Metinvest announces 4Q 2014 and 12M 2014 operational results

OREANDA-NEWS. February 06, 2015. 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 fourth quarter and the twelve months ended 31 December 2014.

OPERATIONAL HIGHLIGHTS

(‘000 tonnes)		4Q 2014	3Q 2014	? ‘000 t	? %		2014	2013	? ‘000 t	? %
Crude steel		1,750	1,730	20	1%		9,205	12,391	-3,186	-26%
Iron ore concentrate (total)		8,436	8,440	-4	0%		34,888	36,926	-2,038	-6%
Coal concentrate (total)		782	954	-172	-18%		4,098	5,513	-1,415	-26%

METALLURGICAL DIVISION

Hot metal production increased by 9% q-o-q in 4Q 2014, as output rose by 141 thousand tonnes at Azovstal and 26 thousand tonnes at Yenakiieve Steel and fell by 14 thousand tonnes at Ilyich Steel. The increase was due to the resumption of production at Yenakiieve Steel on 21 October, following the complete shutdown on 13 August, and the restoration of maximum supplies of raw materials to Azovstal and Ilyich Steel.

Driven by the increase in hot metal output, crude steel production rose by 1% q-o-q in 4Q 2014. Output volumes climbed by 159 thousand tonnes at Azovstal and 22 thousand tonnes at Yenakiieve Steel, while decreasing by 161 thousand tonnes at Ilyich Steel, mainly due to hot metal being reallocated to produce merchant pig iron.

Hot metal production

(‘000 tonnes)		4Q 2014	3Q 2014	? ‘000 t	? %		2014	2013	? ‘000 t	? %
Hot metal		1,803	1,650	153	9%		9,213	11,500	-2,287	-20%
Azovstal		747	606	141	23%		3,151	3,849	-698	-18%
Ilyich Steel		785	799	-14	-2%		4,220	5,062	-842	-17%
Yenakiieve Steel		271	245	26	11%		1,842	2,589	-747	-29%

Crude steel production 

(‘000 tonnes)		4Q 2014	3Q 2014	? ‘000 t	? %		2014	2013	? ‘000 t	? %
Crude steel		1,750	1,730	20	1%		9,205	12,391	-3,186	-26%
Azovstal		859	700	159	23%		3,599	4,468	-869	-19%
Ilyich Steel		587	748	-161	-22%		3,544	5,035	-1,491	-30%
Yenakiieve Steel		304	282	22	8%		2,062	2,888	-826	-29%

Hot metal output decreased by 20% y-o-y in 2014 due to a significant production decline in 2H 2014. This was the result of the complete shutdown of Yenakiieve Steel from August to October 2014, and restrictions in raw material supplies to Ilyich Steel and Azovstal in 2H 2014, following damage to railway infrastructure during the conflict in Eastern Ukraine and the destruction of a railway bridge in Mariupol in December 2014. Output fell by 842 thousand tonnes at Ilyich Steel, 698 thousand tonnes at Azovstal and 747 thousand tonnes at Yenakiieve Steel.

The decline in hot metal output caused a significant decrease in crude steel production. Total crude steel output dropped by 26% y-o-y in 2014, as production fell by 1,491 thousand tonnes at Ilyich Steel, 869 thousand tonnes at Azovstal, and 826 thousand tonnes at Yenakiieve Steel.

Metal product output^[1]

(‘000 tonnes)		4Q 2014	3Q 2014	? ‘000 t	? %		2014	2013	? ‘000 t	? %
Pig iron		263	149	114	77%		1,132	814	318	39%
Semi-finished products		521	317	204	64%		2,068	2,304	-236	-10%
Slab		395	266	129	48%		1,379	1,516	-137	-9%
Square billets		126	51	75	147%		689	788	-99	-13%
Finished products		1,269	1,387	-118	-9%		6,767	9,021	-2,254	-25%
Flat products		884	984	-100	-10%		4,625	5,840	-1,215	-21%
Long products		289	339	-50	-15%		1,765	2,592	-827	-32%
Rail products		6	6	0	0%		81	274	-193	-70%
Tubular products		90	58	32	55%		296	315	-19	-22%
Large-diameter pipes		77	41	36	88%		238	255	-17	-27%
Other pipes		13	17	-4	-24%		58	60	-2	2%
TOTAL		2,053	1,853	200	11%		9,967	12,139	-2,172	-15%

A rise in hot metal output in 4Q 2014 caused an increase in merchant pig iron production of 114 thousand tonnes q-o-q.

