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Evraz Plc EVR Interim Management Statement for Q3 2012

  Evraz Plc (EVR) - Interim Management Statement for Q3 2012

RNS Number : 9712O
Evraz Plc
18 October 2012




                     EVRAZ Q32012 PRODUCTION REPORT AND

                         INTERIM MANAGEMENT STATEMENT

18 October 2012-EVRAZ plc (LSE: EVR) today released its operational  results 
for the third quarter of 2012 and Interim Management Statement.





Q32012 OPERATIONAL HIGHLIGHTS and RECENT DEVELOPMENTS:



· Consolidated crude steel production  decreased by 3% compared to  Q22012 
mainly due to lower production at EVRAZ Vitkovice Steel in the Czech  Republic 
and EVRAZ Highveld in South Africa.

· Despite  reduced crude  steel output  total production  volumes of  steel 
products increased by 2% mostly due to greater use of purchased third  parties 
slabs.

· Coking coal production increased by 20% and steam coal production by  27% 
compared to Q22012  in absence  of any  longwall repositionings  at the  coal 
mines.

· Prices for most steel product  groups reduced due to ongoing  uncertainty 
in global steel markets and decreasing prices of iron ore and coking coal.

· In EVRAZ's  two largest  product groups  (semi-finished and  construction 
products)  average  selling  prices  for  semi-finished  products  in   Russia 
decreased by 13%  quarter-on-quarter whilst prices  for construction  products 
remained flat.

· In Q42012 we  expect to be subject  to usual seasonal trends,  including 
slowdown in the construction activity in Russia.

· EVRAZ continues to expect its net  leverage ratio to increase at the  end 
of 2012 versus 30June 2012 (but within the limits set by our covenants).

· On 4 October  2012 EVRAZ announced  that it had agreed  the terms of  the 
acquisition of an indirect controlling interest in the Raspadskaya coking coal
company  through  the  purchase  of  the  remaining  50%  interest  in  Corber 
Enterprises Limited ("Corber"), which it did not previously hold. Corber holds
82% of the share capital of Raspadskaya.As consideration for the acquisition,
EVRAZ will  (i)  issue  132.7million  new shares  representing  9.9%  of  the 
existing issued share capital of  EVRAZ; (ii) issue 33.9million new  warrants 
to subscribe for 33.9million  new shares representing  2.53% of the  existing 
issued share  capital  of  EVRAZ,  and  (iii)  pay  an  amount,  in  cash,  of 
US$1,949.80 for each of 103,600 ordinary Corber shares, payable in four  equal 
instalments in Q1, Q2, Q3 2013 and Q1 2014. Completion of the deal is expected
in Q42012.

· In October EVRAZ  announced the purchase of  two scrap yards in  Colorado 
that will become part of EVRAZ Recycling, a division of EVRAZ North America.

· In October EVRAZ temporarily shut the steel production at EVRAZ Vitkovice
Steel in  the  Czech Republic  due  to low  demand  and to  optimise  the  raw 
materials inventory.





STEEL



Product, '000 tonnes          Q32012 Q3 2011    Q32012/     Q22012 Q32012/
                                              Q32011, change         Q22012,
                                                                    change
Coke (saleable)                   367     324           13.4%     429  (14.5)%
Pig iron                        3,006   2,865            4.9%   2,889     4.1%
Pig iron (saleable)                67      29          128.5%      27   149.0%
Crude steel                     3,909   4,024          (2.9)%   4,035   (3.1)%
Steel products, net of
re-rolled volumes*              3,658   3,697          (1.1)%   3,594     1.8%
Semi-finished products **         979     793           23.5%     803    21.9%
Finished products               2,679   2,904          (7.8)%   2,791   (4.0)%
Construction products           1,345   1,351          (0.4)%   1,249     7.7%
Railway products                  392     517         (24.2)%     500  (21.6)%
Flat-rolled products              569     609          (6.5)%     648  (12.1)%
Tubular products                  219     238          (8.2)%     211     3.5%
Other steel products              153     188         (18.7)%     183  (16.2)%

Note. Numbers in this table and the tables below may not add to totals due  to 
rounding. Percent changes based on numbers prior to rounding.



* Total volume  of steel products  in the tables  excludes those re-rolled  at 
other EVRAZ's mills. These  volumes are eliminated  as intercompany sales  for 
purposes of EVRAZ's consolidated operating results.

