The company’s production and shipments in 2013 reflect the market conditions. The increase in HBI/DRI production by 3.1% and shipments by 6.7% year-on-year correspond to Metalloinvest’s strategy to increase the share of high value-added products.
 
Management comments

• In Q4 2013, the company increased iron ore production¹ by 0.8% q-o-q² to 9.6 million tonnes. Overall, 2013 production amounted to 38.4 million tonnes, down 3.5% y-o-y
• Pellet production in Q4 2013 was 5.7 million tonnes, equal to Q3 2013. As a result, pellet production in 2013 remained at the level of 22.6 million tonnes
• In Q4 2013, the company increased HBI/DRI production by 6.7% q-o-q to 1.4 million tonnes. This resulted in annual output rising to 5.3 million tonnes, an increase of 3.1% y-o-y
• In Q4 2013, the company increased shipments of iron ore products to the domestic market to 4.2 million tonnes, up 11.1% q-o-q. Overall, 2013 shipments to Russia and the CIS amounted to 16.3 million tonnes, representing 60% of the company’s consolidated shipments of iron ore products, mainly due to increased supplies to MMK and Severstal
• Shipments to Europe remained flat at 1.6 million tonnes in Q4 2013. Thus, by the end of 2013, shipments decreased by 17.6% y-o-y to 5.4 million tonnes, representing 20% of the company’s consolidated shipments of iron ore products
• Due to increased shipments to the domestic market under long-term contracts, the company’s shipments to China decreased to 0.2 million tonnes in Q4 2013 and totaled 2.2 million tonnes in 2013, representing 8% of the company’s consolidated shipments of iron ore products

Mining Segment

• In Q4 2013, LGOK increased iron ore concentrate production by 3.0% q-o-q to 5.1 million tonnes. Overall, 2013 concentrate production decreased by 4.5% y-o-y to 20.3 million tonnes, due to changes in the plan of mining operations, partial replacement of railway tracks in the open pit, as well as realization of maintenance works at the Beneficiation Plant
• MGOK decreased iron ore concentrate production by 1.6% q-o-q to 4.1 million tonnes in Q4 2013, mainly due to a planned increase in maintenance time of the crushing and processing plant. Concentrate production in 2013 decreased by 2.3% y-o-y to 16.6 million tonnes, mainly due to changes in the structure of mining transport operations
• In Q4 2013, pellet production at LGOK amounted to 2.2 million tonnes, representing a decline of 2.0% q-o-q as a result of major maintenance works at Pellet Plant #1. Overall, 2013 pellet production increased by 1.3% y-o-y to 8.9 million tonnes, mainly due to the optimization of maintenance works
• MGOK increased pellet production in Q4 2013 by 5.6% q-o-q to 2.6 million tonnes, mainly due to the reduction of maintenance time. Overall, 2013 pellet production decreased by 2.5% y-o-y to 9.9 million tonnes as a result of planned major maintenance works at Pellet Plant #1 in Q2 2013
• HBI production in Q4 2013 decreased by 4.9% q-o-q to 0.6 million tonnes, due to planned major maintenance works at the HBI-2 Plant. Overall in 2013, LGOK increased HBI production by 7.1% y-o-y to 2.6 million tonnes, resulting from HBI-2 Plant’s modernization together with the increase in productivity of the unit in Q4 2012

Steel Segment

• In Q4 2013, OEMK decreased pellet production by 9.9% q-o-q due to planned major maintenance works at the pellet plant. Overall in 2013, OEMK increased pellet production by 1.8% y-o-y to 3.8 million tonnes due to a reduction in maintenance time y-o-y
• OEMK increased DRI production in Q4 2013 by 18.1% q-o-q to 0.8 million tonnes after the completion of major maintenance works at DRI plants #3 and #4 in Q3 2013. Overall, 2013 DRI production amounted to 2.8 million tonnes and remained at the level of 2012
• Crude steel production at OEMK amounted to 0.8 million tonnes in Q4 2013 (up 11.3% q-o-q). Overall, 2013 crude steel production at OEMK decreased by 2.2% y-o-y to 3.2 million tonnes
• Ural Steel decreased crude steel production in Q4 2013 by 7.6% q-o-q to 0.3 million tonnes, mainly as a result of major maintenance works to the continuous casting machine. Overall, 2013 crude steel production decreased by 37.1% y-o-y to 1.5 million tonnes, due to the closure of the open-hearth plant from Q2 2013 onwards and a decline in the volume of effective orders
• In Q4 2013, Ural Steel increased hot metal production by 3.6% q-o-q to 0.6 million tonnes, mainly due to the increased productivity of the blast furnace shop. Overall, 2013 shipments of merchant pig iron increased by 74.4% y-o-y to 1.4 million tonnes due to the modernization of hot metal production capacities and favorable conditions on the pig iron market

¹ Hereinafter iron ore refers to iron ore concentrate and sintering ore 
² Hereinafter q-o-q represents change in Q4 2013 vs. Q3 2013 (if not stated otherwise)