OREANDA-NEWS. Metinvest B.V., the parent company of a vertically integrated group of steel and mining companies (jointly referred to as "Metinvest" or "the Group"), today announced its operational results for the third quarter and the nine months ended 30 September 2014.

METALLURGICAL DIVISION

Pig iron production decreased by 44% q-o-q in 3Q 2014 as a result of declines in output of 355 thousand tonnes at Azovstal, 558 thousand tonnes at Ilyich Steel, and 402 thousand tonnes at Yenakiieve Steel. The drops in output in 3Q, in particular since the end of July, was due to raw material supply constraints at Azovstal and Ilyich Steel brought about by damage to railway stations during the conflict in Eastern Ukraine and the shutdown of production at Yenakiieve Steel as of 13 August 2014.

As a result of the fall in output of pig iron, steel production dropped by 42% q-o-q in 3Q 2014. Steel output decreased by 420 thousand tonnes at Azovstal, 392 thousand tonnes at Ilyich Steel, and 428 thousand tonnes at Yenakiieve Steel.

Pig iron output fell by 14% y-o-y in 9M 2014 due to the significant production decline in 3Q 2014. Output decreased by 559 thousand tonnes at Azovstal, 277 thousand tonnes at Ilyich Steel and 365 thousand tonnes at Yenakiieve Steel.

Pig iron output declined by 21% y-o-y because of a slump in steel smelting. Production decreased by 691 thousand tonnes at Azovstal, 894 thousand tonnes at Ilyich Steel, and 399 thousand tonnes at Yenakiieve Steel.

The drop in production of pig iron was the result of raw material supply constraints in 3Q 2014 brought about by a decline in merchant iron output of 205 thousand tonnes q-o-q. The increase in merchant iron production in 1H 2014 (up 498 thousand tonnes y-o-y) offset the lower production in 3Q. Merchant iron output rose by 379 thousand tonnes y-o-y in 9M 2014, driven mainly by an increase of 350 thousand tonnes at Ilyich Steel. Merchant iron production rose due to an increase in pig iron smelting in 1H 2014 and the redirection of pig iron volumes to merchant iron, driven by growth in sales volumes in Europe, the US and MENA.

Merchant semi-finished product output shrank by 287 thousand tonnes q-o-q in 3Q 2014 due to the decline in pig iron and steel production. The shutdown of Yenakiieve Steel from 13 August 2014, due to the conflict,, caused merchant billet production to decrease by 73% (138 thousand tonnes). Merchant slab output dropped by 36% (149 thousand tonnes) at Ilyich Steel and Azovstal.

Merchant semi-finished product output decreased by 258 thousand tonnes y-o-y in 9M 2014. An increase in production of 37 thousand tonnes in 2014 partly offset the losses in 3Q. It was mainly attributable to growth in output of square billets in 2Q as a result of a decline in the output of sections.

The output of finished goods decreased q-o-q in 3Q 2014 as a result of declines in pig iron and steel production brought about by the conflict in Eastern Ukraine:

flat product output fell by 438 thousand tonnes

long product output fell by 239 thousand tonnes

rail product output fell by 7 thousand tonnes

pipe (mainly large-diameter pipe) output fell by 54 thousand tonnes due to the complete shutdown of Khartsyzsk Pipe from 15 August 2014 as a result of the conflict in the region

Production decreased y-o-y in 9M 2014 amid reduced output in 3Q 2014:

flat product output dropped by 765 thousand tonnes in 3Q 2014. This was mainly due to decreases in the output of plate at Azovstal (173 thousand tonnes), coil at Ilyich Steel (402 thousand tonnes), and plate at Ilyich Steel (214 thousand tonnes), and a small increase at assets in Europe (24 thousand tonnes).

long product output declined by 483 thousand tonnes due to falls in production at Azovstal and Yenakiieve Steel in 3Q and a major overhaul of Yenakiieve Steel's 150 Mill in February-March 2014. The decrease in long product output was partly offset by a rise in production at Promet Steel thanks to demand in the Bulgarian market and additional orders from North Africa.

output of rail products dropped by 161 thousand tonnes at Azovstal due to decreased demand.

output of large-diameter pipes declined by 59 thousand tonnes.

Coke production

Coke production fell by 604 thousand tonnes q-o-q in 3Q 2014. The decline in production in 3Q was the result of:

raw material supply constraints at Avdiivka Coke, Azovstal and Donetsk Coke from the end of July, due to damage caused to railway stations during the conflict in Eastern Ukraine

the subsequent complete shutdown of production by hot mothballing Avdiivka Coke on 18 August and Donetsk Coke on 26 August due to the conflict in the region

Production in 9M 2014 was also affected by those factors.

