REG - Evraz Plc - EVRAZ Q4 2014 and FY 2014 PRODUCTION REPORT <Origin Href="QuoteRef">EVRE.L</Origin>

EvrazAnnouncement

28/01/2015 01:25

RNS Number : 4714C
Evraz Plc
19 January 2015
EVRAZ Q42014 and FY 2014 PRODUCTION REPORT 
19January 2015-EVRAZ plc (LSE: EVR) today releases its operational results for the fourth quarter of 2014 and the full year of 2014.
FY 2014 OPERATIONAL HIGHLIGHTS:
 Consolidated crude steel production and output of steel products, net of rerolled volumes, decreased by 4% and 5% respectively, mostly as a result of the disposal in April 2014 of EVRAZ Vitkovice Steel in the Czech Republic and the shutdown of EVRAZ Claymont operations in the USA at the end of 2013 as part of the group wide optimisation plan
 The share of semi-finished products in our shipments increased to 31% from 26% in 2013 as a result of a shift in sales from Russia to export destinations driven partially by a weakening rouble, and by a reduction in intercompany supply of slabs for further re-rolling at EVRAZ's rolling mills in Europe and at EVRAZ Claymont due to disposal, shutdown, or suspension of such mills
 EVRAZ ZSMK successfully implemented the pulverised coal injection (PCI) project leading to a sustainable reduction of operating costs
 The EVRAZ Caspian Steel rolling mill in Kazakhstan was commissioned and began mass production of rebars from EVRAZ ZSMK's billets 
 Stable production volumes of saleable iron ore products in Russia (on a comparable basis, excluding volumes from disposed EVRAZ VGOK) 
 Coking coal production grew by 11% due to increased output of 31% at the Raspadskaya coal company. This represents a return to pre-accident levels of annualised production of over 10million tonnes of coking coal
 Prices for steel products and their keyraw material inputs were negatively affected by continuing headwinds in the global markets and depreciation of local currencies in Russia and Ukraine
Q42014 vs Q32014 OPERATIONAL HIGHLIGHTS:
 Consolidated crude steel output stable at 3.9 million tonnes per quarter
 Production of steel products, net of re-rolled volumes, increased by 6%, mostly driven by a 31%increase in production of semi-finished products due to higher shipments of more profitable export billets and slabs
 The share of finished steel products within consolidated volumes decreased to 63% in Q42014 vs. 69% in Q32014 due to higher exports of semi-finished products and weaker demand for construction products and railway products in Russia 
 Production of tubular products in North America increased by 6%, mostly driven by strong market demand for large diameter pipe and operational improvements at our OCTG facilities
 Consolidated raw coking coal output and production of coking coal concentrate increased by 12%and 8% respectively due to strong performance of the Raspadskaya coal company


STEEL
Product, '000 tonnes 
2014
2013
2014/2013, change
Q42014
Q32014
Q42014/ Q32014, change
Coke (saleable)
1,137
1,380
-17.6%
304
305
-0.4%
Pig iron
12,373
12,553
-1.4%
3,143
3,107
1.2%
Pig iron (saleable)
362
341
6.3%
133
67
99.5%
Crude steel
15,535
16,121
-3.6%
3,884
3,859
0.6%
Steel products, gross
15,098
15,982
-5.5%
3,850
3,655
5.4%
Steel products, net of re-rolled volumes
13,949
14,683
-5.0%
3,613
3,414
5.9%
Semi-finished products **
4,314
3,843
12.3%
1,327
1,066
24.5%
Finished products
9,635
10,840
-11.1%
2,286
2,348
-2.6%
Construction products
5,105
5,186
-1.6%
1,250
1,302
-4.0%
Railway products
1,830
1,903
-3.8%
377
410
-8.1%
Flat-rolled products
1,017
1,989
-48.9%
224
221
1.1%
Tubular products
1,065
936
13.7%
279
263
6.4%
Other steel products
618
825
-25.1%
156
152
2.9%
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.
** Consolidated production volumes of semi-finished products are preliminary as intra-group re-rolling volumes are yet to be finalised.
RUSSIA
Product, '000 tonnes 
2014
2013
2014/2013, change
Q42014
Q32014
Q42014/ Q32014, change
Coke (saleable)
402
592
-32.0%
111
94
17.9%
Pig iron
10,706
10,936
-2.1%
2,729
2,695
1.3%
Pig iron (saleable)
297
303
-2.0%
87
61
41.2%
Crude steel
11,798
11,904
-0.9%
2,979
2,948
1.0%
Steel products, gross
11,052
11,056
0.0%
2,891
2,676
8.0%
Steel products, net of re-rolled volumes
10,795
10,799
0.0%
2,815
2,669
5.5%
Semi-finished products
4,787
4,517
6.0%
1,406
1,201
17.1%
Finished products
6,009
6,282
-4.3%
1,409
1,469
-4.0%
Construction products
4,187
4,185
0.0%
1,033
1,052
-1.9%
Railway products
1,292
1,409
-8.3%
237
283
-16.3%
Other steel products
529
687
-23.0%
139
133
5.0%
* In Q4 2014 includes 65kt produced by EVRAZ Caspian Steel mill (former "Eastern mill") in Kazakhstan from EVRAZ ZSMK's billets

