REG - Evraz Plc - Q2 2017 production report <Origin Href="QuoteRef">EVRE.L</Origin>

EvrazAnnouncement

19/07/2017 07:06

RNS Number : 4465L
Evraz Plc
19 July 2017
EVRAZ Q22017 PRODUCTION REPORT 
19July 2017 - EVRAZ plc (LSE: EVR; "EVRAZ" or the "Group") today released its operational results for the second quarter of 2017. 
Q22017 vs Q12017 OPERATIONAL HIGHLIGHTS:
 Consolidated crude steel output fell by 9.5% quarter-on-quarter to 3.3 million tonnes in Q2 2017, primarily due to planned capital repairs at EVRAZ ZSMK's oxygen steelmaking converter no. 5 and blast furnace no.2, as well as planned capital repairs at EVRAZ DMZ' oxygen-converter plant.
 Production of steel products, net of re-rolled volumes, decreased by 8.0% quarter-on-quarter to 3.0 million tonnes as a result of reduced output of semi-finished products amid planned capital repairs at EVRAZ ZSMK.
 The share of finished steel products in consolidated volumes rose to 63.8% in Q2 2017, up from 55.6% in Q1 2017, due to lower output of semi-finished products in Russia and Ukraine.
 Production of construction products increased by 10.5% quarter-on-quarter, as demand for construction products improved with the beginning of construction season.
 Production of railway products was down 1.9% due tochanged product mix on Russian facilities, which was partially offset by higher output in North America (up 10.1% quarter-on-quarter) due to marginally increased demand for rails driven by ClassI railroads finalised destocking. 
 Output of flat products rose by 8.4% quarter-on-quarter, mostly following planned maintenance outage at EVRAZ Palini e Bertoli in Q12017 as well as due to strengthening demand in North America. 
 Consolidated raw coking coal output increased by 7.9% following a planned longwall repositioning at the Raspadskaya mine in Q1 2017. In addition, open-pit mining operations were started at the site of the Raspadskaya-Koksovaya mine to produce deficit OS (semi-hard) coking coal grade.
STEEL
Product, '000 tonnes 
Q2
2017
Q1 2017
Q22017/ Q12017, change
H1 
2017
H1
2016
H12017/ H12016, change
Coke (saleable)
171
118
44.9%
289
457
-36.8%
Pig iron
2,793
2,894
-3.5%
5,687
5,557
2.3%
Pig iron (saleable)
195
44
343.2%
239
188
27.1%
Crude steel
3,328
3,679
-9.5%
7,007
6,739
4.0%
Steel products, gross*
3,211
3,522
-8.8%
6,733
6,461
4.2%
Steel products, net of re-rolled volumes
2,994
3,255
-8.0%
6,249
6,134
1.9%
Semi-finished products**
1,084
1,446
-25.0%
2,530
2,439
3.7%
Finished products
1,910
1,809
5.6%
3,719
3,695
0.6%
Construction products
970
878
10.5%
1,848
2,075
-10.9%
Railway products
410
418
-1.9%
828
751
10.3%
Flat-rolled products***
206
190
8.4%
396
279
41.9%
Tubular products
167
166
0.6%
333
308
8.1%
Other steel products
157
157
0.0%
314
282
11.3%
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 mills. However, such volumes are eliminated as inter-company sales for the purposes of EVRAZ' consolidated operating results.
** Consolidated production volumes of semi-finished products are preliminary, as intra-group re-rolling volumes are yet to be finalised.
*** Includes production volumes of EVRAZ Palini e Bertoli (65 thousand tonnes in Q2 2017 and 116 thousand tonnes in H1 2017), which resumed operations in 2016 after suspending them in August 2013.
RUSSIA and KAZAKHSTAN
Product, '000 tonnes 
Q2 2017
Q1 2017
Q22017/ Q1 2017, change
H1
2017
H1
2016
H12017/ H12016, change
Coke (saleable)
75
69
8.7%
144
191
-24.6%
Pig iron
2,537
2,663
-4.7%
5,200
5,020
3.6%
Pig iron (saleable)
90
37
143.2%
127
175
-27.4%
Crude steel
2,762
2,980
-7.3%
5,742
5,444
5.5%
Steel products, gross
2,558
2,806
-8.8%
5,364
5,104
5.1%
Steel products, net of re-rolled volumes
2,493
2,769
-10.0%
5,262
5,009
5.1%
Semi-finished products
1,178
1,536
-23.3%
2,714
2,408
12.7%
Finished products
1,315
1,232
6.7%
2,547
2,600
-2.0%
Construction products
859
759
13.2%
1,617
1,768
-8.5%
Railway products
311
328
-5.2%
639
570
12.1%
Other steel products
145
145
0.0%
290
262
10.7%
In Q2 2017, production of crude steel and steel products (net of re-rolled volumes) decreased quarter-on-quarter by 7.3% and 10.0%, respectively, due to planned capital repairs at EVRAZ ZSMK's oxygen steelmaking converter no. 5 in April-June and blast furnace no. 2 in June.
