Capital/Financing Update • Apr 26, 2018
Capital/Financing Update
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RNS Number : 1931M
Evraz Plc
26 April 2018
EVRAZ Q1 2018 TRADING UPDATE
26 April 2018 - EVRAZ plc (LSE: EVR; "EVRAZ" or the "Group") today released its trading update for the first quarter of 2018.
Please, note that starting Q1 2018 the Group will publish Trading updates instead of Production reports.
The following key changes should be taken into consideration:
1) Production and sales data were aligned with reporting segments in EVRAZ' financial statements to improve transparency.
2) Production volumes for saleable products were replaced with the sales data, in which own produced products and the resale of third-party product volumes were separated.
3) The cash costs for steel, iron ore and coking coal products were added and will be reported within the trading updates on a quarterly basis going forward.
4) Pig iron and crude steel production volumes were reported on a "by plant" basis in the Steel and Steel, North America segments.
5) Iron ore production volumes reflect the performance of the following assets: EVRAZ KGOK and Evrazruda. The saleable concentrate production volumes from Evrazruda replaced the data on sinter produced at EVRAZ ZSMK.
6) Coking coal concentrate output at the Steel segment (EVRAZ ZSMK's coal washing plant) has a breakdown by volumes produced from own and from third-party raw coal.
Q1 2018 vs Q4 2017 HIGHLIGHTS:
· In Q1 2018, EVRAZ' consolidated crude steel output fell by 5.5% QoQ to 3.3 million tonnes, primarily as a result of lower pig iron production due to iron ore supply logistics limitation in the view of severe weather conditions in January and February (congelation of third party iron ore concentrate and pellets) as well as the technical condition of blast furnaces no. 1 and no. 3 at EVRAZ ZSMK, shutdown of the blast furnace no.6 at EVRAZ NTMK and the disposal of EVRAZ DMZ in March 2018.
· Production of raw coking coal climbed by 6.7% QoQ to 6.0 million tonnes following the completion of scheduled longwall repositioning at the Alardinskaya and Uskovskaya mines.
· Total steel product sales dropped by 5.7% QoQ due to lower crude steel production. Sales of semi-finished products fell by 16.6%, primarily due to reduced pig iron and crude steel production. This was partly offset by a 5.7% increase in the output of finished products (mainly construction products, driven by stronger demand for rebars and channels).
· Coking coal product sales declined by 10.0% QoQ, mainly due to unusually high sales of raw coking coal in Q4 2017, which was driven by higher sales prices and the need to reduce coking coal inventories. Coking coal concentrate sales volumes grew by 9.8% QoQ due to higher sales prices for coal concentrate and increased export sales following the debottlenecking of logistics capacity.
· Iron ore product sales decreased by 4.3% QoQ due to restocking of pellets, which has been made driven by expected higher marginal sales to domestic market and scheduled repairs in September.
· Sales of vanadium products fell by 17.0% QoQ, mainly due to lower FeV and oxide sales, resulting from reduced oxide availability. The main reason for lower oxide availability was reduced slag conversion at third parties resulting from slag produced in 2017. Despite the fact of expected total lower slag production during 2018 comparing to 2017, the aim is to increase conversion of the slag produced in 2018 and accumulated from 2017 later in the year.
| Product, '000 tonnes | Q1 2018 |
Q4 2017 |
Q1 2018/ Q4 2017, change | Q1 2017 |
Q1 2018/ Q1 2017, change |
| Total crude steel production | 3,357 | 3,551 | -5.5% | 3,678 | -8.7% |
| Russia | 2,730 | 2,842 | -3.9% | 2,980 | -8.4% |
| Ukraine | 154 | 257 | -40.0% | 241 | -36.1% |
| North America* | 473 | 452 | 4.6% | 457 | 3.5% |
| Total raw coking coal mined | 5,969 | 5,593 | 6.7% | 5,603 | 6.5% |
| Total coking coal concentrate production |
4,154 | 4,112 | 1.0% | 3,605 | 15.2% |
| Iron ore production | 3,431 | 3,352 | 2.4% | 3,689 | -7.0% |
| Total sales of steel products* | 3,214 | 3,406 | -5.7% | 3,461 | -7.2% |
| Semi-finished products | 1,448 | 1,735 | -16.6% | 1,770 | -18.2% |
| Finished products | 1,766 | 1,671 | 5.7% | 1,691 | 4.4% |
| Total sales of third-party steel products |
170 | 190 | -10.5% | 145 | 17.2% |
| Sales of coking coal products | 2,801 | 3,111 | -10.0% | 2,136 | 31.1% |
| Sales of iron ore products | 585 | 611 | -4.3% | 800 | -26.9% |
| Sales of vanadium final products** | 3,108 | 3,746 | -17.0% | 4,266 | -27.1% |
Note. Numbers in this table and the tables below may not add up to totals due to rounding.