In July 2014, EVRAZ ZSMK successfully completed the pulverised coal injection (PCI) project, a follow-on project to the implementation of the PCI technology at EVRAZ NTMK in 2013. PCI ensures substantial cost savings in natural gas and coke consumption. One of the coking plants at EVRAZ ZSMK was mothballed, resulting in a 32%decrease of saleable coke production year-on-year. The 18%growth in saleable coke production quarter-on-quarter was due to lower internal requirement following the PCI launch.
In 2014, crude steel production and production of steel products by EVRAZ's Russian steel mills were largely unchanged vs. 2013. Production of semi-finished products increased by 6% while production of finished steel products declined by 4%, due to higher export sales driven by a weakening Russian rouble during the second half of 2014, as well as the shutdown of the unprofitable plate rolling mill and Mill 450 at EVRAZ ZSMK (in Q22013 and Q32014 respectively). 
Despite the increased competition in the domestic market, production of construction products remained at 2013 levels supported by strong demand in the peak months of the construction season and by lower imports from Ukraine.
Production of railway products was down 8% year-on-year as a result of lower orders for solid wheels and railcar sections from railcar producers and railcar repair shops.
In Q42014, crude steel output rose slightly by 1% compared to Q32014, which was then affected by unscheduled maintenance works (change of the obsolete charging device) at one of the EVRAZ ZSMK blast furnaces. Production of steel products, net of re-rolled volumes, increased by 6% compared to the previous quarter.
Production of semi-finished goods surged by 17% compared to Q32014 due to volumes from the Russian market being re-directed to export destinations as a result of a weakening rouble, and also due to to the successful implementation of a billet inventory optimisation programme at EVRAZ NTMK. 
Production of finished steel products declined by 4% compared to the previous quarter, including:
- 2% decrease in construction products due to low demand at the end of the construction season;
- 16% reduction in railway products due to softer demand for railway wheels and railcar sections and fastenings.
Prices for semi-finished goods were in line with global prices. Prices for finished products sold primarily in the Russian market fell year-on-year and quarter-on-quarter in US dollar terms as domestic steel prices failed to adjust to the sharp depreciation of the Russian rouble versus the US dollar, particularly in Q42014.
Production of steel and total steel products is expected to increase in Q12015 compared to Q42014, mostly due to improved steel production at the EVRAZ ZSMK rail mill's steel shop and the absence of major repairs at other production facilities. Prices in the Russian market are expected to grow thus catching up with the export parity.
Average selling prices
USD/tonne (ex works)
2014
2013
Q4 2014
Q3 2014
Coke
118
160
92
118
Pig iron
293
301
261
309
Steel products