On average, around 70% of total coke output was used internally by the Group in 3Q 2014.

MINING DIVISION

Production of iron ore concentrate and pellets

Total iron ore concentrate output dropped by 751 thousand tonnes q-o-q in 3Q 2014. The major cause of the decrease was a decline in production of 573 thousand tonnes at Northern GOK due to the lower productivity of Ore Beneficiation Plant #1 as the result of an increased volume of complex ores and the technical condition of equipment. In addition, it was planned to decrease volumes by 124 thousand tonnes at Ingulets GOK and 54 thousand tonnes at Central GOK due to one-day maintenance and repair works.

Merchant iron ore product output increased by 592 thousand tonnes due to changes in the structure of merchant product output and consequent shift toward merchant concentrate. Production of concentrate increased by 23% amid a reduction in the volume of pellet output and decrease in internal consumption as a result of damage to railway stations and the shutdown of Yenakiieve Steel due to the conflict in Eastern Ukraine.

Merchant concentrate output increased by 782 thousand tonnes q-o-q in 3Q mainly due to a decrease in internal consumption by the Group's enterprises of 569 thousand tonnes and a reduction in pellet output of 213 thousand tonnes in favour of concentrate.

Merchant pellet production dropped by 10% q-o-q in 3Q 2014 due to Northern GOK decreasing pellet output by 1,047 thousand tonnes as a result of changes in the market environment. This was offset by a decrease of 686 thousand tonnes in intragroup consumption and increase in production of 171 thousand tonnes at Central GOK.

Total production of iron ore concentrate dropped by 1,283 thousand tonnes y-o-y in 9M 2014, mainly driven by:

decreased concentrate production volumes at Northern GOK due to the technical condition of the beneficiation plant and downtime caused by weather conditions in February 2014 (down 976 thousand tonnes)

decreased Fe content in the source ore and stop of concentrate production from sand in 1Q 2014 (abnormally low ambient temperature), which caused a decline in production of 194 thousand tonnes at Central GOK

decreased production of 113 thousand tonnes (down 1%) at Ingulets GOK

Merchant concentrate output amounted to 10,572 thousand tonnes 9M 2014. This was a result of an increase of 216 thousand tonnes in merchant concentrate production volumes and a decrease of 629 thousand tonnes in internal consumption of concentrate, due to damage to railway stations and the shutdown of Yenakiieve Steel amid the conflict in Eastern Ukraine.

Merchant pellet production dropped by 603 thousand tonnes, driven by a fall in pellet output of 1,330 thousand tonnes, partly offset by a decrease of 727 thousand tonnes in internal consumption.

Quarterly clean coal production fell by 174 thousand tonnes q-o-q in 3Q 2014 due to a decrease in output of 273 thousand tonnes at the mines of Krasnodon Coal, while output at United Coal's Affinity, Carter Roag, and Wellmore mines increased by 99 thousand tonnes.

The drop in the production volume at Krasnodon Coal was due to shipment constraints caused by the ongoing conflict in Eastern Ukraine (down 206 thousand tonnes) and the shutdown of the Orekhovska mine (down 23 thousand tonnes) and two production faces at the Molodohvardeiska mine due to a fire (down 44 thousand tonnes).

Clean coal output fell by 1,067 thousand tonnes y-o-y in 9M 2014 as a result of a decrease in coal output of 301 thousand tonnes at United Coal and 766 thousand tonnes at Krasnodon Coal.

At United Coal, coal extraction increased at the Affinity and Wellmore mines by a total of 373 thousand tonnes due to increase in intragroup consumption, while mining at the Pocahontas and Carter Roag facilities decreased by 342 thousand tonnes overall due to downtime in 1Q 2014 and more complex geological conditions.

Krasnodon Coal's production declined due to the following:

the volume extracted declined by 537 thousand tonnes amid limited shipment capacity caused by the ongoing conflict in Eastern Ukraine (down 206 thousand tonnes) and a decrease in the yield of clean coal due to the deterioration of ash content in extracted coal (down 331 thousand tonnes)

stoppage of production at the Orekhovska mine (down 23 thousand tonnes)

decrease in production at the Molodohvardeiska mine (down 64 thousand tonnes) due to the decommissioning of two production faces due to a fire

shutdown of production at the 50 Years of the USSR mine in November 2013 (down 142 thousand tonnes)