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EVRAZ Announces 2014 Operational Highlights
01/22/2015 - EVRAZ plc released its operational results for the fourth quarter of 2014 and the full year of 2014.
FY 2014 OPERATIONAL HIGHLIGHTS:
Q4 2014 vs Q3 2014 OPERATIONAL HIGHLIGHTS:
In July 2014, EVRAZ ZSMK successfully completed the pulverized coal injection (PCI) project, a follow-on project to the implementation of the PCI technology at EVRAZ NTMK in 2013. PCI ensures substantial cost savings in natural gas and coke consumption. One of the coking plants at EVRAZ ZSMK was mothballed, resulting in a 32% decrease of saleable coke production year-on-year. The 18% growth in saleable coke production quarter-on-quarter was due to lower internal requirement following the PCI launch.
In 2014, crude steel production and production of steel products by EVRAZ’s Russian steel mills were largely unchanged vs. 2013. Production of semi-finished products increased by 6% while production of finished steel products declined by 4%, due to higher export sales driven by a weakening Russian rouble during the second half of 2014, as well as the shutdown of the unprofitable plate rolling mill and Mill 450 at EVRAZ ZSMK (in Q2 2013 and Q3 2014 respectively).
Despite the increased competition in the domestic market, production of construction products remained at 2013 levels supported by strong demand in the peak months of the construction season and by lower imports from Ukraine.
Production of railway products was down 8% year-on-year as a result of lower orders for solid wheels and railcar sections from railcar producers and railcar repair shops.
In Q4 2014, crude steel output rose slightly by 1% compared to Q3 2014, which was then affected by unscheduled maintenance works (change of the obsolete charging device) at one of the EVRAZ ZSMK blast furnaces. Production of steel products, net of re-rolled volumes, increased by 6% compared to the previous quarter.
Production of semi-finished goods surged by 17% compared to Q3 2014 due to volumes from the Russian market being re-directed to export destinations as a result of a weakening rouble, and also due to to the successful implementation of a billet inventory optimization program at EVRAZ NTMK.
Production of finished steel products declined by 4% compared to the previous quarter, including:
Production of steel and total steel products is expected to increase in Q1 2015 compared to Q4 2014, mostly due to improved steel production at the EVRAZ ZSMK rail mill’s steel shop and the absence of major repairs at other production facilities. Prices in the Russian market are expected to grow thus catching up with the export parity.
NORTH AMERICA
In 2014, crude steel and steel products output decreased by 9% due to shutdown of the EVRAZ Claymont operations in Q4 2013. Excluding EVRAZ Claymont, the production of both crude steel and of steel products increased - by 3% and 4% respectively.
Rail production was up 9% year-on-year and achieved a new record high due to the completion of the rail mill upgrade project.
Production of flat-rolled products was 37% lower than in 2013, mostly as a result of EVRAZ Claymont’s shutdown.
Production of tubular products increased by 14% year-on-year driven by strong market demand for small diameter pipe and operational improvements implemented at EVRAZ North America’s OCTG facilities. Large diameter market showed another strong year in 2014 (+2.5% year-on-year in production volumes).
In Q4 2014, crude steel output grew by 6% vs. the previous quarter supported by the strong order book for tubular products.
An unplanned outage to repair a cooling water main in our Pueblo melt shop resulted in a 2% decrease in production of steel products quarter-on-quarter. The outage translated into limited availability of steel for the wire rod mill.
Production of flat-rolled products at EVRAZ Portland declined by 12% quarter-on-quarter as a result of record levels of plate imports negatively impacting orders.
Production of tubular goods grew by 6% compared with Q3 2014, mostly driven by a seasonal pick-up in demand for OCTG.
The positive market trend for LD pipe is expected to continue into 2015.
OCTG demand will face significant headwinds during 2015 as a result of the rapid declines in oil prices. We are following demand trends very closely to adequately match production output and capex to prevailing market trends.
Robust plate market fundamentals secure our production volumes in Q1 2015 despite elevated imports levels during the first quarter of 2015.