Semi-finished products
410
401
392
417
Construction products
574
649
484
587
Railway products
747
852
613
747
Other steel products
580
641
517
606
NORTH AMERICA
Product, '000 tonnes 
2014
2013
2014/2013, change
Q42014
Q32014
Q42014/ Q32014, change
Crude steel
1,999
2,191
-8.8%
528
500
5.7%
Steel products, net of re-rolled volumes
2,548
2,769
-8.0%
639
649
-1.6%
Construction products
324
348
-7.0%
70
90
-22.3%
Railway products
537
493
8.9%
140
127
10.2%
Flat-rolled products
621
992
-37.3%
150
170
-11.7%
Tubular products
1,065
936
13.7%
279
263
6.4%
* Q4 2014 and FY 2014 production volumes are preliminary
In 2014, crude steel and steel products output decreased by 9% due to shutdown of the EVRAZ Claymont operations in Q4 2013. Excluding EVRAZ Claymont, the production of both crude steel and of steel products increased - by 3% and 4% respecively (see Attachment 1).
Rail production was up 9% year-on-year and achieved a new record high due to the completion of the rail mill upgrade project. 
Production of flat-rolled products was 37% lower than in 2013, mostly as a result of EVRAZ Claymont's shutdown.
Production of tubular products increased by 14% year-on-year driven by strong market demand for small diameter pipe and operational improvements implemented at EVRAZ North America's OCTG facilities. Large diameter market showed another strong year in 2014 (+2.5% year-on-year in production volumes).
In Q42014, crude steel output grew by 6% vs. the previous quarter supported by the strong order book for tubular products.
An unplanned outage to repair a cooling water main in our Pueblo melt shop resulted in a 2%decrease in production of steel products quarter-on-quarter. The outage translated into limited availability of steel for the wire rod mill.
Production of flat-rolled products at EVRAZ Portland declined by 12% quarter-on-quarter as a result of record levels of plate imports negatively impacting orders. 
Production of tubular goods grew by 6% compared with Q32014, mostly driven by a seasonal pick-up in demand for OCTG. 
The positive market trend for LD pipe is expected to continue into 2015.
OCTG demand will face significant headwinds during 2015 as a result of the rapid declines in oil prices. We are following demand trends very closely to adequately match production output and capex to prevailing market trends. 
Robust plate market fundamentals secure our production volumes in Q12015 despite elevated imports levels during the first quarter of 2015.
Average selling prices
USD/tonne (ex works)
2014
2013
Q4 2014
Q3 2014
Construction products
791
765
768
794
Flat-rolled products
955
858
935
987
Tubular products
1,333
1,350
1,338
1,370
UKRAINE
Product, '000 tonnes 
2014
2013
2014/2013, change
Q42014
Q32014
Q42014/ Q32014, change
Coke (saleable)
734
788
-6.8%
193
211
-8.6%
Pig iron
1,001
978
2.4%
246
258
-4.6%
Pig iron (saleable)
65
38
73.2%
47
5
762.4%
Crude steel
986
995
-1.0%
217
269
-19.6%
Steel products
840
854
-1.6%
189
218
-13.2%
Semi-finished products
398
359
10.7%
80
94
-14.6%
Finished products
442
494
-10.5%
109
124
-12.2%
Construction products
378
407
-7.1%
97
110
-12.3%
Other steel products
65
87
-26.2%
12
14
-11.4%
In 2014, the year-on-year production of crude steel and of steel products by the EVRAZ DMZ steel mill remained broadly unchanged, despite limitations on use of electricity in the country in Q4 2014.
Production of finished products decreased by 11% year-on-year as a result of lower demand for finished products, in particular sections, both in the Ukrainian market (the largest end-user is located in the Donetsk region) and in Russia and in the Middle East. Consequently, production of semi-finished products grew by 11% vs. 2013, also supported by the weakening Ukrainian hryvnia and by strong demand for export billets as a result of lower supply by Ukrainian steel producers. 
In Q42014, DMZ had to scale back production of crude steel (-20% vs. Q32014) selling more pig iron in the market due to restrictions on electricity consumption. As a result of reduced steel availability, production of steel products decreased by 13%.
In Q12015, pig iron and crude steel production is expected to stabilise, subject to electricity and gas availability. 
Average selling prices
USD/tonne (ex works)
2014
2013
Q4 2014
Q3 2014
Coke (saleable)
173
213
190
167
Pig iron
315
356
308
330
Steel products




