the first nine months of this year to the same period last year, semi-finished goods demonstrated growth due to reallocation of part of the production volumes to export markets.
Production of railway products in Q32015, in particular rails, was down by 17% over Q22015 as a result of the scheduled capital repair of the EVRAZ ZSMK electric arc furnace and rail mill in Q32015. The 9M2015 to 9M2014 decrease in railway product output is attributable to lower consumption in the CIS countries caused by a decrease in new construction and overhaul of railway infrastructure.
Lower prices are in line with global benchmarks.
In Q42015, steel production is expected to remain at the level of Q32015 and production of semi-finished products for exports may increase due to low season in Russia. 
Average selling prices
USD/tonne (ex works)
Q32015
Q22015
9m2015
9m2014
Coke
108
136
112
126
Pig iron
189
205
198
307
Steel products




Semi-finished products
241
278
276
417
Construction products
365
419
400
604
Railway products
527
611
553
779
Other steel products
381
462
421
604
NORTH AMERICA 
Product, '000 tonnes 
Q3 2015
Q2 2015
Q32015/ Q22015, change
9m 2015
9m 2014
9m2015/ 9m2014, change
Crude steel
432
431
0.3%
1,340
1,471
-8.9%
Steel products, net of re-rolled volumes
567
530
6.9%
1,712
1,909
-10.3%
Construction products
71
58
22.7%
204
254
-19.9%
Railway products
95
141
-32.4%
379
398
-4.8%
Flat-rolled products
188
167
12.7%
497
471
5.4%
Tubular products
213
165
29.4%
633
786
-19.4%
* Q32015 and 9m2015 production volumes are preliminary
In Q32015, crude steel production remained unchanged compared to Q22015 as an increase in steel production for construction products was partially offset by a decline in rail production.
Railway products declined 32% in Q32015 when compared to the previous quarter due to the combined effect of approximately three weeks of maintenance outages at the EVRAZ Pueblo rail mill and a seasonal slowdown in rail purchases.
Production of flat-rolled products increased 13% over Q22015 as plate demand returned to more normal levels. Additionally, Q3 production benefited from no maintenance outages in comparison with a 17-day maintenance outage in Portland and eight days of planned outages mostly related to maintenance activities at EVRAZ Regina during Q22015. 
Production of tubular products increased 30% QoQ on the back of higher linepipe volumes to fulfill increased demand from oil and natural gas transmission companies. Additionally, EVRAZ OCTG mills in Red Deer and Calgary and the seamless pipe facility in Pueblo which resumed production at the end of Q22015 continued operating at low levels throughout the quarter.
When comparing the first nine months of 2015 with the same period in the previous year, crude steel and steel products declined by 9% and 10% respectively. Key drivers for these declines were the idling of seamless and OCTG facilities, subdued flat products demand, and selective reduction in rod & bar volumes to eliminate low margin products. During the first nine months of 2015 we also carried out significant maintenance projects as described in the preceeding paragraphs in this report and in the first quarter and second quarter operating reports.
Third party sales of flat-rolled products increased as volumes previously consumed by EVRAZ North America's OCTG and hollow structural shapes mills were directed to third party sales.
Tubular goods output in the first nine months of 2015 declined as low oil and natural gas prices resulted in reduced exploration and production activity which in turn dampened OCTG consumption. This decline was partially offset by increased output of large diameter linepipe, a segment where we expect to continue seeing volume growth.
Prices for most steel products continued to decline during Q32015 reflecting prevailing scrap and other inputs declines.
During Q42015 we expect a return of rail production to normalised levels. During Q42015 we are also planning to reduce utilisation of the large diameter mill in Regina to approximately 70% of its capacity during October and November to accommodate work related to the new large diameter mill project announced previously. 
Average selling prices
USD/tonne (ex works)
Q32015
Q22015
9m2015
9m2014
Construction products
589
738
672
798
Flat-rolled products
652
727
751
962
Tubular products
1,055
1,096
1,147
1,331
UKRAINE
Product, '000 tonnes 
Q3 2015
Q2 2015
Q32015/ Q22015, change
9m 2015
9m 2014
9m2015/ 9m2014, change
Coke (saleable)
133
190
-29.6%
531
542
-1.9%
Pig iron
249
258
-3.3%
744
755
-1.5%
Pig iron (saleable)
24
23
1.9%
69
19
262.6%
Crude steel
242
254
-4.9%
729
769
-5.2%
Steel products
189
225
-16.2%
610
651
-6.4%
Semi-finished products
63
133
-53.0%
237
318
-25.4%
Finished products
126
92
37.3%
310
333
-7.0%
Construction products
117
79
48.1%
275
281
-2.2%
Other steel products
9
13
-30.0%
35
52
-33.0%
The 30% reduction in saleable coke volumes in Q22015 vs. Q32014 and in the nine months of 2015 vs. the nine months of 2014 was caused by decreased orders from other Ukrainian steel producers.
Production of crude steel and steel products, in particular semi-finished goods, fell as a result of scheduled maintenance works at blast furnace3 and rolling mills in Q32015.
Production of construction products, meanwhile, grew by 48% in Q32015 vs. Q22015 and declined by 2% only in the nine months this year vs. 2014 due to better seasonal demand and larger shipments to the Ukrainian, Russian and European markets in 2015.
In Q42015, production of crude steel and steel products is expected to increase compared to Q32015 as no maintenance works are planned.
Average selling prices
USD/tonne (ex works)
Q32015
Q22015
9m2015
9m2014
Coke (saleable)
152
175
176
167
Pig iron
223
248
247
331
Steel products