UKRAINE
In 2014, the year-on-year production of crude steel and of steel products by the EVRAZ DMZ steel mill remained broadly unchanged, despite limitations on use of electricity in the country in Q4 2014.
Production of finished products decreased by 11% year-on-year as a result of lower demand for finished products, in particular sections, both in the Ukrainian market (the largest end-user is located in the Donetsk region) and in Russia and in the Middle East. Consequently, production of semifinished products grew by 11% vs. 2013, also supported by the weakening Ukrainian hryvnia and by strong demand for export billets as a result of lower supply by Ukrainian steel producers.
In Q4 2014, DMZ had to scale back production of crude steel (-20% vs. Q3 2014) selling more pig iron in the market due to restrictions on electricity consumption. As a result of reduced steel availability, production of steel products decreased by 13%.
In Q1 2015, pig iron and crude steel production is expected to stabilize, subject to electricity and gas availability.
EUROPE
Operations at EVRAZ Palini e Bertoli in Italy have remained suspended due to market conditions since August 2013.
SOUTH AFRICA
In 2014, crude steel production decreased by 3% due to operational challenges and unplanned maintenance. Production of steel products was up by 5%. Production of construction products, in particular, extended by 17% on the back of improved domestic demand compared to 2013.
In Q4 2014, the output of crude steel and steel products increased by 13% and 18% respectively vs. Q3 2014 due to operational improvements of hot metal and steel making production and improved ore quality.
IRON ORE
In 2014, production of iron ore products (sinter plus pellets) in Russia decreased by 4% compared to 2013 as a result of the disposals and shutdowns of unprofitable iron ore assets in 2013, EVRAZ VGOK in particular. Excluding VGOK, production of iron ore products in general, and of sinter made from own concentrate in particular, was flat year-on-year.
In Q4 2014 total production of iron ore products in Russia was flat quarter-on-quarter (4,332 kt vs 4,381 kt). The decline in production of sinter due to maintenance works at one of EVRAZ ZSMK’s sintering machines was partially offset by increased production of both pellets and sinter by EVRAZ KGOK after completion of maintenance works at its sintering facilities in Q3 2014. The share of EVRAZ’s own concentrate used in production of sinter rose to 79% compared to 75% in Q3 2014 due to higher primary concentrate production at Evrazruda’s mines.
Production of lumpy ore in Ukraine went down by 3% year-on-year due to lower quality of ore (lower Fe content) at the depleting section of the Yubileynaya mine. It increased by 4% quarter-on-quarter after maintenance works at the mine were completed in Q3.
Production of iron ore at the Mapochs mine in South Africa in Q4 2014 decreased compared to the previous quarter due to run-out of the run-of-mine ore. On a yearly comparison, production has improved due to better productivity of the crushing facilities of the mine after repairs performed in January-February 2014.
COAL
Coking coal
In 2014, production of raw coking coal by EVRAZ increased by 11% compared to 2013 as a result of significant growth in production by the Raspadskaya coal company (+31%) as a consequence of the successful implementation of the Raspadskaya underground mine’s restoration program.
Consequently, total production of coking coal concentrate by EVRAZ’s coal washing plants went up by 2%: coking coal concentrate production by Raspadskaya increased by 13% year-on-year and by Yuzhkuzbassugol - by 4%.
Production of coking coal concentrate by EVRAZ ZSMK coal washing plant declined by 24% year-onyear due to lower requirements for coke after introduction of the PCI technology at EVRAZ ZSMK resulting in mothballing of one of its coking plants.
In Q4 2014, production of raw coking coal by EVRAZ rose by 12% vs. Q3 2014 due to a 36% increase in volumes of raw coal mined by the Raspadskaya coal company which has operated in four longwalls since November 2014.
In Q4 2014, Yuzhkuzbassugol decreased production of coking coal by 10% compared to Q3 2014, as longwall moves at the Osinnikovskaya and Alardinskaya mines were carried out.