Semi-finished products
444
465
402
462
Construction products
558
600
512
570
Other steel products
848
878
758
901
EUROPE
Product, '000 tonnes 
2014
2013
2014/2013, change
Q42014
Q32014
Q42014/ Q32014, change
Crude steel
131
388
-66.3%
0
0
n/a
Steel products, gross
129
801
-83.9%
0
0
n/a
Steel products, net of re-rolled volumes
129
792
-83.7%
0
0
n/a
Construction products
22
80
-73.1%
0
0
n/a
Flat-rolled products
103
693
-85.1%
0
0
n/a
Other steel products
5
19
-75.9%
0
0
n/a
EVRAZ Vitkovice Steel in the Czech Republic was disposed of in April 2014. 
Operations at EVRAZ Palini e Bertoli in Italy have remained suspended due to market conditions since August 2013.
SOUTH AFRICA
Product, '000 tonnes 
2014
2013
2014/2013, change
Q42014
Q32014
Q42014/ Q32014, change
Pig iron
666
639
4.2%
168
154
9.0%
Crude steel
621
642
-3.3%
160
141
13.2%
Steel products
529
502
5.4%
131
111
18.1%
Semi-finished products
22
0
n/a
2
5
-59.3%
Finished products
507
502
1.0%
129
106
22.1%
Construction products
194
166
17.2%
51
50
3.3%
Flat-rolled products
293
305
-4.0%
73
51
44.1%
Other steel products
20
31
-35.8%
5
5
-13.6%
In 2014, crude steel production decreased by 3% due to operational challenges and unplanned maintenance. Production of steel products was up by 5%. Production of construction products, in particular, extended by 17% on the back of improved domestic demand compared to 2013.
In Q42014, the output of crude steel and steel products increased by 13% and 18% respectively vs. Q32014 due to operational improvements of hot metal and steel making production and improved ore quality.
Average selling prices
USD/tonne (ex works)
2014
2013
Q4 2014
Q3 2014
Semi-finished products
422
436
415
413
Construction products
678
717
693
694
Flat-rolled products
621
689
602
619
Other steel products
510
660
485
474
IRON ORE
Product, '000 tonnes 
2014
2013
2014/2013, change
Q42014
Q32014
Q42014/ Q32014, change
Sinter (Russia)
11,134
12,083
-7.9%
2,673
2,744
-2.6%
Pellets (Russia)
6,444
6,301
2.3%
1,660
1,636
1.4%
Lumpy ore (Ukraine)
2,889
2,973
-2.8%
735
705
4.3%
Fines ore (South Africa)
721
651
10.7%
196
190
3.6%
Lumpy ore (South Africa) 
1,585
1,431
10.7%
411
474
-13.3%
In 2014, production of iron ore products (sinter plus pellets) in Russia decreased by 4% compared to 2013 as a result of the disposals and shutdowns of unprofitable iron ore assets in 2013, EVRAZ VGOK in particular. Excluding VGOK, production of iron ore products in general, and of sinter made from own concentrate in particular, was flat year-on-year (see Attachment 2).
In Q42014 total production of iron ore products in Russia was flat quarter-on-quarter (4,332 kt vs 4,381 kt). The decline in production of sinter due to maintenance works at one of EVRAZ ZSMK's sintering machines was partially offset by increased production of both pellets and sinter by EVRAZ KGOK after completion of maintenance works at its sintering facilities in Q32014. The share of EVRAZ's own concentrate used in production of sinter rose to 79% compared to 75% in Q32014 due to higher primary concentrate production at Evrazruda's mines.
Production of lumpy ore in Ukraine went down by 3% year-on-year due to lower quality of ore (lower Fe content) at the depleting section of the Yubileynaya mine. It increased by 4% quarter-on-quarter after maintenance works at the mine were completed in Q3.
