Metinvest announces 1Q 2016 operational results

29 April 2016 – 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 first quarter ended 31 March 2016.

OPERATIONAL HIGHLIGHTS

METALLURGICAL DIVISION

Hot metal production

Crude steel production

In 1Q 2016, the Group’s hot metal output increased by 5% q-o-q to 2,059 thousand tonnes, as production rose at all of its steelmakers. Azovstal boosted output by 46 thousand tonnes, following the relaunch of blast furnace no. 4 in February after its major overhaul and a revival in demand for steel products. Yenakiieve Steel increased output by 43 thousand tonnes, as the situation with supplies of raw materials and diesel fuel improved and the natural gas supply to the plant was reinstated on 15 March 2016. At Ilyich Steel, after blast furnace no. 4 was shut down in 4Q 2015, the enterprise continued to operate three blast furnaces, boosting output slightly, by 7 thousand tonnes.

In 1Q 2016, Metinvest’s crude steel production grew by 17% q-o-q to 1,998 thousand tonnes, driven by the rise in hot metal output and a decrease in pig iron production. Steel output increased by 108 thousand tonnes at Azovstal, 128 thousand tonnes at Ilyich Steel and 50 thousand tonnes at Yenakiieve Steel.

In 1Q 2016, the Group’s hot metal production rose by 17% y-o-y, driven by a rebound in production at Yenakiieve Steel and Ilyich Steel, following a decline amid the continuing conflict in Eastern Ukraine from the second half of 2014. In particular, due events on the ground in 1Q 2015, Yenakiieve Steel was shut down completely from 7 February to 16 March 2015, and raw material supplies to Azovstal and Ilyich Steel were constrained. As a result of these factors, hot metal production increased by 81 thousand tonnes at Ilyich Steel and 247 thousand tonnes at Yenakiieve Steel and decreased by 27 thousand tonnes at Azovstal.

Crude steel production mirrored the change in hot metal output. In 1Q 2016, Metinvest’s crude steel production equalled 1,998 thousand tonnes, up 19% y-o-y. Output increased by 122 thousand tonnes at Ilyich Steel and 239 thousand tonnes at Yenakiieve Steel and decreased by 35 thousand tonnes at Azovstal. 

Crude steel production mirrored the change in hot metal output. In 1Q 2016, Metinvest’s crude steel production equalled 1,998 thousand tonnes, up 19% y-o-y. Output increased by 122 thousand tonnes at Ilyich Steel and 239 thousand tonnes at Yenakiieve Steel and decreased by 35 thousand tonnes at Azovstal.

Metal product output [1]

In 1Q 2016, the Group’s output of merchant semi-finished products declined by 27% q-o-q to 552 thousand tonnes, as output of pig iron fell by 153 thousand tonnes, slabs by 44 thousand tonnes and square billet by 6 thousand tonnes. Pig iron output dropped by 41% q-o-q, as hot metal was redirected for crude steel production to increase output of higher value-added finished products. Output of merchant slabs fell by 18% q-o-q, as intragroup consumption increased amid greater production of flat products. Production of square billets decreased by 4% q-o-q due to greater output of long products at Yenakiieve Steel.

In 1Q 2016, Metinvest’s output of merchant semi-finished products fell by 8% y-o-y, as output of pig iron and square billets decreased by 70 and 7 thousand tonnes, respectively, amid an increase in merchant slab production of 28 thousand tonnes. The decline in output of pig iron and square billets was due to a switch in favour of higher value-added finished products. Output of slabs increased, as intragroup consumption decreased following the suspension of operations at Khartsyzk Pipe in July 2015.

In 1Q 2016, the Group’s output of finished products rose by 265 thousand tonnes q-o-q to 1,504 thousand tonnes.

In 1Q 2016, Metinvest’s output of flat products increased by 178 thousand tonnes q-o-q, driven by a revival in demand and price growth. The Group’s Ukrainian plants increased output of flat products by 155 thousand tonnes by ramping up that of plates by 150 thousand tonnes and coils by 5 thousand tonnes. The European re-rolling mills boosted their output by 23 thousand tonnes by increasing production of plates.

In 1Q 2016, Metinvest’s output of long products increased by 91 thousand tonnes q-o-q, driven by increases of: 

• 64 thousand tonnes at Yenakiieve Steel;
• 7 thousand tonnes at Azovstal;
• 20 thousand tonnes at Promet Steel in Bulgaria, as square billet shipments resumed from Yenakiieve Steel. 