** Consolidated production volumes  of semi-finished products are  preliminary 
as intra-group re-rolling volumes are yet to be finalised





In Q32012, EVRAZ's overall production of crude steel decreased by 3%  against 
both Q22012 and Q32011, 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  Q32012 were sold to  market and therefore included  in 
the total steel volumes,  while in Q22012 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  Q32011 
and by  22% compared  to Q22012.  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 Q32011 and 78% in Q22012.



RUSSIA



Product, '000 tonnes   Q32012 Q3 2011    Q32012/     Q22012    Q32012/
                                       Q32011, change         Q22012, change
                                                        
Coke (saleable)            135     128            5.4%     139          (3.1)%
Pig iron                 2,695   2,540            6.1%   2,487            8.4%
Pig iron (saleable)         45      18          147.2%      22          101.9%
Crude steel              2,931   2,909            0.7%   2,819            4.0%
Steel products, net of
re-rolled volumes        2,721   2,639            3.1%   2,574            5.7%
Semi-finished products   1,122     915           22.6%     949           18.2%
Finished products        1,599   1,724          (7.3)%   1,625          (1.6)%
Construction products    1,127   1,089            3.5%   1,037            8.7%
Railway products           277     396         (30.1)%     366         (24.4)%
Flat-rolled products        74     102         (27.2)%      84         (11.8)%
Other steel products       120     137         (11.9)%     138         (12.5)%

In Q32012 pig iron output  increased by 6% compared  to the same period  last 
year and by 8% compared to Q22012 as overall repair downtime at EVRAZ's blast
furnaces was  shorter  in Q32012  than  in comparable  periods.  Crude  steel 
production volumes remained flat year-on-year  and increased by 4% in  Q32012 
compared to the previous quarter.



Production of construction products increased by 4% compared to Q32011 and by
9% vs. Q22012 reflecting growing demand for long steel products in Russia.



As the EVRAZ ZSMK's rail mill has been closed for modernisation since 20April
2012, production  of railway  products,  mainly rails,  decreased by  30%  vs. 
Q32011 and by 24% vs. Q22012. The modernised rail mill is expected to resume
production, as scheduled, in Q4 2012.



It is  expected that  in Q42012  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 Q22013
due to revisions in the project design documentation.





UKRAINE



Product, '000 tonnes  Q32012 Q3 2011     Q32012/     Q22012    Q32012/
                                      Q32011, change          Q22012, change
                                                        
Coke (saleable)           232     196            18.6%     290         (20.0)%
Pig iron                  227     209             8.3%     239          (4.9)%
Pig iron (saleable)        22      11            98.5%       5          366.9%
Crude steel               208     215           (3.5)%     251         (17.1)%
Steel products            162     186          (13.0)%     215         (24.5)%
Semi-finished
products                   49      47             3.8%      98         (50.2)%
Finished products         113     139          (18.6)%     117          (2.9)%
Construction products      88     118          (25.1)%      92          (3.8)%
Other steel products       25      22            16.5%      25            0.3%



In Q32012, crude steel production decreased by almost 4% compared to  Q32011 
and by  17%  compared to  Q22012  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 Q22012 and reduction of production volumes of
steel products by 13% and 25% against Q32011 and Q22012 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 Q42012 compared to Q3 2012.





NORTH AMERICA



Product, '000 tonnes         Q32012* Q3 2011    Q32012/     Q22012 Q32012/
                                              Q32011, change         Q22012,
                                                                   change
Crude steel                       611     599            2.1%     616   (0.8)%
Steel products, net of
re-rolled volumes                 664     675          (1.6)%     678   (2.1)%
Construction products              78      81          (3.4)%      79   (1.9)%
Railway products                  115     121          (4.7)%     134  (13.9)%
Flat-rolled products              252     236            7.1%     254   (0.5)%
Tubular products                  219     238          (8.2)%     211     3.5%



* Q3 2012 production volumes are preliminary



In Q32012, 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 Q22012 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 
Q32011  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 
2011mainly due to a switch from 36inch 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 Q22012 volumes  that were  impacted by  a 
Canadian National railroad strike and a labour dispute in Camrose in May 2012.