Production of iron ore at the Mapochs mine in South Africa in Q42014 decreased compared to the previous quarter due to run-out of the run-of-mine ore. On a yearly comparison, production has improved due to better productivity of the crushing facilities of the mine after repairs performed in January-February 2014.
Average selling prices
USD/tonne (ex works)
2014
2013
Q4 2014
Q3 2014
Sinter (Russia)
57
76
34
52
Pellets (Russia)
69
86
45
64
Lumpy ore (Ukraine)
52
66
36
46
Fines ore (South Africa)
27
23
39
41
COAL
Product, '000 tonnes 
2014
2013
2014/2013, change
Q42014
Q32014
Q42014/ Q32014, change
Raw coking coal (mined)
21,062
18,933
11.2%
5,972
5,329
12.1%
Yuzhkuzbassugol
10,789
11,110
-2.9%
2,585
2,870
-10.0%
Raspadskaya
10,223
7,824
30.7%
3,337
2,459
35.7%
Mezhegeyugol
51
0
n/a
51
0
n/a
Coking coal concentrate (production)
13,936
13,664
2.0%
3,770
3,496
7.8%
Produced at Yuzhkuzbassugol coal washing plants
6,042
5,821
3.8%
1,544
1,543
0.1%
Produced at EVRAZ ZSMK coal washing plant
1,977
2,591
-23.7%
420
469
-10.6%
Produced at Raspadskaya coal washing plant
5,916
5,252
12.7%
1,806
1,483
21.8%
Raw steam coal (mined)
757
1,432
-47.1%
0
0
n/a
Steam coal concentrate (production)
33
99
-67.1%
0
5
n/a
Coking coal
In 2014, production of raw coking coal by EVRAZ increased by 11% compared to 2013 as a result of significant growth in production by the Raspadskaya coal company (+31%) as a consequence of the successful implementation of the Raspadskaya underground mine's restoration programme. Consequently, total production of coking coal concentrate by EVRAZ's coal washing plants went up by 2%: coking coal concentrate production by Raspadskaya increased by 13% year-on-year and by Yuzhkuzbassugol - by 4%.
Production of coking coal concentrate by EVRAZ ZSMK coal washing plant declined by 24% year-on-year due to lower requirements for coke after introduction of the PCI technology at EVRAZ ZSMK resulting in mothballing of one of its coking plants.
In Q42014, production of raw coking coal by EVRAZ rose by 12% vs. Q32014 due to a 36%increase in volumes of raw coal mined by the Raspadskaya coal company which has operated in four longwalls since November 2014. 
In Q42014, Yuzhkuzbassugol decreased production of coking coal by 10% compared to Q32014, as longwall moves at the Osinnikovskaya and Alardinskaya mines were carried out.
Share of own raw coal used in total concentrate production by EVRAZ increased to 95% in 2014 from 93% in 2013.
The blended average selling price of coking coal concentrate in dollar terms went down due to the weakening of the Russian rouble. 
Steam coal
In 2014, in line with the strategic decision to stop non-core steam coal production, the Kusheyakovskaya mine, the only remaining steam coal mine within EVRAZ's Russian coal assets, terminated production and began the mine's conservation, with steam coal concentrate being used for internal consumption by the coal washing plant.
Average selling prices
USD/tonne (ex works)
2014
2013
Q4 2014
Q3 2014
Raw coking coal
46
58
37
44
Coking coal concentrate 
70
87
57
70
VANADIUM
Product, tonnes of V* 
2014
2013
2014/2013, change
Q42014
Q32014
Q42014/ Q32014, change
Vanadium in slag (gross production)
22,252
21,077
5.6%
6,048
5,799
4.3%
Russia
15,125
14,403
5.0%
4,018
4,034
-0.4%
South Africa
7,127
6,675
6.8%
2,031
1,765
15.1%
Vanadium in final products (saleable)