The Group’s output of tubular products totalled 21 thousand tonnes in 1Q 2016, unchanged q-o-q. Amid a lack of orders since June 2015, Khartsyzk Pipe has been idle.

In 1Q 2016, Metinvest’s output of finished goods rose by 21% y-o-y, as the steel market revived and operations at Yenakiieve Steel stabilised: 

• flat product output increased by 56 thousand tonnes, mainly due to a rise in plate production of 134 thousand tonnes at Ilyich Steel, which compensated a decrease in plate production of 50 thousand tonnes at Azovstal and 2 thousand tonnes at the European plants, as well as a reduction in coil production of 26 thousand tonnes at Ilyich Steel;
• long product output increased by 218 thousand tonnes, driven by a greater production at Azovstal (24 thousand tonnes), the resumption of operations at Yenakiieve Steel and its Makiivka branch (149 thousand tonnes), and increased output at Promet Steel (45 thousand tonnes) as deliveries of billets for re-rolling stabilised;
• tubular output dropped by 18 thousand tonnes due to a decline in production of large-diameter pipes of 30 thousand tonnes at Khartsyzk Pipe, which was partly offset by a rise in output of other pipes of 12 thousand tonnes at Ilyich Steel. The situation in Eastern Ukraine constrained supplies of coating materials for pipes and shipments of finished goods. In addition, Khartsyzk Pipe has been idle amid a lack of orders since June 2015.

Coke production [2]

Coke output rose by 1% q-o-q to 1,124 thousand tonnes in 1Q 2016, as Avdiivka Coke increased production by 13 thousand tonnes, Zaporizhia Coke by 17 thousand tonnes and Azovstal by 17 thousand tonnes. This fully compensated a loss of production from Donetsk Coke (36 thousand tonnes) following its cold mothballing.

Coke output rose by 28% y-o-y, as operations stabilised at Avdiivka Coke and the needs of the Group's steelmakers increased.

On average, around 76% of the total coke output produced in 1Q 2016 was consumed internally.

MINING DIVISION

Iron ore concentrate and pellet output[3]

In 1Q 2016, Metinvest’s production of overall iron ore concentrate fell by 302 thousand tonnes q-o-q to 7,911 thousand tonnes. Northern GOK reduced output by 145 thousand tonnes and Central GOK by 186 thousand tonnes, which was slightly offset by an increase of 29 thousand tonnes at Ingulets GOK. The Group decreased production in response to lower prices and demand, while unremoved overburden rock at Central GOK during 2015 also contributed to the decline.

In 1Q 2016, merchant iron ore product output decreased by 12% q-o-q to 4,858 thousand tonnes due to the following factors:

• Merchant concentrate output dropped by 947 thousand tonnes, as it was redirected to produce pellets for intragroup consumption (587 thousand tonnes) and third-party sales (306 thousand tonnes), and there was a decline of 54 thousand tonnes amid lower prices and demand;
• Output of merchant pellets increased by 280 thousand tonnes, as production at Central GOK's pelletising plant rose (92 thousand tonnes) following the repair of the roasting machine in 4Q 2015 and there was a shift in sales of merchant products towards higher-margin pellets (188 thousand tonnes).

In 1Q 2016, overall iron ore concentrate production rose by 6% y-o-y. The low output in 1Q 2015 stemmed from shipment issues and lower intragroup consumption amid the conflict in Eastern Ukraine (Yenakiieve Steel was idle in February-March 2015, while Ilyich Steel and Azovstal decreased hot metal production).

Merchant concentrate output totalled 3,432 thousand tonnes in 1Q 2016, up 29% y-o-y. This was due to lower output of merchant concentrate in 1Q 2015, caused by an inventory build-up due to shipment constraints.

In 1Q 2016, output of merchant pellets slumped by 33% y-o-y to 1,426 thousand tonnes amid greater intragroup consumption.

Coal concentrate production [4]

In 1Q 2016, the Group’s coal concentrate production equalled 799 thousand tonnes, unchanged q-o-q. Krasnodon Coal boosted its output by 106 thousand tonnes, as the extraction rate at existing faces increased amid improved logistics. United Coal reduced coal concentrate production by 110 thousand tonnes, as operations resumed at Krasnodon Coal, which is primarily used for intragroup consumption.

Metinvest’s coal concentrate production dropped by 6% y-o-y in 1Q 2016. Output at Krasnodon Coal increased by 120 thousand tonnes, as shipments of finished goods resumed. Production at United Coal fell by 167 thousand tonnes due to lower intragroup consumption amid growing output at Krasnodon Coal.