Meтinvest announces operational results for the first quarter of 2012

Metinvest B.V., a parent company of the international vertically integrated steel and mining Group of companies (jointly referred to as “Metinvest”), today announced its operational results for the first quarter of 2012 ended 31 March, 2012.

FIRST QUARTER 2012 HIGHLIGHTS

• Crude steel production down 8.7% quarter-on-quarter to 3,296 thousand tonnes  
• Coking coal (mined) up 10.7% quarter-on-quarter to 2, 970 thousand tonnes
• Iron ore concentrate production up 3.3%  quarter-on-quarter to 9,189 thousand tonnes

STEEL

In the first quarter of 2012, Metinvest produced 2,866 thousand tonnes of hot metal, representing a 4.8% decrease from the corresponding period of 2011. This resulted in overall decrease in production of crude steel by 8.7% to 3,296 thousand tonnes, primarily due to a decline in production volumes at Azovstal Iron and Steel Works (“Azovstal”). At the same time, steel output at Yenakiieve Iron and Steel Works (“Yenakiieve Steel”) increased by 20.2% quarter-on-quarter as a result of the launch of a new blast furnace No. 3.

The decrease in the production of crude steel by 2.9% (or 98 thousand tonnes) quarter-to-quarter was driven by a general decline in demand in the steel market.

Production of Hot metal 

Production of Crude steel

Production of merchant semi-finished products decreased by 34.5% quarter-to-quarter due to a decline in production of slabs at Azovstal and Ilyich Iron and Steel Works (“Ilyich Steel”) by 89 thousand tonnes and 93 thousand tonnes respectively, as well as due to a drop in production of merchant square billets to third parties by 74 thousand tonnes.

The decline in production of merchant slabs resulted from a weaker demand for metal products at the beginning of 2012, while the decrease in production of merchant square billets was driven by the increased internal consumption for rolling at Azovstal and Promet Steel, as well by the loading of the rolling mills at Yenakiieve Steel.

The share of finished products in the total volume of steel products grew by 6.6% quarter-to-quarter to 82.9%. The production of flat products remained stable at 1,424 thousand tonnes. This was primarily due to an increase in the production of plates at Azovstal (+75 thousand tonnes) and Ilyich Steel (+16 thousand tonnes), as well as due to a growth in the production of coils at Ferreira Valsider (+29 thousand tonnes), whilst the production of coils at Ilyich Steel saw a reduction of 117 thousand tonnes.

A minor decrease of 51 thousand tonnes in the production of long products quarter-to-quarter was a result of the decline in production at the Promet Steel European plant. However, compared to the corresponding period of 2011, the overall production volumes of long products remained stable at 615 thousand tonnes, primarily due to a surge in rolling of semi-finished products internally and the output of the higher value-added products.

At the same time, the Group demonstrated a significant increase in production of railway products which went up by 70.7% (or 41 thousand tonnes) quarter-on-quarter on the back of a rise in orders from the CIS countries (Uzbekistan and Kazakhstan) and Georgia.

Metinvest increased the production of tubular products by 26.7% quarter-on-quarter and by 11.8% vs. the fourth quarter 2011. The boost in production was driven by the continued implementation of a number of long-term projects launched in the second half of 2011, such as the Beyneu-Shymkent project (Kazakhstan) and the East-West project (Turkmenistan), while the pipe product sales in the first quarter of 2011 were carried out mainly on the spot market.

Production of Steel products¹

MINING

Iron ore

Metinvest’s total iron ore concentrate production amounted to 9,189 thousand tonnes in the first quarter of 2012, representing a quarter-on-quarter increase of 294 thousand tonnes. The increase in production was primarily attributed to the launch of the sections 15 and 16 of the iron ore enrichment facility No.1 at the Northern Iron Ore Enrichment Works (+210 thousand tonnes) and the second magnetic and floatation iron ore concentrate upgrading facility (“MFCU”) at Ingulets Iron Ore Enrichment Works (+69 thousand tonnes).

At the same time, production volumes of salable iron ore concentrate to third parties grew by 2.4% quarter-on-quarter to 78 thousand tonnes due to a decrease in internal consumption as a result of the lower output of steel products.

Production of salable pellets increased by 51.3% quarter-on-quarter to 722 thousand tonnes and was attributed to: the redistribution of sales volumes of pellets to third parties (338 thousand tonnes); differences in scheduled equipment maintenance works between the two reporting periods, which had a direct influence on the ratio of equipment effectiveness and productivity of the pelletising machines, and, as a consequence, on the production volumes (300 thousand tonnes); as well as the overall redistribution of the production volumes from iron ore concentrate to pellets (84 thousand tonnes). 

Production of Iron ore concentrate and Pellets

Production of iron ore concentrate and pellets to third parties also saw a quarter-to-quarter increase by 281 and 188 thousand tonnes respectively, and was primarily driven by a decline in the internal iron ore concentrate consumption.

Coal

Total mining of coking coal rose by 10.7% (or 286 thousand tonnes) quarter-on-quarter to 2,970 thousand tonnes.  Mining of coking coal at the Group’s American mines (United Coal Company) increased by 384 thousand tonnes, whilst mining at the Group’s Ukrainian mines (Krasnodon Coal Company) contracted by 98 thousand tonnes.

Mining of Coal and production of Coal concentrate

The increase in volumes of coking coal mined at the American mines was primarily attributed to: a surge in mining of the coking coal by 119 thousand tonnes at Pocahontas mine following the deployment of additional equipment for horizontal drilling; an opening of the new Affinity mine which added 42 thousand tonnes and which was not active in the first quarter of 2011; and a boost by 223 thousand tonnes of coking coal following the launch of a new site at Wellmore.

Total volumes of steam coal declined by 46.4% quarter-on-quarter to 307 thousand tonnes. The volumes dropped as a result of two mines remaining idle on the back of low demand for steam coal, which resulted in production losses of 266 thousand tonnes of coal.

¹ - Total volumes of steel products exclude intra-Group sales and the internal consumption of products by the Group’s companies for the purpose of the consolidation of Metinvest results. 

Flat products include hot rolled quarto plates and hot rolled heavy plates, hot rolled, cold rolled and hot-dip galvanized sheets and coils

Long products include hot rolled sections (light, medium, heavy), debars, merchant bars and wire rods

Railway products include light and heavy rails, rail fasteners

Large diameter pipes are LSAW (longitudinal submerged arc welded) large diameter pipes

Other pipes include ERW (electric resistance welded) pipes and seamless pipes 

² - The total volumes of Iron ore products exclude intra-Group sales and internal consumption of the raw materials by the Group’s companies for the purpose of the consolidation of Metinvest results.

³ - The total volumes of coal products exclude intra-Group sales and internal consumption of the raw materials by the Group’s companies for the purpose of the consolidation of Metinvest results.