Metinvest announces 3Q and 9M 2013 operational results

Metinvest B.V., the parent company of a vertically integrated group of steel and mining companies (jointly referred to as “Metinvest” or “the Group”), today announces its operational results for the third quarter and nine months ended 30 September 2013.

OPERATIONAL HIGHLIGHTS

METALLURGICAL DIVISION

In 3Q 2013, Metinvest produced 3,015 thousand tonnes of hot metal, up 5% q-o-q, and 3,200 thousand tonnes of crude steel, up 2%, as output rose at all Group’s enterprises.

In 9M 2013, output of crude steel totalled 9,439 tonnes, down 1% y-o-y, as production declined by 100 thousand tonnes at Azovstal Iron and Steel Works (“Azovstal”) and by 84 thousand tonnes at Ilyich Iron and Steel Works (“Ilyich Steel”), and increased by 44 thousand tonnes at Yenakiieve Iron and Steel Works (“Yenakiieve Steel”). The insignificant reduction in steel output was due to a shortage of scrap metal on the market, which led to growth in internal consumption of pig iron, while Ilyich Steel increased output of merchant pig iron.

Production of hot metal

Production of crude steel

In 3Q 2013, output of semi-finished products rose to 879 tonnes, up 18% q-o-q. This was mainly due to Ilyich Steel boosting production of merchant pig iron by 126 thousand tonnes and Yenakiieve Steel increasing output of square billets by 13 thousand tonnes. Output of merchant slabs remained unchanged q-o-q.

In 9M 2013, production of merchant semi-finished products increased to 2,295 thousand tonnes, up 17% y-o-y, as the Group’s enterprises boosted output of merchant pig iron by 179 thousand tonnes, merchant slabs by 137 thousand tonnes, and square billets by 13 thousand tonnes. The increase in production of merchant pig iron was due to the launch of pulverised coal injection (PCI) technology at Ilyich Steel.

Output of metal products[1]

In 3Q 2013, production of finished goods totalled 2,487 thousand tonnes, up 15% q-o-q. This was mainly due to the growth in production of:

• plate by 223 thousand tonnes at Ilyich Steel, offset by a fall of 74 thousand tonnes at Azovstal due to lack of orders;
• coil by 107 thousand tonnes at Ilyich Steel;
• rail products by 25 thousand tonnes at Azovstal in response to additional orders from Kazakhstan;
• large-diameter pipes by 13 thousand tonnes at Khartsyzk Pipe Plant on new orders.

In 9M 2013, output of finished goods remained largely unchanged y-o-y and totalled 6,965 thousand tonnes, as:

• production of flat goods rose by 65 thousand tonnes;
• output of long products increased by 55 thousand tonnes, as output of sections grew by 93 thousand tonnes at Promet Steel in response to stronger demand in Bulgaria, but contracted by 38 thousand tonnes at the Ukrainian plants due to the decommissioning of Yenakiieve Steel's mill 360 in the second half of 2012 and a decrease in new orders;
• production of tubular products declined by 101 thousand tonnes due to the completion of major projects in 2012.

MINING DIVISION

Production of iron ore concentrate and pellets

In 3Q 2013, overall production of iron ore concentrate equalled 9,070 thousand tonnes, down 3% q-o-q. The volume of merchant concentrate declined by 398 thousand tonnes q-o-q, as the Group reduced output by 205 thousand tonnes and increased internal consumption by 193 thousand tonnes. Production of iron ore concentrate dropped by 152 thousand tonnes at Central GOK and 172 thousand tonnes at Ingulets GOK due to scheduled repair works. This decrease was partly offset by an increase in output at Northern GOK by 119 thousand tonnes, as the enterprise changed its product mix in favour of concentrate in the third quarter.

Pellets production for third parties decreased by 384 tonnes in 3Q 2013, as Metinvest boosted internal consumption by 326 thousand tonnes and scaled back output by 58 thousand tonnes amid planned equipment maintenance works.

In 9M 2013, overall production of iron ore concentrate grew to 27,734 thousand tonnes, up 2% y-o-y. The increase was the result of various operational improvements (435 thousand tonnes) and mining of iron ore with a higher Fe content (134 thousand tonnes).

The volume of merchant concentrate sold to third parties remained largely unchanged.

The volume of pellets produced for sale to third parties rose to 6,524 thousand tonnes, up 11% y-o-y, as:

• intra-Group pellet consumption declined by 765 thousand tonnes;
• production at Northern GOK fell by 144 thousand tonnes due to an overhaul of the roasting machines;
• output at Central GOK grew by 15 thousand tonnes following the implementation of continuous improvement measures.

Coal mining and output of coal products

In 3Q 2013, the volume of coking coal mined equalled 2,967 thousand tonnes, down 2% q-o-q, as a result of the decline in output at United Coal in the US by 97 thousand tonnes. At the same time, output at Krasnodon Coal in Ukraine rose by 36 thousand tonnes, as capacity at a new longwall face commissioned in April 2013  increased from 1,180 tonnes to 1,583 tonnes a day.

In 9M 2013, the volume of coking coal mined totalled 8,891 thousand tonnes, up 1% y-o-y, due to the    output increase at Krasnodon Coal by 182 thousand tonnes, and decline in production at United Coal by 107 thousand tonnes. The increase at the Ukrainian operations was due to the commissioning of a highly productive longwall face at the Sukhodolska-Vostochnaya mine and an additional face at Molodogvardeyskaya mine.

United Coal did not mine any steam coal in 9M 2013 due to low demand on the US market.