* Q1 2018 production and sales volumes of Evraz North America are preliminary
** in tonnes of pure vanadium
STEEL SEGMENT
Total production volumes (RUSSIA and UKRAINE)
| Product, '000 tonnes | Q1 2018 | Q4 2017 | Q1 2018/ Q4 2017, change | Q1 2017 | Q1 2018/ Q1 2017, change |
| Pig iron production | 2,571 | 2,805 | -8.3% | 2,894 | -11.2% |
| EVRAZ ZSMK | 1,397 | 1,468 | -4.8% | 1,429 | -2.2% |
| EVRAZ NTMK | 1,020 | 1,087 | -6.2% | 1,234 | -17.3% |
| EVRAZ DMZ | 153 | 251 | -39.0% | 232 | -34.1% |
| Crude steel production | 2,884 | 3,099 | -6.9% | 3,221 | -10.5% |
| EVRAZ ZSMK | 1,790 | 1,877 | -4.6% | 1,883 | -4.9% |
| EVRAZ NTMK | 940 | 964 | -2.5% | 1,097 | -14.3% |
| EVRAZ DMZ | 154 | 257 | -40.1% | 241 | -36.1% |
| Iron ore products production | 3,431 | 3,352 | 2.4% | 3,689 | -7.0% |
| Pellets (EVRAZ KGOK) | 1,651 | 1,608 | 2.7% | 1,634 | 1.0% |
| Sinter (EVRAZ KGOK) | 831 | 833 | -0.2% | 898 | -7.5% |
| Concentrate saleable (EVRAZ KGOK, Evrazruda) | 949 | 912 | 4.1% | 1,157 | -18.0% |
| Coking coal concentrate production | 522 | 546 | -4.4% | 481 | 8.5% |
| From own raw coal* | 282 | 211 | 33.6% | 221 | 27.6% |
| From third-party raw coal | 240 | 336 | -28.6% | 260 | -7.7% |
| Gross vanadium slag production** | 4,020 | 4,372 | -8.1% | 4,553 | -11.7% |
Note. Numbers in this table and the tables below may not add up to totals due to rounding.
* from Coal segment
** in tonnes of pure vanadium
In Q1 2018, EVRAZ' pig iron output at its Russian and Ukrainian mills fell by 8.3% QoQ to 2.6 million tonnes. The main reasons were logistics limitation of iron ore supplies because of severe weather conditions in January and February (congelation of third party iron ore concentrate and pellets) and lower productivity driven by technical incidents at EVRAZ ZSMK's blast furnaces no. 1 and no. 3. This decrease was accompanied by the shutdown of EVRAZ NTMK's blast furnace no. 6 and the launch of blast furnace no. 7.
In Ukraine, pig iron production declined due to the disposal of EVRAZ DMZ in March 2018 and unstable operations of EVRAZ DMZ' blast furnace no. 3.
Crude steel output fell by 6.9% QoQ to 2.9 million tonnes following a reduction in pig iron output.
Consolidated output of vanadium slag fell by 8.1% QoQ, which was in line with lower pig iron production.
Total sales volumes (RUSSIA, UKRAINE, KAZAKHSTAN and EUROPE)
| Product, '000 tonnes | Q1 2018 |
Q4 2017 |
Q1 2018/ Q4 2017, change | Q1 2017 |
Q1 2018/ Q1 2017, change |
| Coke | 85 | 109 | -22.0% | 49 | 73.5% |
| Steel products, external sales | 2,730 | 2,939 | -7.1% | 2,992 | -8.8% |
| Semi-finished products | 1,448 | 1,735 | -16.6% | 1,770 | -18.2% |
| Slabs | 708 | 787 | -10.1% | 1,054 | -32.9% |
| Billets | 635 | 786 | -19.2% | 615 | 3.3% |
| Other steel products* | 105 | 162 | -35.3% | 101 | 4.0% |
| Finished products | 1,283 | 1,204 | 6.5% | 1,222 | 5.0% |
| Construction products | 735 | 644 | 14.1% | 702 | 4.7% |
| Railway products | 308 | 351 | -12.2% | 347 | -11.3% |
| Flat products | 94 | 70 | 34.3% | 45 | 108.9% |
| Other steel products | 146 | 140 | 4.3% | 129 | 13.2% |
| Steel products, inter-segment sales | 129 | 132 | -2.3% | 166 | -22.5% |
| Sales of third-party steel products, external sales | 170 | 190 | -10.5% | 145 | 17.2% |
| Sales of iron ore products, external sales | 585 | 611 | -4.3% | 800 | -26.9% |
| Pellets | 585 | 611 | -4.3% | 312 | 87.5% |
| Other | 0 | 0 | n/a | 488 | -100.0% |
| Sales of vanadium final products** | 3,108 | 3,746 | -17.0% | 4,266 | -27.1% |
Note. Numbers in this table and the tables below may not add to totals due to rounding.
