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ММК Group Trading Update for Q4 and FY 2014

ММК Group1 Trading Update for Q4 and FY 2014

ММК Group:

Operational highlights

Output, thousand tonnes

 

FY 2014

FY 2013

%

Q42014

Q32014

%

MMK Group crude steel

13,031

11,941

 

3,072

3,381

-9.1%

ММК crude steel

13,031

11,941

 

3,072

3,381

-9.1%

ММК Metalurji crude steel

0

0

-

0

0

-

MMK Group steel products

12,158

11,060

 

2,914

3,131

-6.9%

MMK steel products

11,650

10,667

 

2,776

2,996

-7.3%

ММК-Metiz steel products2

508

535

-5.1%

101

142

-28.8%

ММК Metalurji steel products2

690

664

 

172

184

-6.4%

ММК Group HVA products

5,480

5,336

 

1,344

1,420

-5.4%

ММК Group HVA products share

           

Belon coal concentrate

2,942

2,858

 

886

672

 

Iron ore

3,387

3,723

-9.0%

815

919

-11.3%

FY 2014 highlights

  • MMK Group’s overall crude steel output in FY 2014 totalled 13,031 thousand tonnes (+9.1% y-o-y). Overall steelmaking capacity utilization at the main Magnitogorsk site exceeded 90%. At the same time, converter production operated at 100% of capacity.
  • MMK Group’s overall finished steel products shipments in FY 2014 (excluding intra-group sales) amounted to 12,158 thousand tonnes (+9.9% y-o-y).
  • MMK Group’s HVA steel products output in FY 2014 totalled 5,480 thousand tonnes (+2.7% y-o-y). The share of HVA products in total output volume was 45.1%. Capacity utilization of key rolled production facilities (mill 5000 and mill 2000 c/r) amounted to 98-100%.
  • Production of Belon coal concentrate in FY 2014 amounted to 2,942 thousand tonnes (+2.9% y-o-y).
  • In-house consumption of iron ore produced by the Group in FY 2014 decreased by 9.0% y-o-y to 3,387 thousand tonnes.

Q4 2014 highlights

  • MMK Group crude steel output in Q4 2014 totalled 3,072 thousand tonnes (-9.1% q-o-q). This decline was mainly due to scheduled maintenance of the blast furnace #8 and oxygen converter and seasonal factor.
  • MMK Group finished steel products shipments in Q4 2014 (excluding intra-group sales) amounted to 2,914 thousand tonnes (-6.9% q-o-q).
  • MMK Group HVA steel products output in Q4 2014 totalled 1,344 thousand tonnes (-5.4% q-o-q). The share of HVA products in total output volume increased to 46.1%.
  • Production of Belon coal concentrate in Q4 2014 amounted to 886 thousand tonnes (+31.8% q-o-q).

1 - MMK Group is understood as OJSC MMK together with subsidiaries; OJSC MMK is referred to as MMK

2 – Products manufactured from MMK steel are not included in the finished products of MMK Group

Steel segment

ММК

Output, thousand tonnes

 

FY 2014

FY 2013

%

Q42014

Q32014

%

Cast iron

10,280

9,586

 

2,476

2,629

-5.8%

Crude steel

13,031

11,941

 

3,072

3,381

-9.1%

Finished products output, of which:

11,650

10,667

 

2,776

2,996

-7.3%

Slabs and billets

75

9

-

4

5

-

Long products

1,827

1,814

 

450

463

-2.9%

Flat hot-rolled products

5,403

4,647

 

1,236

1,413

-12.5%

HVA products, of which:

4,345

4,197

 

1,086

1,114

-2.5%

Thick plate (mill 5000)

924

843

 

237

273

-13.2%

Flat cold-rolled products

1,441

1,509

-4.5%

360

332

 

Downstream products, of which:

1,980

1,844

 

489

508

-3.9%

Tin plate

143

140

 

29

34

-12.4%

Galvanised steel

1,116

978

 

