15.7.2011 - EVRAZ GROUP 2Q 2011 OPERATIONAL RESULTS
15 July 2011 - Evraz Group S.A. (LSE: EVR) ("EVRAZ") today released its operational results for the second quarter of 2011.
2Q 2011 HIGHLIGHTS:
- Steel product mix shifted much more in favour of finished goods
- Prices for almost all product groups increased as a result of stronger demand and higher raw materials prices
- Coking coal production decreased compared to the previous quarter due to the ongoingoperational issues at some of the Yuzhkuzbassugol mines
The production of finished goods increased on average by 9% and 4% compared to 2Q 2010 and to 1Q 2011 respectively while the volumes of semi-finished products decreased by 19% reflecting a recovery in EVRAZ's key markets, 100% utilisation of available capacity at the Russian steel mills, a bigger share of high value added products.
Production of crude steel by Russian mills decreased by 5% compared to 1Q 2011 because of the scheduled repairs of blast furnaces at Zapsib (BF 2 in April, BF 1 in June), the under supply of pellets to Zapsib from Mikhailovsky GOK in April and a seasonal scrap deficit in April.
Production of semi-finished steel decreased by almost 20% vs. 2Q 2010 in favour of higher value added products as a result of improving domestic demand for construction and flat-rolled products. The 2Q 2011 production of construction steel was up 12%, whilst production of flatrolled steel was up 14% against the same period last year.
EVRAZ DMZ increased production of finished steel, decreasing volumes of semi-finished goods. In particular, volumes of finished construction steel rose 22% and 10% compared to 2Q 2010 and 1Q 2011, respectively.
In 2Q 2011, EVRAZ Vitkovice Steel operated at maximum crude steel production capacity. Flatrolled product output remained strong in response to stable demand from energy-related and yellow goods sectors, particularly in Germany. Construction products volumes decreased as the heavy section mill was temporary closed during some of May for the optimisation of stocks.
In 2Q 2011, flat-rolled production increased by 14% from Q1 2011 and by 32% from 2Q 2010 due to growth in end-user demand for commodity plate, driven by improved market sentiment. In particular the service centre industry is increasing inventories to historical levels and fabricators operating in the wind tower, tank, and transmission line businesses have higher demand.
Rail production increased by 11% when comparing Q2 2011 to Q1 2011 and by 36% compared to the same quarter in 2010 as class one railroads (Union Pacific Railroad, BNSF Railway and Canadian Pacific Railway) are expanding infrastructure and stockpiling rail for upcoming projects in 2011 and 2012. Our enhanced focus on rail quality resulted in increased share in North American market.
Production of tubular goods increased by 10% relative to the Q1 2011 volumes and remained at nearly the same level as a year earlier on the back of a tubular market recovery, partially offset by the traditional seasonal slowdown in the sector.
Construction product output, mainly of rods and bars, decreased by 14% in 2Q11 compared to 1Q 2011 and by 27% compared to 2Q 2010 as EVRAZ Pueblo has shifted operational resources to produce more rails and seamless pipes that enjoy higher margins and growing demand.
Pig iron production and crude steel declined by 18% and 14% respectively vs. 1Q 2011 because of an upgrade of one of the furnaces, expected to be completed in 3Q 2011.
Production of construction steel decreased by 13% compared to 1Q 2011 and semi-finished products by 32% because of the weak end markets.
Total iron ore production increased by 13% and 9% relative to 2Q 2010 and 1Q 2011, respectively.
The growth in production of saleable concentrate in Russia 14% vs. 2Q 2011 and 1Q 2011 is explained by more stable operations and debottlenecking at Evrazruda in 2Q11.
Sukha Balka in Ukraine demonstrated a 116% production growth in 2Q 2011 compared to the previous quarter after completion of a lifting equipment upgrade at the Yubileynaya mine.
Production of lumpy ore at the Mapochs mine in South Africa decreased by 17% compared to 1Q 2011 and by 33% compared to 2Q 2010 2010 due to lower requirement from the steel mill.
Raw coking coal production at Yuzhkuzbassugol decreased by 5% against 1Q 2011 as a result of temporary shutdowns of the Alardinskaya and Osinnikovskaya mines to resolve operational issues related to potential safety risks. The losses were partially offset by increased production in 2Q 2011 by Abashevskaya and Yesaulskaya mines (the latter was closed for longwall repositioning in 1Q 2011).
Raw steam coal and steam concentrate production decreased by 27% and by 67% respectively in 2Q 2011 compared to 2Q 2010 because of a shutdown of the Tagaryshskaya mine in 1Q 2011 and the longwall repositioning at the Kusheyakovskaya mine from mid-February through May 2011.
Production of finished vanadium goods (ferrovanadium, Nitrovan®) increased substantially driven by stronger demand, e.g. Ferrovanadium increased 20% relative to 2Q 2010.