In Q42012 the  rail mill  is expected  to be  fully utilised  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



Product, '000 tonnes Q32012 Q3 2011 Q32012/ Q32011, Q22012    Q32012/
                                          change               Q22012, change
                                                        
Crude steel               81     181           (55.1)%     197         (58.6)%
Steel products           237     270           (12.4)%     267         (11.3)%
Construction
products                  26      32           (19.5)%       0             n/a
Flat-rolled products     207     216            (4.1)%     243         (14.7)%
Other steel products       4      22           (83.8)%      23         (84.7)%



Production of crude steel at EVRAZ Vitkovice Steel (EVS) in Q32012  decreased 
by 55% compared to Q32011 and by  59% compared to Q22012 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. Q32011 and by 15%  vs. 
Q22012 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.



Q42012 crude steel production plans will be driven by market demand.





SOUTH AFRICA



Product, '000 tonnes  Q32012 Q3 2011     Q32012/     Q22012    Q32012/
                                      Q32011, change          Q22012, change
                                                       
Pig iron                   84     116          (27.1)%     163         (48.3)%
Crude steel                78     120          (35.3)%     153         (49.3)%
Steel products             65     111          (40.9)%     124         (47.3)%
Semi-finished
products                    0      16              n/a       3             n/a
Finished products          65      95          (31.1)%     121         (46.1)%
Construction products      27      32          (17.4)%      41         (34.8)%
Flat-rolled products       35      55          (36.5)%      66         (47.5)%
Other steel products        4       8          (49.9)%      14         (72.4)%



In Q32012 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 
Q32012.





MINING



IRON ORE



Product, '000 tonnes   Q32012 Q3 2011    Q32012/     Q22012    Q32012/
                                       Q32011, change         Q22012, change
                                                        
Iron ore products        5,158   5,436          (5.1)%   5,258          (1.9)%
Lumpy ore (Ukraine) ^      559     724         (22.8)%     735         (23.9)%
Concentrate,  saleable
(Russia)                 1,569   1,734          (9.5)%   1,427            9.9%
Sinter (Russia)          1,128   1,009           11.8%   1,130          (0.1)%
Pellets (Russia)         1,397   1,465          (4.7)%   1,528          (8.6)%
Fines ore (South
Africa)                    153     186         (18.0)%     132           15.8%
Lumpy ore (South
Africa)                    352     317           11.1%     307           14.7%



Overall production of saleable iron ore  products by the Company decreased  by 
5% compared to Q32011 and was flat compared to Q22012.



Sukha Balka  produced 23%  and 24%  less  lumpy ore  compared to  Q32011  and 
Q22012 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  mid-November. Production of  lumpy ore  is 
expected to remain almost flat in Q42012 compared to Q32012.



Production of  saleable concentrate  in  Russia increased  by 10%  in  Q32012 
compared to the previous  quarter as a result  of higher iron ore  production. 
Pellets production decreased by 5% compared  to Q32011 and by 9% compared  to 
Q22012 due to kiln repair at EVRAZ KGOK iron ore processing plant.



COAL



Product, '000 tonnes   Q32012 Q3 2011    Q32012/     Q22012    Q32012/
                                       Q32011, change         Q22012, change
                                                        
Raw coking coal
(mined)                  2,313   1,237           86.9%   1,935           19.5%
Raw steam coal (mined)     892     889            0.3%     700           27.3%
Coking coal
concentrate
(production)             1,627   1,391           17.0%   1,575            3.3%
Steam coal concentrate
(production)               132     338         (61.0)%     190         (30.7)%
Equity investments -
Raspadskaya^*
Coking coal (mined)      1,378   1,212           13.7%   1,843         (25.3)%



*Reported numbers are for 100% production. As at 30September 2012 EVRAZ held
a 41% effective interest in the Raspadskaya coal company.



Coking coal



In Q32012, raw  coking coal  production at Yuzhkuzbassugol  increased by  87% 
compared to Q32011  and by  20% compared  to Q22012  due to  the absence  of 
longwall repositionings at the mines in Q32012. The growth of raw coking coal
production led to bigger production volumes of coking coal concentrate.



Q42012 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. Q22012  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. 
Q32011 and by 31% vs. Q22012 due to larger raw coal sales. 



Q42012 steam coal production is expected to be flat, quarter-on-quarter.