Share of own raw coal used in total concentrate production by EVRAZ increased to 95% in 2014 from 93% in 2013.
The blended average selling price of coking coal concentrate in dollar terms went down due to the weakening of the Russian rouble.
Steam coal
In 2014, in line with the strategic decision to stop non-core steam coal production, the Kusheyakovskaya mine, the only remaining steam coal mine within EVRAZ’s Russian coal assets, terminated production and began the mine’s conservation, with steam coal concentrate being used for internal consumption by the coal washing plant.
VANADIUM
In 2014, Vanadium slag production increased by 6% compared to 2013 both due to higher slag volumes in Russia (+5%, due to improved Vanadium slag yields and use of the duplex process at the EVRAZ NTMK steel making facilities ) and South Africa (+7%).
Production of ferrovanadium remained broadly unchanged supported by strong demand in Russia, including EVRAZ plants, and in other CIS countries. Nitrovan production was up by 7% year-on-year due to enhanced production process at EVRAZ Vametco in South Africa and absence of labour actions as experienced in 2013.
In 2014, production of oxides, vanadium aluminum and chemicals grew by 10% vs. 2013 due to higher oxide extraction yields and stable feedstock availability.
The quarter-on-quarter production of vanadium slag went up by 4%, due to increased production in South Africa as a result of higher iron output and improved vanadium content in iron.
In Q4 2014, production of ferrovanadium grew by 2% vs. Q3 2014, mostly thanks to higher (+8%) volumes processed at third parties’ facilities due to increased production at Treibacher as a result of better EVRAZ Highveld vanadium slag availability, supported by healthy demand and improved extraction ratios, and due to increased shipments of V slag to Hochvanadium from EVRAZ Highveld in Q4 2014.
The Q4 2014 production volumes of Nitrovan were 17% higher than in the previous quarter as a result of production of Nitrovan by Vametco in South Africa being negatively affected by the scheduled annual shutdown of the plant in September 2014.
Production of oxides, vanadium aluminum and chemicals increased by 17% vs. Q3 2014 thanks to successful implementation of capital projects and production debottlenecking at EVRAZ Stratcor.
Despite growing demand for vanadium in the world, deteriorating steel fundamentals in China led to higher exports of vanadium products, which ultimately drove Metal Bulletin Ferrovanadium index down to $24.10/kg V in December 2014. In 2014, Metal Bulletin Ferrovanadium index average resulted in $25.53/kg V vs. $27.73/kg V in 2013 (-7.9% y-o-y). This had an adverse effect on Ferrovanadium and Nitrovan prices that were experiencing downward trends through 2014 vs. 2013.
Prices of oxides, vanadium aluminum and chemicals advanced quarter-on-quarter due to increased sales volumes of liquid chemicals and vanadium aluminum products. The year-on-year decrease in the selling price was due to the sales mix which included commodity oxide sales which were negatively impacted by the Metal Bulletin Oxide index movement.