* includes tonnes of pig iron
** in tonnes of pure vanadium
In Q1 2018, external sales of steel products fell by 7.1% QoQ, mostly due to lower crude steel production volumes. A reduction of 16.6% QoQ in sales of semi-finished products was partly offset by a rise of 6.5% in sales of finished products (mainly construction products, sales of which climbed by 14.1% QoQ, driven by stronger demand for rebars and channels).
Sales of railway products fell by 12.2% QoQ amid lower production due changes in the product mix and lower demand from Russian Railways (RZhD) in January and February.
Sales of flat-rolled products rebounded by 34.3% QoQ due to lower production at EVRAZ Palini e Bertoli in Q4 2017, which was caused by a delay in the delivery of slabs, accompanied by a shorter maintenance stop in January 2018 than in December 2017.
Iron ore product sales decreased by 4.3% QoQ due to restocking of pellets, which has been made driven by expected higher marginal sales to domestic market and scheduled repairs in September.
Sales of vanadium products fell by 17.0% QoQ, mainly due to lower FeV and oxide sales, resulting from reduced oxide availability. The main reason for lower oxide availability was reduced slag conversion at third parties resulting from slag produced in 2017. Despite the fact of expected total lower slag production during 2018 comparing to 2017, the aim is to increase conversion of the slag produced in 2018 and accumulated from 2017 later in the year.
| Cash cost, USD/t | Q1 2018 |
Q4 2017 |
Q1 2018/ Q4 2017, change | Q1 2017 |
Q1 2018/ Q1 2017, change |
| Slab cash cost (vertically integrated) | 256 | 257 | -0.4 % | 256 | 0.0 % |
| Iron ore products (Fe 62%) | 38 | 41 | -7.3 % | 35 | 8.6 % |
Average selling prices
| US$/tonne (ex works) | Q1 2018 |
Q4 2017 |
Q1 2017 |
|---|---|---|---|
| Coke | 264 | 219 | 207 |
| Steel products | 544 | 499 | 435 |
| Semi-finished products* | 439 | 423 | 341 |
| Construction products | 618 | 581 | 530 |
| Railway products | 720 | 661 | 621 |
| Other steel products | 628 | 595 | 516 |
| Pellets | 61 | 54 | 84 |
| Metal Bulletin Ferro-Vanadium basis 78% min, free DDP, consumer plant, 1st grade Western Europe** |
61.90 | 39.28 | 25.31 |
| Ryan's Notes N.A. FeV 80% min, US ex-warehouse, duty paid** | 63.32 | 42.72 | 27.24 |
* includes prices for pig iron
** US$/kgV
In Q2 2018, the increase of pig iron production by c.9% is expected amid absence of major repairs and launching of blast furnace no.7 at EVRAZ NTMK. In Q2 2018, pellets production at EVRAZ KGOK is expected to decrease by c.2% due to the scheduled repairs in June.
STEEL, NORTH AMERICA SEGMENT
Production and sales volumes
| Product, '000 tonnes | Q1 2018* |
Q4 2017 |
Q1 2018/ Q4 2017, change | Q1 2017 |
Q1 2018/ Q1 2017, change |
| Crude steel | 473 | 452 | 4.9% | 457 | 3.5% |
| EVRAZ Pueblo | 227 | 202 | 12.4% | 201 | 12.9% |
| EVRAZ Regina | 246 | 249 | -1.2% | 256 | -3.9% |
| Sales of steel products | 484 | 468 | 3.4% | 469 | 3.0% |
| Construction products | 69 | 59 | 17.0% | 64 | 7.8% |
| Railway products | 98 | 81 | 21.0% | 95 | 3.2% |
| Flat-rolled products | 135 | 110 | 22.7% | 141 | -4.3% |
| Tubular products | 182 | 218 | -16.5% | 169 | 7.7% |
* Q1 2018 production and sales volumes are preliminary
In Q1 2018, crude steel production grew by 4.9% QoQ, primarily driven by improved rail and rod and bar order book at the EVRAZ Pueblo mill.
Sales of construction products climbed by 17.0% QoQ, which included a 13-day planned maintenance outage and downtime for the Thanksgiving and Christmas holidays.
Railway products sales were up 21.0% QoQ, driven by improved demand and downtime for the holidays in Q4 2017.
