EVRAZ plc released its operational results for the third quarter of 2012.

Steel
In Q3 2012, EVRAZ’s overall production of crude steel decreased by 3% against both Q2 2012 and Q3 2011, mainly due to decreased steel production levels at EVRAZ steel mills in the Czech Republic and South Africa as described below.

Production volumes of steel products increased by 2% because more slabs produced in Russia in Q3 2012 were sold to market and therefore included in the total steel volumes, while in Q2 2012 significant volumes of slabs were shipped to North America and Europe for further re-rolling and therefore were excluded from the total steel volumes. This reduction in the intragroup supply of semis was compensated by purchases of third party semis by EVRAZ mills in North America and Europe.

The production of semi-finished products increased by 24% compared to Q3 2011 and by 22% compared to Q2 2012. Consolidated production of finished steel goods decreased by 8% compared to the same period last year and by 4% compared to the previous quarter of this year due to lower output of flat-rolled products in Russia and Europe and lower production of rails in Russian and American mills. Finished products accounted for 73% of the consolidated output of steel products, a decrease from 79% in Q3 2011 and 78% in Q2 2012.

Russia
In Q3 2012 pig iron output increased by 6% compared to the same period last year and by 8% compared to Q2 2012 as overall repair downtime at EVRAZ’s blast furnaces was shorter in Q3 2012 than in comparable periods. Crude steel production volumes remained flat year-on-year and increased by 4% in Q3 2012 compared to the previous quarter.

Production of construction products increased by 4% compared to Q3 2011 and by 9% vs. Q2 2012 reflecting growing demand for long steel products in Russia.

As the EVRAZ ZSMK’s rail mill has been closed for modernisation since 20 April 2012, production of railway products, mainly rails, decreased by 30% vs. Q3 2011 and by 24% vs. Q2 2012. The modernized rail mill is expected to resume production, as scheduled, in Q4 2012.

It is expected that in Q4 2012 crude steel production in Russia will be negatively affected by scheduled repairs of converter No 4 at EVRAZ NTMK and of converter No 4 at EVRAZ ZSMK.

The completion of the PCI project at EVRAZ ZSMK has been delayed until Q2 2013 due to revisions in the project design documentation.

Ukraine
In Q3 2012, crude steel production decreased by almost 4% compared to Q3 2011 and by 17% compared to Q2 2012 due to the scheduled maintenance in the converter shop which began in mid-September and which will continue to the end of October. The maintenance in the converter shop resulted in higher saleable volumes of pig iron compared to Q2 2012 and reduction of production volumes of steel products by 13% and 25% against Q3 2011 and Q2 2012 respectively.

Given that the converter shop maintenance is expected to continue until the end of October, steel production is expected to decrease by approximately 17% in Q4 2012 compared to Q3 2012.

North America
In Q3 2012, EVRAZ’s North American steel output remained flat as our North American steel mills have continued to operate at high utilisation levels.

Rail production decreased by 14% compared to Q2 2012 due to scheduled annual maintenance at the Pueblo rail mill in September 2012. It decreased by 5% year-on-year, because, besides the regular maintenance of the rail mill in September 2011, crude steel production at EVRAZ Pueblo is limited and in Q3 2011 available crude steel volumes were shifted to production of construction products from rail production.

Production of tubular goods decreased by 8% compared to the same period last year as a result of a market slowdown leading in particular to temporary idling of the Camrose DSAW mill. Spiral weld pipe production was lower vs Q3 2011 mainly due to a switch from 36 inch to 30 inch pipe in 2012 that resulted in a 9,000 tonnes decrease in production volumes. In Q3 2012 tubular goods production grew up 4% against the Q2 2012 volumes that were impacted by a Canadian National railroad strike and a labour dispute in Camrose in May 2012.