The decrease in steel product volumes was primarily caused by reduced output of semi-finished products (down 23.3% quarter-on-quarter), which was partly offset by higher output of construction products (up 13.2% quarter-on-quarter), driven by stronger demand for rebars and channels.
Output of railway products, including rails, was down slightly quarter-on-quarter due to lower volumes at EVRAZZSMK in the view of changed product mix. However, volumes increased half-on-half, mainly due to higher volumes at EVRAZ ZSMK amid more favourable demand for rails and wheels in 2017. 
Average selling prices
US$/tonne (ex works)
Q2
2017
Q1
2017
H1
2017
H1
2016
Coke
172
212
189
83
Pig iron
251
262
255
141
Steel products
Semi-finished products
352
344
347
210
Construction products
499
530
514
348
Railway products
646
621
633
442
Other steel products
501
503
502
357
Overall, steel selling prices in Q2 2017 followed divergent trends according to global benchmarks.
In Q3 2017, crude steel output is expected to increase by roughly 3% due to the completion of capital repairs at EVRAZ ZSMK's blast furnace no. 2 in Q2 2017. Production of finished products is expected to fall as a result of a gas pause at EVRAZ ZSMK in August, as well as capital repairs of the rail mills at EVRAZ NTMK in August-September and at EVRAZ ZSMK in August.
NORTH AMERICA
Product, '000 tonnes 
Q2 2017*
Q1 2017
Q22017/ Q12017, change
H1 2017
H1 
2016
H12017/ H12016, change
Crude steel
419
457
-8.3%
876
734
19.3%
Steel products, net of re-rolled volumes
467
462
-1.1%
929
895
3.8%
Construction products
61
68
-10.3%
129
135
-4.4%
Railway products
98
89
10.1%
187
181
3.3%
Flat-rolled products
141
139
1.4%
280
271
3.3%
Tubular products
167
166
0.6%
333
308
8.1%
* Q22017 production volumes are preliminary
Crude steel production decreased by 8.3% quarter-on-quarter as a result of a planned outage at the Regina mill in order to install upgrades to the rolling mill, which were part of the previously announced investment projects.
Construction products output declined by 10.3% quarter-on-quarter due to strong import pressure.
Railway products production increased by 10.1% quarter-on-quarter, driven by marginally better demand as Class I railroads finalised destocking.
Production of flat-rolled products increased by 1.4% quarter-on-quarter as a result of strengthening demand. 
Production of tubular products remained almost unchanged quarter-on-quarter. Line pipe demand continued to be impacted by uncertainty, while oil country tubular goods (OCTG) experienced a healthy demand recovery combined with gaining share in Western Canada.
Average selling prices
US$/tonne (ex works)
Q2
2017
Q1
2017
H1
2017
H1
2016
Construction products
635
594
614
512
Flat-rolled products
814
742
776
624
Tubular products
1,015
980
998
982
Prices for most steel products increased in Q2 2017, reflecting prevailing scrap and other inputs increases, reduced pressure from imports and positive demand fundamentals.
In Q3 2017, crude steel output is expected to increase by 5-10% quarter-on-quarter, as EVRAZ Regina's availability returns to normal levels after the prolonged planned outage in Q2 2017. Tubular product volumes are expected to experience a modest quarter-on-quarter increase in volume; flat rolled products and construction products are expected to remain essentially unchanged from Q2 2017 levels; and railway product volumes are expected to decrease slightly as a result of an annual maintenance outage in the rail mill during September and of a customary seasonal slowdown in orders expected in the third quarter.
UKRAINE
Product, '000 tonnes 
Q2 2017
Q1 2017
Q22017/ Q12017, change
H1 2017
H1 2016
H12017/ H12016, change
Coke (saleable)
96
50
92.0%
146
266
-45.1%
Pig iron
257
232
10.8%
489
537
-8.9%
Pig iron (saleable)
106
7
n/a
113
14
n/a
Crude steel
147
241
-39.0%
388
560
-30.7%
Steel products
120
203
-40.9%
323
455
-29.0%
Semi-finished products
58
139
-58.3%
197
263
-25.1%
Finished products
62
63
-1.6%
125
192
-34.9%
Construction products
50
52
-3.8%
102
172
-40.7%
Other steel products
12
12
0%
24
20
20.0%
In Q2 2017, saleable coke volumes increased by 92.0% quarter-on-quarter in response to higher domestic demand and increased pig iron output.
Pig iron production went up 10.8% amid increased blast furnace productivity, with saleable pig iron increase due to reduced billet production (which had a lower margin in the product mix).
Production of crude steel and steel products decreased by 39.0% and 40.9% quarter-on-quarter, respectively, (they were also down half-on-half) after cutting production of low-margin semi-finished products in February-May and capital repairs at EVRAZ DMZ' oxygen-converter plant and rolling mill no. 1.
Average selling prices
US$/tonne (ex works)
Q2
2017
Q1
2017
H1
2017
H1
2016
Coke (saleable)
230
274
245
125
Pig iron
322
314
321
196
Steel products
Semi-finished products
353
335
340
254
Construction products
474
456
465
357
Other steel products
667
604
636
484
Overall, prices moved in line with global benchmarks. In Q2 2017, changes in saleable coke prices primarily reflected lower coal prices.