Output of merchant pig iron increased by 318 thousand tonnes y-o-y in 2014, mainly due to a rise of 278 thousand tonnes at Ilyich Steel. Driving the overall increase was the rise in hot metal output in 1H 2014 and the reallocation of hot metal to produce merchant pig iron, amid greater sales in the US, Europe and the Middle East and North Africa (MENA).

Output of semi-finished merchant products grew by 204 thousand tonnes q-o-q in 4Q 2014 due to a recovery in hot metal and steel smelting. The restoration of production at Yenakiieve Steel in 4Q 2014 caused an increase in square billet output of 75 thousand tonnes (up 147%). Overall slab output grew by 129 thousand tonnes (up 48%), driven by greater production at Ilyich Steel and Azovstal.

In 2014, output of semi-finished products decreased by 236 thousand tonnes y-o-y. The volume of slab fell by 137 thousand tonnes and square billets by 99 thousand tonnes, as output fell in 2H 2014 due to the conflict in Eastern Ukraine.

Output of finished products decreased by 118 thousand tonnes q-o-q in 4Q 2014, due to the reallocation of steel to produce semi-finished products.

• flat product volumes fell by 100 thousand tonnes
• long product volumes dropped by 50 thousand tonnes

At the same time, the output of tubular products increased by 32 thousand tonnes q-o-q in 4Q 2014. Driving this was a rise in output of large-diameter pipes (36 thousand tonnes), as operations at Khartsyzk Pipe resumed following a complete shutdown on 15 August 2014 amid the conflict.

Output of finished products fell by 2,254 thousand tonnes y-o-y in 2014 due to a slump in 2H 2014 with a start of recovery only in the end 2014

• flat product output shrank by 1,215 thousand tonnes, as production of plate decreased at Azovstal (194 thousand tonnes) and Ilyich Steel (501 thousand tonnes) and that of coil fell at Ilyich Steel (575 thousand tonnes), while production at the European assets increased by 55 thousand tonnes
• long product output declined by 827 thousand tonnes due to decreases in production at Azovstal and Yenakiieve Steel in 2H 2014 and a major overhaul of the 150 mill at Yenakiieve Steel in February-March 2014. Long product output at Promet Steel fell by 37 thousand tonnes, amid a shortage of square billet due to the shutdown of Yenakiieve Steel from August to October 2014
• rail product output at Azovstal dropped by 193 thousand tonnes due to decreased demand
• tubular product output declined by 19 thousand tonnes due to the complete shutdown of Khartsyzk Pipe from the middle of 3Q 2014 until the year-end.

Coke production

In 4Q 2014, coke production changed insignificantly q-o-q. Over the full year, it fell by 1,315 thousand tonnes y-o-y, as output fell in 2H 2014 due to:

• raw material supply constraints at Avdiivka Coke, Azovstal and Donetsk Coke since late July due to damage to railway infrastructure during the conflict and the destruction of a railway bridge in Mariupol in December 2014
• the complete shutdown of operations and hot mothballing from 18 August to 11 September at Avdiivka Coke and from 26 August until 9 October at Donetsk Coke due to the conflict.

On average, Metinvest used around 70% of its coke output internally in 4Q 2014. 

(‘000 tonnes)		4Q 2014	3Q 2014	? ‘000 t	? %		2014	2013	? ‘000 t	? %
Coke production (total)		901	906	-5	-1%		4,795	6,110	-1,315	-22%
Coke[2]		260	274	-14	-5%		1,104	1,148	-44	-4%

MINING DIVISION

Iron ore concentrate and pellet output

Overall production of iron ore concentrate remained flat q-o-q in 4Q 2014. Measures to stabilise operations at Northern GOK helped to compensate production losses at Central GOK and Ingulets GOK due to restricted electricity supplies.