n/a


n/a
Ferrovanadium
14,076
13,975
0.7%
3,343
3,277
2.0%
Produced at own facilities
7,512
7,465
0.6%
1,718
1,768
-2.8%
Processed at 3rd parties' facilities
6,565
6,510
0.8%
1,624
1,509
7.6%
Nitrovan
2,463
2,294
7.3%
602
515
17.0%
Oxides, vanadium aluminium and chemicals
1,822
1,652
10.3%
547
467
17.0%
*Calculated in pure vanadium equivalent
In 2014, Vanadium slag production increased by 6% compared to 2013 both due to higher slag volumes in Russia (+5%, due to improved Vanadium slag yields and use of the duplex process at the EVRAZ NTMK steel making facilities ) and South Africa (+7%).
Production of ferrovanadium remained broadly unchanged supported by strong demand in Russia, including EVRAZ plants, and in other CIS countries. Nitrovan production was up by 7% year-on-year due to enhanced production process at EVRAZ Vametco in South Africa and absence of labour actions as experienced in 2013.
In 2014, production of oxides, vanadium aluminum and chemicals grew by 10% vs. 2013 due to higher oxide extraction yields and stable feedstock availability.
The quarter-on-quarter production of vanadium slag went up by 4%, due to increased production in South Africa as a result of higher iron output and improved vanadium content in iron.
In Q42014, production of ferrovanadium grew by 2% vs. Q32014, mostly thanks to higher (+8%) volumes processed at third parties' facilities due to increased production at Treibacher as a result of better EVRAZ Highveld vanadium slag availability, supported by healthy demand and improved extraction ratios, and due to increased shipments of V slag toHochvanadium from EVRAZ Highveld in Q4 2014.
The Q42014 production volumes of Nitrovan were 17% higher than in the previous quarter as a result of production of Nitrovan by Vametco in South Africa being negatively affected by the scheduled annual shutdown of the plant in September 2014.
Production of oxides, vanadium aluminum and chemicals increased by 17% vs. Q32014 thanks to successful implementation of capital projects and production debottlenecking at EVRAZ Stratcor. 
Despite growing demand for vanadium in the world, deteriorating steel fundamentals in China led to higher exports of vanadium products, which ultimately drove Metal Bulletin Ferrovanadium index down to $24.10/kg V in December 2014. In 2014, Metal Bulletin Ferrovanadium index average resulted in $25.53/kg V vs. $27.73/kg V in 2013 (-7.9% y-o-y). This had an adverse effect on Ferrovanadium and Nitrovan prices that were experiencing downward trends through 2014 vs. 2013. 
Prices of oxides, vanadium aluminum and chemicals advanced quarter-on-quarter due to increased sales volumes of liquid chemicals and vanadium aluminum products. The year-on-year decrease in the selling price was due to the sales mix which included commodity oxide sales which were negatively impacted by the Metal Bulletin Oxide index movement.
Average selling prices
USD/tonne of V (ex works)
2014
2013
Q4 2014
Q3 2014
Ferrovanadium
25,049
26,581
24,387
24,933
Nitrovan
27,244
28,945
26,360
27,182
Oxides, vanadium aluminium and chemicals
31,725
34,295
31,055
30,505
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:
Media Relations: 
Vsevolod Sementsov
VP, Corporate Communications
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, Italy and South Africa. EVRAZ is among the top steel producers in the world based on crude steel production of 16.1million tonnes in 2013. 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 2013 were US$14,411million, and consolidated EBITDA amounted to US$1,821million. The company's consolidated revenues for the six months ended 30 June 2014 were US$6,805 million, and consolidated EBITDA amounted to US$1,080 million.
Attachment 1
Production of steel by EVRAZ North America, excluding EVRAZ Claymont
Product, '000 tonnes 
2014
2013
2014/2013, change
Crude steel
1,999
1,940
3.1%
Steel products, net of re-rolled volumes
2,548
2,443
4.3%
Construction products
324
348
-7.0%
Railway products
537
493
8.9%
Flat-rolled products
621
665
-6.6%
Tubular products
1,065
936
13.8%
Attachment 2
Production of iron ore products in Russia, excluding EVRAZ VGOK 
(sold in October 2013)



Product, '000 tonnes 
2014
2013
2014/2013, change
Sinter
11,134
11,224
-0.8%
Pellets
6,444
6,301
2.3%
Total iron ore products
17,578
17,524
0.3%

This information is provided by RNS
The company news service from the London Stock Exchange
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