290

290

-0.2%

Colour-coated steel

368

372

-1.3%

88

87

 

Band

126

125

 

32

33

-3.9%

Formed section

138

143

-3.5%

25

40

-38.7%

Pipes

88

86

 

26

25

 

Shipments by market:

           

Russia +CIS

9,588

8,993

 

2,337

2,510

-6.9%

Export

2,063

1,674

 

439

486

-9.5%

Averageprices, USD

 

FY 2014

FY 2013

%

Q42014

Q32014

%

Average price per tonne:

573

633

-9.4%

516

640

-19.4%

Long products

521

588

-11.4%

466

585

-20.3%

Flat hot-rolled products

499

536

-6.7%

453

547

-17.2%

HVA products, of which:

691

760

-9.2%

608

780

-22.1%

     Thick plate (mill 5000)

719

792

-9.2%

684

830

-17.6%

Flat cold-rolled products

538

589

-8.7%

475

587

-19.1%

Downstream products, of which:

788

886

-11.0%

669

880

-24.0%

Tin plate

873

1,024

-14.8%

724

951

-23.9%

Galvanised steel

751

827

-9.2%

633

855

-26.0%

Colour-coated steel

1,013

1,121

-9.6%

865

1,158

-25.3%

Band

581

662

-12.3%

527

623

-15.4%

Formed section

710

850

-16.4%

662

755

-12.3%

Pipes

607

701

-13.4%

522

651

-19.8%

FY 2014 highlights

  • Crude steel output in FY 2014 increased by 9.1% y-o-y and totalled 13,031 thousand tonnes.
  • In FY 2014, shipments of finished products totalled 11,650 thousand tonnes, up 9.2% y-o-y. This growth was driven by increased sales volumes for hot-rolled products, thick plate and galvanised rolled products.
  • A favourable pricing environment on commodities markets and the decline in the ruble during 2014 supported growth in MMK’s shipment volumes on the Russia+CIS and export markets by 595 thousand tonnes and 389 thousand tonnes, respectively. At the same time the share of the domestic market decreased slightly, to 82.3%.
  • Export sales of finished products in FY 2014 amounted to 2,063 thousand tonnes, up 23.2% y-o-y.
  • In FY 2014, capacity utilization of long steel production facilities remained 99%, driving shipments of 1,827 thousand tonnes of long products to customers.
  • Due to significant growth in domestic and export sales in FY 2014, shipments of hot-rolled products increased by 16.3% y-o-y to 5,403 thousand tonnes.
  • Sales of HVA products in FY 2014 were supported by higher output of thick plate (mill 5000) and continued growth in galvanised steel output.
  • As a result, sales of HVA products in FY 2014 increased by 3.5% y-o-y and totalled 4,345 thousand tonnes. The share of HVA products in total shipments volumes in FY 2014 slightly decreased to 37.3%.
  • Growth in orders for thick plate for production of large diameter pipes in 2014 resulted in a significant increase in mill 5000 production volumes. Sales of thick plate in FY 2014 increased by 9.6% y-o-y to 924 thousand tonnes. Key customers included pipemakers supplying the Power of Siberia and Southern Corridor projects.
  • Strong demand for construction products and a continued deficit of galvanised steel products on the domestic market supported an increase in sales of galvanised steel by 14.1% (above average sales growth rates) to 1,116 thousand tonnes.
  • The average dollar sales price in FY 2014 decreased by 9.4% y-o-y. Key factors included a traditional lag in the recovery of Russian market sales prices to parity with export prices (due to the decline of the ruble) and continued negative pressure on global steel prices as a result of a global surplus of production facilities. At the same time, ruble prices on the Russian market in 2014 increased by 8.6% y-o-y.