In 4Q 2014, output of iron ore products decreased by 103 thousand tonnes q-o-q, following changes in the product mix in favour of pellets and an increase in internal consumption after the restoration of operations at Yenakiieve Steel. 

(‘000 tonnes)		4Q 2014	3Q 2014	? ‘000 t	? %		2014	2013	? ‘000 t	? %
Iron ore concentrate (total)		8,436	8,440	-4	0%		34,888	36,926	-2,038	-6%
Iron ore products[3]		5,778	5,881	-103	-2%		22,271	21,521	750	3%
Iron ore concentrate		3,738	4,135	-397	-10%		14,310	12,939	1,371	11%
Pellets		2,040	1,746	294	17%		7,961	8,582	-621	-7%

In 4Q 2014, output of merchant iron ore concentrate declined by 397 thousand tonnes q-o-q. This was mainly due to an increase in internal concentrate consumption of 223 thousand tonnes and a decrease of 174 thousand tonnes in concentrate output in favour of pellets.

Merchant pellet output rose by 17% q-o-q in 4Q 2014, as internal consumption decreased by 126 thousand tonnes and production increased by 168 thousand tonnes amid changes in the market situation.

In 2014, overall production of iron ore concentrate dropped by 2,038 thousand tonnes y-o-y, driven by the following factors:

• a fall in concentrate production of 1,580 thousand tonnes at Northern GOK due to the technical condition of facilities at the beneficiation plant and downtime caused by weather conditions in February 2014
• a lower Fe content in the source ore and suspension of concentrate production from sand in 1Q 2014 (due to an abnormally low ambient temperature), which caused production to decline by 171 thousand tonnes at Central GOK
• a drop in production of 288 thousand tonnes at Ingulets GOK due to restricted electricity supplies in December 2014

In 2014, output of merchant iron ore concentrate amounted to 14,310 thousand tonnes, as production increased by 464 thousand tonnes and internal consumption fell by 907 thousand tonnes due to damage to railway infrastructure and the shutdown of Yenakiieve Steel.

in 2014, merchant pellet production decreased by 621 thousand tonnes that was primarily driven by:

• a decline in overall output of concentrate described above
• a decline in pellet production at Northern GOK due to the weather conditions in February 2014
• a decline in pellet production in favour of concentrate due to changes in the market situation.

Coal concentrate production 

(‘000 tonnes)		4Q 2014	3Q 2014	? ‘000 t	? %		2014	2013	? ‘000 t	? %
Coal concentrate (total)		782	954	-172	-18%		4,098	5,513	-1,415	-26%
Coal concentrate[4]		269	271	-2	-1%		1,196	1,893	-697	-37%

Coal concentrate production fell by 172 thousand tonnes in 4Q 2014, as output declined by 125 thousand tonnes at Krasnodon Coal and 47 thousand tonnes at the Affinity, Carter Roag, and Wellmore mines of United Coal due to vacations in November.

The decrease in output at Krasnodon Coal was the result of restricted product shipments due to the conflict in Eastern Ukraine, as well as an accumulation of raw coal in the enterprise’s warehouses and coal concentrate in the processing plants' warehouses. As a result, the Molodogvardeiska and Samsonovska mines were switched to maintenance mode.

Coal concentrate output fell by 1,415 thousand tonnes y-o-y in 2014, as production fell by 149 thousand tonnes at United Coal and 1,266 thousand tonnes at Krasnodon Coal. Coal concentrate output decreased at the Affinity, Pocahontas and Carter Roag mines due to downtime in early 2014 and difficult geological conditions. Krasnodon Coal's output declined due to:

• a fall in output of 878 thousand tonnes amid restricted shipments due to the conflict in Eastern Ukraine
• a reduction in coal concentrate output due to increased ash content in mined coal (66 thousand tonnes)
• a decrease in production of 164 thousand tonnes at the Molodogvardeiska mine, as operations were stopped at two faces due to a fire
• a decrease in output of 158 thousand tonnes, as production ended at the 50 Years of USSR mine