- Consolidated crude steel production and output of steel products, net of rerolled volumes, decreased by 4% and 5% respectively, mostly as a result of the disposal in April 2014 of EVRAZ Vitkovice Steel in the Czech Republic and the shutdown of EVRAZ Claymont operations in the USA at the end of 2013 as part of the group wide optimization plan
- The share of semi-finished products in our shipments increased to 31% from 26% in 2013 as a result of a shift in sales from Russia to export destinations driven partially by a weakening rouble, and by a reduction in intercompany supply of slabs for further re-rolling at EVRAZ’s rolling mills in Europe and at EVRAZ Claymont due to disposal, shutdown, or suspension of such mills
- EVRAZ ZSMK successfully implemented the pulverized coal injection (PCI) project leading to a sustainable reduction of operating costs
- The EVRAZ Caspian Steel rolling mill in Kazakhstan was commissioned and began mass production of rebars from EVRAZ ZSMK’s billets
- Stable production volumes of saleable iron ore products in Russia (on a comparable basis, excluding volumes from disposed EVRAZ VGOK)
- Coking coal production grew by 11% due to increased output of 31% at the Raspadskaya coal company. This represents a return to pre-accident levels of annualized production of over 10 million tonnes of coking coal
- Prices for steel products and their key raw material inputs were negatively affected by continuing headwinds in the global markets and depreciation of local currencies in Russia and Ukraine
Q4 2014 vs Q3 2014 OPERATIONAL HIGHLIGHTS:
- Consolidated crude steel output stable at 3.9 million tonnes per quarter
- Production of steel products, net of re-rolled volumes, increased by 6%, mostly driven by a 31% increase in production of semi-finished products due to higher shipments of more profitable export billets and slabs
- The share of finished steel products within consolidated volumes decreased to 63% in Q4 2014 vs. 69% in Q3 2014 due to higher exports of semi-finished products and weaker demand for construction products and railway products in Russia
- Production of tubular products in North America increased by 6%, mostly driven by strong market demand for large diameter pipe and operational improvements at our OCTG facilities
- Consolidated raw coking coal output and production of coking coal concentrate increased by 12% and 8% respectively due to strong performance of the Raspadskaya coal company
In July 2014, EVRAZ ZSMK successfully completed the pulverized coal injection (PCI) project, a follow-on project to the implementation of the PCI technology at EVRAZ NTMK in 2013. PCI ensures substantial cost savings in natural gas and coke consumption. One of the coking plants at EVRAZ ZSMK was mothballed, resulting in a 32% decrease of saleable coke production year-on-year. The 18% growth in saleable coke production quarter-on-quarter was due to lower internal requirement following the PCI launch.
In 2014, crude steel production and production of steel products by EVRAZ’s Russian steel mills were largely unchanged vs. 2013. Production of semi-finished products increased by 6% while production of finished steel products declined by 4%, due to higher export sales driven by a weakening Russian rouble during the second half of 2014, as well as the shutdown of the unprofitable plate rolling mill and Mill 450 at EVRAZ ZSMK (in Q2 2013 and Q3 2014 respectively).
Despite the increased competition in the domestic market, production of construction products remained at 2013 levels supported by strong demand in the peak months of the construction season and by lower imports from Ukraine.
Production of railway products was down 8% year-on-year as a result of lower orders for solid wheels and railcar sections from railcar producers and railcar repair shops.
In Q4 2014, crude steel output rose slightly by 1% compared to Q3 2014, which was then affected by unscheduled maintenance works (change of the obsolete charging device) at one of the EVRAZ ZSMK blast furnaces. Production of steel products, net of re-rolled volumes, increased by 6% compared to the previous quarter.
Production of semi-finished goods surged by 17% compared to Q3 2014 due to volumes from the Russian market being re-directed to export destinations as a result of a weakening rouble, and also due to to the successful implementation of a billet inventory optimization program at EVRAZ NTMK.
Production of finished steel products declined by 4% compared to the previous quarter, including:
- - 2% decrease in construction products due to low demand at the end of the construction season;
- - 16% reduction in railway products due to softer demand for railway wheels and railcar sections and fastenings.
Production of steel and total steel products is expected to increase in Q1 2015 compared to Q4 2014, mostly due to improved steel production at the EVRAZ ZSMK rail mill’s steel shop and the absence of major repairs at other production facilities. Prices in the Russian market are expected to grow thus catching up with the export parity.
NORTH AMERICA
In 2014, crude steel and steel products output decreased by 9% due to shutdown of the EVRAZ Claymont operations in Q4 2013. Excluding EVRAZ Claymont, the production of both crude steel and of steel products increased - by 3% and 4% respectively.
Rail production was up 9% year-on-year and achieved a new record high due to the completion of the rail mill upgrade project.
Production of flat-rolled products was 37% lower than in 2013, mostly as a result of EVRAZ Claymont’s shutdown.