In Q3 2017, pig iron production is expected to increase followingrepairs at EVRAZ DMZ' rolling mill no.1 and oxygen-converter plant in Q2 2017, accompanied by expected higher blast furnace productivity in Q3 2017. Consequently, output of crude steel and steel products (billets) is expected to increase quarter-on-quarter.
IRON ORE
Product, '000 tonnes 
Q2
2017
Q1
2017
Q22017/ Q12017, change
H1
2017
H1
2016
H12017/ H12016, change
Iron ore products*
4,536
4,984
-9.2%
9,520
9,844
-3.3%
* Includes production of sinter, pellets and other iron ore products
In Q2 2017, production of iron ore decreased by 9.2% quarter-on-quarter, mainly due to lower volumes of sinter amid capital repairs at EVRAZ ZSMK's sintering machines no. 1 and no. 2. The reduced output of pellets was also partly caused by the accidental outage of EVRAZ KGOK's indurating machine no. 2 in June. 
Average selling prices
US$/tonne (ex works)
Q2 
2017
Q1 
2017
H1 
2017
H1 
2016
Pellets (Russia)
66
84
74
36
Prices for pellet moved in line with global benchmarks.
In Q3 2017, sinter output is expected to decrease by roughly 2.5% quarter-on-quarter, mainly due to capital repairs of sintering machine no. 2 at EVRAZ KGOK in September. Following the accidental outage of EVRAZKGOK's indurating machine no. 2 in Q2 2017, output of pellets should increase by roughly 5% quarter-on-quarter in Q3 2017.
COAL
Product, '000 tonnes 
Q2 2017
Q1 2017
Q22017/ Q12017, change
H1
2017
H1
2016
H12017/ H12016, change
Raw coking coal (mined)
6,048
5,603
7.9%
11,651
11,016
5.8%
Yuzhkuzbassugol
2,761
2,502
10.4%
5,263
5,928
-11.2%
Raspadskaya
3,071
2,886
6.4%
5,957
4,883
22.0%
Mezhegeyugol
216
215
0.5%
431
206
109.6%
Coking coal concentrate (production)
3,612
3,605
0.2%
7,217
7,297
-1.1%
Yuzhkuzbassugol's coal washing plants
1,491
1,491
0.0%
2,982
3,321
-10.2%
Raspadskaya's coal washing plant
1,615
1,634
-1.2%
3,249
3,120
4.1%
EVRAZ ZSMK's coal washing plant
506
480
5.4%
986
857
15.1%
Production of raw coking coal increased by 7.9% following the planned longwall repositioning in Q12017 at the Raspadskaya mine, accompanied by stable work at the Raspadskaya mine's three longwalls. 
In addition, open-pit mining operations were started at the site of the Raspadskaya-Koksovaya mine to produce deficit OS (semi-hard) coking coal grade.
Output of coking coal concentrate remained almost unchanged quarter-on-quarter due tohigher production at EVRAZZSMK's coal washing plant.
Average selling prices
US$/tonne (ex works) 
Q2
2017
Q1
2017
H1
2017
H1
2016
Raw coking coal
52
86
69
32
Coking coal concentrate 
103
155
129
56
In Q2 2017, coal prices were down in line with global benchmarks.
In Q3 2017, raw coal production is expected to increase slightly following the longwall repositioning at the Erunakovskaya-8 mine in Q2 2017. This will be partially offset by the scheduled longwall repositioning at the Raspadskaya mine in Q3 2017.
VANADIUM
Product, tonnes of V*
Q2 2017
Q1 2017
Q22017/ Q12017, change
H1 2017
H1 2016
H12017/ H12016, change
Vanadium slag, gross production (Russia)
4,795
4,553
5.3%
9,348
8,267
13.1%
Vanadium in final products (saleable)
2,641
3,291
-19.8%
5,932
6,606
-10.2%
*Calculated in pure vanadium equivalent
In Q2 2017, output of saleable vanadium products decreased by 19.8% quarter-on-quarter, primarily due to the discontinuation of Nitrovan production as a result of Vametco's divestment in April.
Average FeV indices
US$/kgV
Q2
2017
Q1
2017
H1
2017
H1
2016
Metal Bulletin Ferro-Vanadium basis 78% min, free DDP, consumer plant, 1st grade Western Europe
27.01
25.31
26.14
16.52
Ryan's Notes N.A. FeV 80% min, US ex-warehouse, duty paid
27.10
27.24
27.18
18.38
Sale prices for vanadium products followed market trends.
In Q2 2017, the Metall Bulletin FeV80 index averaged US$27.01/kgV, up 7% from US$25.31/kgV in Q12017. Meanwhile, the Ryan's Notes index, used in North America, averaged US$27.10/kgV in Q22017, down 1% from US$27.24/kgV in the previous quarter.
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. They also include railway products for Ukraine.
###
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 Republicand Italy. EVRAZ is among the top steel producers in the world based on crude steel production of 13.5million tonnes in 2016. 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 2016 were US$7,713 million, and consolidated EBITDA amounted to US$1,542 million. 

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