Semi-finished products
289
325
327
454
Construction products
396
436
420
574
Other steel products
609
704
616
870
SOUTH AFRICA
Results of EVRAZ Highveld Steel and Vanadium have been deconsolidated following introduction of business rescue proceedings at EVRAZ Highveld and Vanadium in April 2015.
IRON ORE
Product, '000 tonnes 
Q3 2015
Q2 2015
Q32015/ Q22015, change
9m 2015
9m 2014
9m2015/ 9m2014, change
Sinter (Russia)
2,884
2,595
11.2%
8,316
8,461
-1.7%
Pellets (Russia)
1,615
1,629
-0.8%
4,875
4,784
1.9%
Lumpy ore (Ukraine)
721
726
-0.6%
2,115
2,154
-1.9%
On completion of scheduled maintenance works at EVRAZ ZSMK's sintering machine in Q22015, production of iron ore products (sinter plus pellets) in Russia rose by 7% QoQ and remained flat when comparing the first nine months of 2015 with the same period in the previous year. 
Production is expected to be stable in Q42015.
In Ukraine, production of lumpy ore has been stable, and maintenance works, replacement of parts of mining equipment scheduled for Q42015 are not expected to significantly impact production volumes.
In Q32015, prices for iron ore products followed global benchmarks.
Average selling prices
USD/tonne (ex works)
Q32015
Q22015
9m2015
9m2014
Pellets (Russia)
36
41
41
76
Lumpy ore (Ukraine)
20
21
23
56
COAL
Product, '000 tonnes 
Q3 2015
Q2 2015
Q32015/ Q22015, change
9m 2015
9m 2014
9m2015/ 9m2014, change
Raw coking coal (mined)
5,232
3,840
36.3%
14,539
15,089
-3.6%
Yuzhkuzbassugol
2,426
1,510
60.6%
6,563
8,204
-20.0%
Raspadskaya
2,727
2,270
20.2%
7,799
6,885
13.3%
Mezhegeyugol
79
60
32.2%
177
0
n/a
Coking coal concentrate (production)
3,666
3,123
17.4%
10,169
10,165
0.0%
Coking coal
In Q32015, production of coking coal concentrate was 17% up on the back of increased raw coking coal production (+36% QoQ).
Following scheduled longwall moves at its Yerunakovskaya VIII, Osinnikovskaya and Yesaulskaya mines, Yuzhkuzbassugol expanded coal production by 61% compared with Q22015. The Raspadskaya coal company mined 20% more coal having completed the longwal move at the Raspadskaya underground mine and resuming full-scale operations at the Razrez Raspadksy open pit which were curtailed in Q22015 in response to excessive supply of GZh and GZhO grades in the market. 
Pricing in the Russian market is set quarterly. In Q32015, the weighted average price of coking coal concentrate in Russian rouble terms remained unchanged compared to Q22015. However, due to to unexpected sharp Russian rouble depreciation, when re-calculated in US dollars, the prices are lower than in the previous quarter. 
In Q42015, Yuzhkuzbassugol and Raspadskaya mines will continue to work on existing longwalls.
Average selling prices
USD/tonne (ex works)
Q32015
Q22015
9m2015
9m2014
Raw coking coal
29
42
32
47
Coking coal concentrate 
54
68
59
74
VANADIUM
Product, tonnes of V* 
Q3 2015
Q2 2015
Q32015/ Q22015, change
9m 2015
9m 2014
9m2015/ 9m2014, change
Vanadium in slag (gross production)
4,140
3,834
8.0%
13,891
16,203
-14.3%
Russia
4,140
3,834
8.0%
12,102
11,107
9.0%
South Africa
0
0
n/a
1,788
5,096
-64.9%
Vanadium in final products (saleable)
3,108
3,276
-5.1%
11,583
13,870
-16.5%
*Calculated in pure vanadium equivalent
In Q32015, Vanadium slag production grew by 8% QoQ as a result of higher pig iron output at EVRAZ NTMK. The 14% decrease in the first nine months of 2015 compared to the same period of 2014 is attributable to EVRAZ Highveld's deconsolidation since April 2015. 
Production of final vanadium products decreased QoQ affected by lower availability of feedstock for production of ferrovanadium as a result of EVRAZ Highveld's production stoppage in South Africa and due to lower production of oxides, vanadium aluminum and chemicals at EVRAZ Stratcor in the USA due to a one-month idling of the plant in April 2015 driven by lack of feedstock. The 17% decline in production of final vanadium products in the first nine months of 2015 vs. the same period last year was also a result of deconsolidation of EVRAZ Highveld's subsidiary Hochvanadium.
Average Q32015 Metal Bulletin FeV80 index of $17.90/kgV showed a decline of 15.7% vs. $21.24/kgV of the previous quarter. In the meantime Ryan's Notes index used in North America averaged $19.63/kgV in Q32015, declining by 8.9% from $21.54/kgV achieved in Q22015. The EVRAZ selling quotation followed suit.
Average FeV indices
USD/tonne of V 
Q32015
Q22015
9m2015
9m2014
Metal Bulletin Ferro-vanadium basis 78% min, free DDP, consumer plant, 1st grade Western Europe
17,896
21,239
20.306
25.868
Ryan's Notes N.A. FeV 80% min, US ex-warehouse, duty paid
19,630
21,536
22,031
28,913
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 further information:
Media Relations: 

London: +442078328998
Moscow: +74959376871
media@evraz.com

Investor Relations:

London: +442078328990
Moscow: +74952321370
ir@evraz.com

EVRAZ is a vertically integrated steel, mining and vanadium business with operations in the Russian Federation, Ukraine, Kazakhstan, USA, Canada, Czech Republic, and South Africa. EVRAZ is among the top steel producers in the world based on crude steel production of 15.5million tonnes in 2014. 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 31December 2014 were US$13,061million, and consolidated EBITDA amounted to US$2,325million. 

This information is provided by RNS
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