Production of tubular products increased by 14% year-on-year driven by strong market demand for small diameter pipe and operational improvements implemented at EVRAZ North America’s OCTG facilities. Large diameter market showed another strong year in 2014 (+2.5% year-on-year in production volumes).
In Q4 2014, crude steel output grew by 6% vs. the previous quarter supported by the strong order book for tubular products.
An unplanned outage to repair a cooling water main in our Pueblo melt shop resulted in a 2% decrease in production of steel products quarter-on-quarter. The outage translated into limited availability of steel for the wire rod mill.
Production of flat-rolled products at EVRAZ Portland declined by 12% quarter-on-quarter as a result of record levels of plate imports negatively impacting orders.
Production of tubular goods grew by 6% compared with Q3 2014, mostly driven by a seasonal pick-up in demand for OCTG.
The positive market trend for LD pipe is expected to continue into 2015.
OCTG demand will face significant headwinds during 2015 as a result of the rapid declines in oil prices. We are following demand trends very closely to adequately match production output and capex to prevailing market trends.
Robust plate market fundamentals secure our production volumes in Q1 2015 despite elevated imports levels during the first quarter of 2015.
UKRAINE
In 2014, the year-on-year production of crude steel and of steel products by the EVRAZ DMZ steel mill remained broadly unchanged, despite limitations on use of electricity in the country in Q4 2014.
Production of finished products decreased by 11% year-on-year as a result of lower demand for finished products, in particular sections, both in the Ukrainian market (the largest end-user is located in the Donetsk region) and in Russia and in the Middle East. Consequently, production of semifinished products grew by 11% vs. 2013, also supported by the weakening Ukrainian hryvnia and by strong demand for export billets as a result of lower supply by Ukrainian steel producers.
In Q4 2014, DMZ had to scale back production of crude steel (-20% vs. Q3 2014) selling more pig iron in the market due to restrictions on electricity consumption. As a result of reduced steel availability, production of steel products decreased by 13%.
In Q1 2015, pig iron and crude steel production is expected to stabilize, subject to electricity and gas availability.
EUROPE
Operations at EVRAZ Palini e Bertoli in Italy have remained suspended due to market conditions since August 2013.
SOUTH AFRICA
In 2014, crude steel production decreased by 3% due to operational challenges and unplanned maintenance. Production of steel products was up by 5%. Production of construction products, in particular, extended by 17% on the back of improved domestic demand compared to 2013.
In Q4 2014, the output of crude steel and steel products increased by 13% and 18% respectively vs. Q3 2014 due to operational improvements of hot metal and steel making production and improved ore quality.
IRON ORE
In 2014, production of iron ore products (sinter plus pellets) in Russia decreased by 4% compared to 2013 as a result of the disposals and shutdowns of unprofitable iron ore assets in 2013, EVRAZ VGOK in particular. Excluding VGOK, production of iron ore products in general, and of sinter made from own concentrate in particular, was flat year-on-year.
In Q4 2014 total production of iron ore products in Russia was flat quarter-on-quarter (4,332 kt vs 4,381 kt). The decline in production of sinter due to maintenance works at one of EVRAZ ZSMK’s sintering machines was partially offset by increased production of both pellets and sinter by EVRAZ KGOK after completion of maintenance works at its sintering facilities in Q3 2014. The share of EVRAZ’s own concentrate used in production of sinter rose to 79% compared to 75% in Q3 2014 due to higher primary concentrate production at Evrazruda’s mines.
Production of lumpy ore in Ukraine went down by 3% year-on-year due to lower quality of ore (lower Fe content) at the depleting section of the Yubileynaya mine. It increased by 4% quarter-on-quarter after maintenance works at the mine were completed in Q3.
Production of iron ore at the Mapochs mine in South Africa in Q4 2014 decreased compared to the previous quarter due to run-out of the run-of-mine ore. On a yearly comparison, production has improved due to better productivity of the crushing facilities of the mine after repairs performed in January-February 2014.