In Q4 2012 the rail mill is expected to be fully utilized as rail demand remains strong. Flat-rolled production is expected to grow slightly vs Q3 2012. Spiral pipe capacity in Canada is expected to be fully utilised under existing contracts. Overall demand for OCTG drilling activity remains stable with some slight signs of temporary weakness, while the seamless market is expected to remain solid in the near term.

Europe
Production of crude steel at EVRAZ Vitkovice Steel (EVS) in Q3 2012 decreased by 55% compared to Q3 2011 and by 59% compared to Q2 2012 as the steel plant did not operate in July-August 2012 due to scheduled yearly maintenance. Meanwhile, production of steel products decreased by only 12% and 11% respectively as the plate mill used purchased slabs for its operations.

Production of flat-rolled products decreased by 4% vs. Q3 2011 and by 15% vs. Q2 2012 in response to weakening plate demand in the European markets, as well as a two week scheduled maintenance of the plate mills in the Czech Republic and Italy in August 2012.

The EVS heavy section mill, which was temporarily closed in February due to weak demand in Europe, resumed operations in July as a result of margin and price improvement.

On 11 October the crude steel production at EVRAZ Vitkovice Steel was temporarily closed due to low demand and the company’s plan to reduce its inventory. The rolling mill and heavy section mills will remain open as the company has open orders through the end of 2012. Q4 2012 crude steel production plans will be driven by market demand.

South Africa
In Q3 2012 production of crude steel and steel products at EVRAZ Highveld Steel and Vanadium decreased compared to last year and to the previous quarter as a result of a four-week industrial action initiated by Highveld’s largest union NUMSA. An agreement has been reached between EVRAZ Highveld and NUMSA, and the steelworks re-commenced operations on 13 August 2012. It is expected that the steelworks will return to full production in October and the output of crude steel and steel products will increase compared to Q3 2012.

Mining

Iron Ore
Overall production of saleable iron ore products by the company decreased by 5% compared to Q3 2011 and was flat compared to Q2 2012.

Sukha Balka produced 23% and 24% less lumpy ore compared to Q3 2011 and Q2 2012 respectively due to production being scaled down as a result of a skip conveyor repositioning at the Yubileynaya mine that started in mid-September and is expected to continue until midNovember. Production of lumpy ore is expected to remain almost flat in Q4 2012 compared to Q3 2012.

Production of saleable concentrate in Russia increased by 10% in Q3 2012 compared to the previous quarter as a result of higher iron ore production. Pellets production decreased by 5% compared to Q3 2011 and by 9% compared to Q2 2012 due to kiln repair at EVRAZ KGOK iron ore processing plant.

Coal
Coking coal
In Q3 2012, raw coking coal production at Yuzhkuzbassugol increased by 87% compared to Q3 2011 and by 20% compared to Q2 2012 due to the absence of longwall repositionings at the mines in Q3 2012. The growth of raw coking coal production led to bigger production volumes of coking coal concentrate.

Q4 2012 coking coal production is expected to decrease, largely driven by a 60-day longwall repositioning at the Osinnikovskaya mine.

Steam coal
Production of raw steam coal remained unchanged compared to the same period last year and increased by 27% vs. Q2 2012 due to the loss of a month’s production volumes at the Gramoteinskaya mine in April-May as a result of a fire at the mine. Steam coal concentrate production decreased by 61% vs. Q3 2011 and by 31% vs. Q2 2012 due to larger raw coal sales. Q4 2012 steam coal production is expected to be flat, quarter-on-quarter.

Vanadium
In Q3 2012, EVRAZ’s total production of primary vanadium (vanadium slag) decreased by 6% compared to Q3 2011 and by 15% compared to Q2 2012, negatively affected by the four-week union industrial action at EVRAZ Highveld Steel and Vanadium.

Production of ferrovanadium decreased by 24% compared to Q3 2011 and by 13% compared to Q2 2012 due to the scheduled maintenance at EVRAZ Nikom plant in the Czech Republic and reduced raw materials (slag) availability as a result of the industrial action at EVRAZ Highveld.