Q4 2014 highlights

  • Crude steel output in Q4 2014 decreased 309 thousand tonnes or 9.1% q-o-q. Out of this 9% approximately 6% related to a scheduled maintenance of BF #8 (December 2015) and oxygen converter (November-December 2015). Seasonal slowdown of the demand resulted in another 3% of the decline.
  • In Q4 2014, shipments of finished products decreased by 7.3% q-o-q.
  • Long products sales in Q4 2014 declined by 13 thousand tonnes, primarily due to a seasonal reduction in shipments to MMK-Metiz.
  • In Q4 2014 sales of cold-rolled products increased by 28 thousand tonnes or 8.3% q-o-q. This was primarily driven by an increase in shipments to customers in the pipemaking and automotive industries by 15.9 thousand tonnes and 8.6 thousand tonnes, respectively.
  • The decline in sales of thick plate from mill 5000 in Q4 2014 by 13.2% q-o-q or 36 thousand tonnes was due to changes in product mix in customer orders, resulting in a larger share of better quality, but less productive product mix.
  • In Q4 2014, sales of HVA products declined at a slower rate than overall volumes (-3.9% versus - 7.3%), due to higher demand for coated products from traders, who were replenishing long-term stocks in anticipation of domestic prices growth.

MMK-Metiz

Output, thousand tonnes

 

FY 2014

FY 2013

%

Q42014

Q32014

%

Finished products output, of which:

508

535

-5.1%

101

142

-28.8%

Products from MMK steel

501

527

-4.8%

101

141

-28.4%

  • Production of finished steel products at MMK-Metiz in FY 2014 reached 508 thousand tonnes, down 5.1% y-o-y. This decrease was primarily due to an overall decline in demand for rail fastenings during the year.
  • Sales volumes in Q4 2014 decreased by 28.8% q-o-q due to slowdown in business activity on the domestic market in winter.

ММКMetalurji

Output, thousand tonnes

 

FY 2014

FY 2013

%

Q42014

Q32014

%

ММКMetalurji finished products, of which:

690

664

 

172

184

-6.4%

Flat hot-rolled products

64

60

 

15

21

-27.1%

HVA products, of which:

627

604

 

157

164

-3.7%

Galvanised steel

381

294

 

89

96

-7.4%

Colour-coated steel

246

311

-21.0%

68

67

 
             

ММКMetalurji finished output from ММК steel

189

279

-32.4%

34

50

-31.5%

  • Overall sales volumes in FY 2014 increased by 3.9% y-o-y to 690 thousand tonnes.
  • The increase in finished products sales in FY 2014 was due to strong demand for quality galvanised steel on the domestic market, as well as MMK Metalurji strengthening positions among local producers of the product.
  • The decline in output from HRC produced by MMK in FY 2014 (‑32.4% y-o-y) was due to a market environment in which purchases of hot-rolled products on the Turkish market were more cost-effective.
  • Sales of finished products in Q4 2014 declined by 6.4% q-o-q due to seasonal factor.

Mining segment

Coal

Belon

Output, thousand tonnes

 

FY 2014

FY 2013

%

Q42014

Q32014

%

Coking coal mining

3,658

3,468

 

1,071

820

 

Coking coal processing

5,095

4,955

 

1,510

1,213

 

Mined

3,608

3,635

-0.7%

1,126

834

 

Purchased

1,487

1,320

 

384

379

 

Coking coal concentrate

2,942

2,858

 

886

672

 
  • Coking concentrate processing volumes in FY 2014 increased by 2.9% y-o-y or by 84 thousand tonnes.
  • In Q4 2014, stable operation of the new coalface commissioned at the Kostromovskaya mine at the end of Q3 2014 resulted in an increase in coal mining during the quarter to 1,071 thousand tonnes (+251 thousand tonnes or +30.6% as compared to Q3 2014).

Outlook

Ruble sales prices for metal products in Russia have increased since December 2014. It is expected that domestic prices will continue to grow in Q1 2015 to catch up with export parity price.

In January 2015, notwithstanding a seasonal slowdown in business activity on the domestic market, capacity utilization rate at MMK remains on a high level. Among other factors, influencing Q1 results, we may highlight launch of BF#8 in March 2015 after scheduled maintenance.

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