OREANDA-NEWS. April 22, 2011. MMK Group released operational trading update for 1Q 2011.

MMК Group operational highlights

Production, th. tonnes

Production

Q1`11

Q4`10

%

Q1`11

Q1`10

%

Crude steel

3,092

2,765

12%

3,092

2,732

13%

MMK steel products

2,707

2,508

8%

2,707

2,453

10%

MMK-Metiz steel products

123

120

2%

123

104

18%

MMK-Atakas steel products

28

45

-37%

28

18

56%

       MMK Group HVA products

1,080

1,079

0%

1,080

842

28%

MMK Group HVA products share

39%

42%

-

39%

34%

-

Belon coal concentrate, incl.:

766

842

-9%

766

846

-9%

Iron ore

1,277

1,218

5%

1,277

1,048

22%

Crude steel output in Q1 2011 amounted to 3,092 th. tonnes which is 12% higher q-on-q.

MMK finished steel products output in Q1 2011 amounted to 2,707 th. tonnes and increased by 8% q-on-q.

MMK-Metiz finished steel products output in Q1 2011 amounted to 123 th. tonnes and increased by 2%        q-on-q.

Total MMK Group finished steel products output in Q1 2011 amounted to 2,735 th. tonnes, 11% higher y-on-y.

The level of MMK Group higher value-added products (HVA) output in Q1 2011 stayed at the level of Q4 2010 and increased by 28% y-on-y.

Coking coal concentrate output in Q1 2011 amounted to 766 th. tonnes.

In-house production of iron ore in Q1 2011 amounted to 1,277 th. tonnes which is 5% higher q-on-q.

This year the seasonal factor hasn't influenced MMK’s domestic shipments volumes. This was to a large extent possible due to MMK strengthening positions in segments which are the least exposed to seasonal demand volatility. MMK also continues increasing HVA products volumes which allows the company to strengthen its positions in the domestic market by means of the import replacement strategy.

MMK average domestic steel price grew by 17% q-on-q, while average export price grew by 14% for the same period.

Steel segment
MMK

Production, th. tonnes

Production

Q1`11

Q4`10

%

Q1`11

Q1`10

%

Cast iron

2,471

2,363

5%

2,471

2,236

11%

Crude steel

3,092

2,765

12%

3,092

2,732

13%

Finished products output, incl.:

2,707

2,508

8%

2,707

2,453

10%

Slabs and billets

45

11

-

45

0

-

Long products

335

315

6%

335

210

59%

Flat hot-rolled products

1,396

1,246

12%

1,396

1,508

-7%

High value-added (HVA) products, incl.:

931

936

-1%

931

735

27%

Thick plate (mill 5000)

307

294

4%

307

176

74%

Flat cold-rolled products

272

284

-4%

272

251

8%

Downstream products, incl.:

352

358

-2%

352

307

15%

Tin plate

40

42

-5%

40

59

-32%

Galvanized steel

141

166

-16%

141

120

17%

Colour-coated steel

56

46

21%

56

38

46%

Band

24

26

-9%

24

26

-8%

Formed section

69

52

32%

69

50

38%

Pipes

18

25

-27%

18

14

27%

Shipments by market:

 

 

 

 

 

 

Domestic shipments*

1,898

1,932

-2%

1,898

1,564

21%

Export shipments

809

576

40%

809

889

9%

Average prices, USD

 

Q1`11

Q4`10

%

Q1`11

Q1`10

%

Average price per ton:

 

 

 

 

 

 

Slabs and billets

536

435

23%

536

407

32%

Long products

687

601

14%

687

536

28%

Flat hot-rolled products

661

571

16%

661

479

38%

High value-added (HVA) products, incl.:

945

812

16%

945

740

28%

Thick plate (mill 5000)

1,082

913

18%

1,082

820

32%

Flat cold-rolled products

743

640

16%

743

555

34%

Downstream products, incl.:

982

864

14%

982

845

16%

Tin plate

1,085

975

11%

1,085

934

16%

Galvanized steel

939

831

13%

939

813

16%

Colour-coated steel

1,172

1,097

7%

1,172

1,216

-4%

Band

974

811

20%

974

699

39%

Formed section

895

779

15%

895

681

31%

Pipes

827

708

17%

827

597

39%

 Average price per ton, incl.:

760

664

14%

760

562

35%

Domestic sales*

828

705

17%

828

624

33%

Export sales

601

528

14%

601

453

33%

*- including shipments to CIS

Finished steel products output in Q1 2011 rose by 8% q-on-q and amounted to 2,707 th. tonnes. Domestic shipments stayed almost flat while export shipments increased by 40% q-on-q. This growth was due to traders’ intent to replenish stocks ahead of season opening in export markets. Despite the significant growth of export shipments in Q1 2011, the share of domestic shipments remains impressive and exceeds 70% (77% in Q4 2010).

HVA products output in Q1 2011 remained at the level of Q4 2010 and amounted to 931 th. tonnes.

Export slab shipments growth was driven by favourable market conditions, which allowed increasing slab production volumes and sales.

Significant increase in flat hot-rolled products shipments in Q1 2011 (12% q-on-q) is driven by export shipments growth, where the share of flat hot-rolled products is about 80%.

Long steel shipments in Q1 2011 grew by 6% q-on-q and 59% y-on-y thanks to some recovery of construction.

Commercial thick plate output at Mill 5000 amounted to 307 th. tonnes in Q1 2011 which is 4% higher q-on-q. The fluctuation is driven by products mix changes. Mill 5000 operates at full capacity, providing pipe manufacturers with rolled products for large-diameter pipes output.