COAL
Coking coal
In 2014, production of raw coking coal by EVRAZ increased by 11% compared to 2013 as a result of significant growth in production by the Raspadskaya coal company (+31%) as a consequence of the successful implementation of the Raspadskaya underground mine’s restoration program.
Consequently, total production of coking coal concentrate by EVRAZ’s coal washing plants went up by 2%: coking coal concentrate production by Raspadskaya increased by 13% year-on-year and by Yuzhkuzbassugol - by 4%.
Production of coking coal concentrate by EVRAZ ZSMK coal washing plant declined by 24% year-onyear due to lower requirements for coke after introduction of the PCI technology at EVRAZ ZSMK resulting in mothballing of one of its coking plants.
In Q4 2014, production of raw coking coal by EVRAZ rose by 12% vs. Q3 2014 due to a 36% increase in volumes of raw coal mined by the Raspadskaya coal company which has operated in four longwalls since November 2014.
In Q4 2014, Yuzhkuzbassugol decreased production of coking coal by 10% compared to Q3 2014, as longwall moves at the Osinnikovskaya and Alardinskaya mines were carried out.
Share of own raw coal used in total concentrate production by EVRAZ increased to 95% in 2014 from 93% in 2013.
The blended average selling price of coking coal concentrate in dollar terms went down due to the weakening of the Russian rouble.
Steam coal
In 2014, in line with the strategic decision to stop non-core steam coal production, the Kusheyakovskaya mine, the only remaining steam coal mine within EVRAZ’s Russian coal assets, terminated production and began the mine’s conservation, with steam coal concentrate being used for internal consumption by the coal washing plant.
VANADIUM
In 2014, Vanadium slag production increased by 6% compared to 2013 both due to higher slag volumes in Russia (+5%, due to improved Vanadium slag yields and use of the duplex process at the EVRAZ NTMK steel making facilities ) and South Africa (+7%).
Production of ferrovanadium remained broadly unchanged supported by strong demand in Russia, including EVRAZ plants, and in other CIS countries. Nitrovan production was up by 7% year-on-year due to enhanced production process at EVRAZ Vametco in South Africa and absence of labour actions as experienced in 2013.
In 2014, production of oxides, vanadium aluminum and chemicals grew by 10% vs. 2013 due to higher oxide extraction yields and stable feedstock availability.
The quarter-on-quarter production of vanadium slag went up by 4%, due to increased production in South Africa as a result of higher iron output and improved vanadium content in iron.
In Q4 2014, production of ferrovanadium grew by 2% vs. Q3 2014, mostly thanks to higher (+8%) volumes processed at third parties’ facilities due to increased production at Treibacher as a result of better EVRAZ Highveld vanadium slag availability, supported by healthy demand and improved extraction ratios, and due to increased shipments of V slag to Hochvanadium from EVRAZ Highveld in Q4 2014.
The Q4 2014 production volumes of Nitrovan were 17% higher than in the previous quarter as a result of production of Nitrovan by Vametco in South Africa being negatively affected by the scheduled annual shutdown of the plant in September 2014.
Production of oxides, vanadium aluminum and chemicals increased by 17% vs. Q3 2014 thanks to successful implementation of capital projects and production debottlenecking at EVRAZ Stratcor.
Despite growing demand for vanadium in the world, deteriorating steel fundamentals in China led to higher exports of vanadium products, which ultimately drove Metal Bulletin Ferrovanadium index down to $24.10/kg V in December 2014. In 2014, Metal Bulletin Ferrovanadium index average resulted in $25.53/kg V vs. $27.73/kg V in 2013 (-7.9% y-o-y). This had an adverse effect on Ferrovanadium and Nitrovan prices that were experiencing downward trends through 2014 vs. 2013.
Prices of oxides, vanadium aluminum and chemicals advanced quarter-on-quarter due to increased sales volumes of liquid chemicals and vanadium aluminum products. The year-on-year decrease in the selling price was due to the sales mix which included commodity oxide sales which were negatively impacted by the Metal Bulletin Oxide index movement.
