OREANDA-NEWS. July 27, 2011. Severstal has today (27 July) released its 1H11 and 2Q11 operating results.

Crude steel production in 1H11 rose 7% YoY to 5.7mn tonnes in Russia and 1% YoY to 1.8mn tonnes in North America. A QoQ comparison also revealed positive dynamics in 2Q as overall steel production increased 6% QoQ. In terms of finished product sales, Severstal demonstrated 2% QoQ growth in downstream products while sales of rolled products dipped 1% QoQ. Within this segment, however, long products saw 20% growth QoQ suggesting some improvement in demand from construction. Coal sales were down by 2% QoQ while sales of iron ore were up by an impressive 20% QoQ.  Another positive is that the company’s gold mining division showed 14% QoQ growth in gold sales, such that overall gold sales in 1H11 increased by a sizable 43% YoY.

Less positively, we note a decline in sales of rolled products in the North American market by 7% QoQ in 2Q11 and by 17% YoY in 1H11 suggesting weakness in demand from the automotive and construction markets.

In terms of prices in 2Q, Severstal’s products were sold at higher prices QoQ with the exception of the steam coal price on which was down 6% QoQ. 

Bottom line

We view Severstal’s 2Q11 results as marginally positive as stronger prices in 2Q and stable sales volumes should ensure improving profitability for the respective quarter.