Formed sections production in Q1 2011 rose by 32% q-on-q due to significant growth of demand from railroad carriage works, which implement the programme of the railroad cars fleet renewal.

Q1 2011 average realized price per ton of steel products amounted to USD 760, which is 14% higher q-on-q. The average realized price growth was due to growing domestic and export demand for MMK steel products, increasing share of HVA products in the production portfolio and passing on increasing costs to customers.

MMK-Metiz

Production, th. tonnes

Production

Q1`11

Q4‘10

%

Q1`11

Q1`10

%

Finished steel products, incl.:

123

120

2%

123

104

18%

Products from MMK steel

121

118

3%

121

102

19%

MMK-Metiz (MMK Group hardware producer which processes MMK long steel products) is a leading hardware producer in Russia. The company’s product mix includes wires, railroad and construction fastening, calibrated steel products, cold-rolled band, bimetal steel products, welded meshes and nettings, steel ropes, electrodes for welding, etc.

MMK-Metiz finished steel products output amounted to 123 th. tonnes in Q1 2011 which is at the level of Q4 2010. This is due to stable demand of major hardware consuming industries (steelmaking and car-making).

MMK-Atakas


Production, th. tonnes

Production

Q1`11

Q4‘10

%

Q1`11

Q1`10

%

Finished steel products, incl.:

28

45

-37%

28

18

56%

Finished steel products output at MMK-Atakas in Q1 2011 amounted to 28 th. tonnes.

MMK plans to produce about 150 th. tonnes of steel products in Q2 2011 and above 800 th. tonnes in 2011 at its production facilities in Turkey.

Mining segment
COAL
Belon

Production, th. tonnes

Production

Q1`11

Q4‘10

%

Q1`11

Q1`10

%

Coking coal

1,295

1,319

-2%

1,295

1,353

-4%

Mined

1,113

1,181

-6%

1,113

1,201

-7%

Purchased

182

138

32%

182

152

18%

Coking coal concentrate

766

842

-9%

766

846

-9%

Production of coking coal concentrate amounted to 766 th. tonnes in Q1 2011 which is 9% lower q-on-q. The decrease is attributable to planned change of walls which is scheduled for Q1-Q2 2011.   

At present Belon is one of key suppliers of Zh-grade coals in the Russian market with the 10% market share in 2010.
At the end of 2010 MMK completed sale of the steam coal production business at Belon for USD 285 mln within the strategy of MMK to dispose of non-core assets.

IRON ORE

Production, th. tonnes

Production

Q1`11

Q4‘10

%

Q1`11

Q1`10

%

Iron ore (consumed at MMK), incl.:

1,277

1,218

5%

1,277

1,048

22%

        MMK iron ore base at Bakal

346

344

1%

346

337

3%

        MMK iron ore base in Magnitogorsk

395

372

6%

395

375

5%

        Slag processing

536

501

7%

536

336

60%

Captive iron ore consumption increased by 5% q-on-q and 22% y-on-y. The growth is driven by revamping of slag processing facility Amcom-1 and commissioning of Amcom-2 and Amcom-3 in 2010.

Consumption of iron ore coming from Bakal amounted to 346 th. tonnes in Q1 2011, which is flat q-on-q.

Consumption of iron ore produced at MMK base in Magnitogorsk amounted to 395 th. tonnes in Q1 2011 which is 6% higher q-on-q.

Output of iron-containing charge from slag processing increased by 7% in Q1 2011 q-on-q and equaled to 536 th. tonnes. The 60% y-on-y growth is driven by commissioning of new slag processing facilities at MMK.

According to the programme of iron ore production expansion MMK in-house output of iron ore is expected to grow from 4.7 mln tonnes in 2010 to 7.3 mln tonnes by 2013.
Developments at MMK key investment projects
Mill 5000
Mill 5000 is one of the key investment projects of MMK contributing to increase of HVA products share in MMK production portfolio and to growth of the company’s presence in the domestic market in Russia. In 2010 Mill 5000 reached full capacity and currently runs at 100% utilization rate.
Mill 2000
MMK continues construction of its new cold rolling complex (Mill 2000) in order to benefit from the growing market of high-strength steel types. The complex will use state-of-the-art technologies to produce high quality cold-rolled and galvanized steel products for inner and outer car-body parts as well as for use in white-goods production and in construction industry. Mill 2000 will produce 2 mln tons of finished steel products per year, including 700 th. tonnes of galvanized steel.
Phase 1 will be commissioned in July 2011 including cold rolling mill and pickling line, while full-cycle production at the facility will start by mid-2012. Construction and engineering works are advancing in line with the schedule and currently employ 3,000 specialists. At the moment construction of the shop is 100% complete, all the equipment of Phase 1 has been installed and commissioning works are in progress. 10% of phase 2 equipment has already been installed.
MMK-Atakas
In order to strengthen the footprint in the Middle East market MMK completes construction of MMK-Atakas steel-making complex in Turkey.
March 2011 saw commissioning of an electric arc furnace facility in Iskenderun. The hot-rolled mill construction is being completed and expected to be commissioned in July. It is planned that all the production facilities of MMK-Atakas complex in Iskenderun and in Istanbul be commissioned in 2011.
Acquisition of 50 percent minus one share of MMK-Atakas from the Atakas Family is expected to be completed by November 01, 2011 which will allow to fully consolidate company`s financial results.

Outlook
MMK intends to increase finished steel output by 20% in 2011 compared to 2010 (incl. 15% growth at MMK operational site in Russia). Such growth is driven by increasing demand for MMK products from major steel consuming sectors in Russia.
MMK Group Q1 2011 results under IFRS will be published in the beginning of June 2011.