VANADIUM



Product, tonnes of V*  Q32012 Q3 2011    Q32012/     Q22012    Q32012/
                                       Q32011, change         Q22012, change
                                                       
Vanadium in slag
(gross production)       4,528   4,804          (5.7)%   5,343         (15.2)%
Russia                   3,618   3,201           13.0%   3,683          (1.8)%
South Africa               911   1,603         (43.2)%   1,660         (45.1)%
Vanadium in final
products (saleable)
Ferrovanadium            3,297   4,317         (23.6)%   3,769         (12.5)%
Produced at own
facilities               1,671   1,535            8.9%   1,899         (12.0)%
Processed at 3^rd
parties' facilities      1,626   2,782         (41.6)%   1,871         (13.1)%
Nitrovan®                  782     819          (4.6)%     763            2.4%
Oxides, vanadium
aluminium and
chemicals                  443     302           46.9%     329           34.5%



*Calculated in pure vanadium equivalent.



In Q32012,  EVRAZ's  total production  of  primary vanadium  (vanadium  slag) 
decreased by 6% compared to Q32011 and by 15% compared to Q22012, negatively
affected by the four-week union industrial action at EVRAZ Highveld Steel  and 
Vanadium.



Production of ferrovanadium decreased  by 24% compared to  Q32011 and by  13% 
compared to Q22012 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.

AVERAGE SELLING PRICES



USD/tonne (ex works) unless otherwise stated Q32012 Q22012 Q3 2011
Steel products
Russia
Coke                                             189     201     222
Pig iron                                         340     465     494
Steel products
Semi-finished products                           443     510     537
Construction products                            680     683     761
Railway products                                 908     909     914
Flat-rolled products                             577     628     707
Other steel products                             714     728     833
Ukraine
Coke                                             201     222     311
Pig iron                                         349     465     498
Steel products
Semi-finished products                           505     547     623
Construction products                            634     660     706
Other steel products                             883     924   1,103
Europe
Steel products
Construction products                            877     n/a     906
Flat-rolled products                             715     775     942
North America
Steel products
Construction products                            804     890     944
Railway products                                 933   1,031   1,040
Flat-rolled products                             986   1,086   1,188
Tubular products                               1,486   1,566   1,540
South Africa
Steel products
Semi-finished products                           742     465     642
Construction products                            712     673     838
Flat-rolled products                             740     738     926
Other steel products                             615     673     961
Mining products
Iron ore
Lumpy ore (Ukraine)                               61      67      84
Concentrate, saleable (Russia)                    82      94     115
Sinter (Russia)                                   89      98     121
Pellets (Russia)                                  95      94     133
Fines ore (South Africa)                           9      16      22
Coal
Raw coking coal                                   65      79     104
Raw steam coal                                    27      30      37
Coking coal concentrate                          129     135     224
Steam coal concentrate                            59      55      85
Vanadium products (USD/t of V)
Vanadium in final products
Ferrovanadium                                 24,527  25,405  27,811
Nitrovan®                                     28,615  29,815  30,333
Oxides, vanadium aluminium and chemicals      30,944  34,524  34,635



Notes:

Semi-finished products include slabs, billets, pipe blanks and other
semi-finished products.

Construction products include beams, channels, angles, rebars, wire rods,
wire, and other construction products.

Railway products include rails, wheels, tyres and other railway products.

Flat-rolled products include commodity plate, specialty plate and other flat
products.

Tubular products include large diameter line pipes, ERW pipes and casings,
seamless pipes and other tubular products.

Other steel products include rounds, grinding balls, mine uprights, strips
etc. For Ukraine they also include railway products, for Europe - slabs and
cut shapes; for South Africa -rails.



                                     ###



                                      

For further information:



Investor Relations:
London: +442078328990 Moscow: +74952321370

ir@evraz.com



Media Relations:
Oleg Kuzmin
VP, Corporate Communications
London: +442078328998 Moscow: +74959376871
media@evraz.com





EVRAZ is  a vertically  integrated steel,  mining and  vanadium business  with 
operations in the  Russian Federation, Ukraine,  USA, Canada, Czech  Republic, 
Italy and South Africa. EVRAZ is among the top 20 steel producers in the world
based on crude steel production of 16.8 million tonnes in 2011. In 2011  EVRAZ 
sold 15.5  million tonnes  of steel  products. A  significant portion  of  the 
company's internal consumption of iron ore  and coking coal is covered by  its 
mining operations. The company's consolidated  revenues for the year ended  31 
December 2011  were  US$16,400 million  and  consolidated EBITDA  amounted  to 
US$2,898 million. The  H12012 consolidated revenue  was US$7,619million  and 
the H12012 EBITDA was US$1,175million.

                     This information is provided by RNS
           The company news service from the London Stock Exchange

END


IMSEASEPFFSAFEF -0- Oct/18/2012 06:00 GMT