Sales of flat-rolled products surged by 22.7% QoQ due to lower seasonal demand in Q4 2017 as customers reduce inventory at the year-end, as well as stronger demand, partially driven by the impact of Section 232 import tariffs.
Sales of tubular products dropped by 16.5% QoQ amid lower demand for large-diameter line pipe.
Prices for all steel products rose during the reporting period, reflecting higher prevailing prices for scrap and other inputs, reduced pressure from imports and improving demand fundamentals.
Average selling prices
| US$/tonne (ex works) | Q1 2018 |
Q4 2017 |
Q1 2017 |
| Construction products | 701 | 647 | 594 |
| Flat-rolled products | 770 | 768 | 742 |
| Tubular products | 1,243 | 1,195 | 980 |
In Q2 2018, crude steel output is expected to be slightly higher than in the prior quarter, tubular product volumes to experience a 5%-10% increase in volume, flat-rolled products to climb 5-10% and construction products and rail to remain strong, in line with the levels seen in Q1 2018.
COAL SEGMENT
Production volumes
| Product, '000 tonnes | Q1 2018 |
Q4 2017 |
Q1 2018/ Q4 2017, change | Q1 2017 | Q1 2018/ Q1 2017, change |
| Raw coking coal (mined) | 5,969 | 5,593 | 6.7% | 5,603 | 6.5% |
| Yuzhkuzbassugol | 2,720 | 2,468 | 10.2% | 2,502 | 8.7% |
| Raspadskaya | 3,008 | 2,876 | 4.6% | 2,886 | 4.2% |
| Mezhegeyugol | 241 | 249 | -3.2% | 215 | 12.1% |
| Coking coal concentrate (production) | 3,631 | 3,566 | 1.8% | 3,124 | 16.2% |
| Produced at Yuzhkuzbassugol coal washing plants |
1,770 | 1,826 | -3.1% | 1,491 | 18.7% |
| Produced at Raspadskaya coal washing plant | 1,861 | 1,741 | 6.9% | 1,634 | 13.9% |
In Q1 2018, production of raw coking coal rose by 6.7% QoQ, primarily due to scheduled longwall repositioning at the Alardinskaya and Uskovskaya mines in Q4 2017. Output of coking coal concentrate was almost flat QoQ.
Sales volumes
| Product, '000 tonnes | Q1 2018 |
Q4 2017 |
Q1 2018/ Q4 2017, change | Q1 2017 |
Q1 2018/ Q1 2017, change |
| External sales | 2,801 | 3,111 | -10.0% | 2,136 | 31.1% |
| Raw coking coal | 156 | 703 | -77.8% | 190 | -17.9% |
| Coking coal concentrate | 2,644 | 2,407 | 9.8% | 1,947 | 35.8% |
| Intersegment sales | 1,443 | 1,482 | -2.6% | 1,526 | -5.4% |
| Raw coking coal | 396 | 300 | 32.0% | 313 | 26.5% |
| Coking coal concentrate | 1,047 | 1,182 | -11.4% | 1,212 | -13.6% |
In Q1 2018, external sales volumes of raw coking coal dropped by 77.8% amid unusually high sales of raw coking coal in Q4 2017, which was driven by higher sales prices and the need to reduce coking coal inventories. Coking coal concentrate sales volumes grew by 9.8% QoQ due to higher sales prices for coal concentrate and increased export sales following the debottlenecking of logistics capacity.
| Cash cost, USD/t | Q1 2018 |
Q4 2017 |
Q1 2018/ Q4 2017, change | Q1 2017 |
Q1 2018/ Q1 2017, change |
| Coking coal concentrate | 45 | 41 | 9.8% | 44 | 2.3% |
Average selling prices
| US$/tonne (ex works) | Q1 2018 |
Q4 2017 |
Q1 2017 |
| Raw coking coal | 75 | 60 | 89 |
| Coking coal concentrate | 135 | 113 | 155 |
In Q1 2018, coking coal selling prices rose in line with global benchmarks.
In Q2 2018, raw coal production is expected to slightly decrease QoQ resulted from scheduled longwall repositioning at the Raspadskaya mine started from the end of Q1 2018 and is expected to be completed by Q3 2018.
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: +44 207 832 8998 Moscow: +7 495 937 6871
Investor Relations:
London: +44 207 832 8990 Moscow: +7 495 232 1370
EVRAZ is a vertically integrated steel, mining and vanadium business with operations in the Russian Federation, Kazakhstan, USA, Canada, Czech Republic and Italy. EVRAZ is among the top steel producers in the world based on crude steel production of 14 million tonnes in 2017. 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 31 December 2017 were US$10,827 million, and consolidated EBITDA amounted to US$2,624 million.
This information is provided by RNS
The company news service from the London Stock Exchange
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