Metinvest announces 4Q and 12M 2015 operational results

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 announces its operational results for the fourth quarter and the 12 months ended 31 December 2015.

OPERATIONAL HIGHLIGHTS

('000 tonnes)	4Q 2015	3Q 2015	? ‘000 t	? %	2015	2014	? ‘000 t	? %
Crude steel	1 712	2 082	-370	-18%	7 669	9 205	-1 536	-17%
Iron ore concentrate (total)	8 213	8 189	24	0%	32 208	34 888	-2 680	-8%
Coal concentrate (total)	803	844	-41	-5%	3 285	4 098	-813	-20%

METALLURGICAL DIVISION

Hot metal production

('000 tonnes)	4Q 2015	3Q 2015	? ‘000 t	? %	2015	2014	? ‘000 t	? %
Hot metal	1 963	2 247	-284	-13%	8 050	9 213	-1 163	-13%
Azovstal	632	746	-114	-15%	2 825	3 151	-326	-10%
Ilyich Steel	895	999	-104	-10%	3 577	4 220	-643	-15%
Yenakiieve Steel	436	502	-66	-13%	1 648	1 842	-194	-11%

 

Crude steel production

('000 tonnes)	4Q 2015	3Q 2015	? ‘000 t	? %	2015	2014	? ‘000 t	? %
Crude steel	1 712	2 082	-370	-18%	7 669	9 205	-1 536	-17%
Azovstal	675	843	-168	-20%	3 206	3 599	-393	-11%
Ilyich Steel	586	697	-111	-16%	2 645	3 544	-899	-25%
Yenakiieve Steel	451	542	-91	-17%	1 818	2 062	-244	-12%

In 4Q 2015, overall hot metal output decreased by 13% q-o-q to 1,963 thousand tonnes, as production declined at all of the Group's steel plants. Amid a lack of orders for steel products, Azovstal halted blast furnace no. 3 on 1 November 2015 and Ilyich Steel shut down blast furnace no. 4 on 5 November 2015. These moves caused a q-o-q decline in production of 104 thousand tonnes at Ilyich Steel and 114 thousand tonnes at Azovstal. Output at Yenakiieve Steel fell by 66 thousand tonnes q-o-q, due to limited supplies of raw materials to Eastern Ukraine and interruptions in natural gas supplies.

Driven by the decrease in hot metal output, the Group’s crude steel production dropped by 18% q-o-q to 1,712 thousand tonnes in 4Q 2015. Compared with the previous quarter, steel output fell by 168 thousand tonnes at Azovstal, 111 thousand tonnes at Ilyich Steel and 91 thousand tonnes at Yenakiieve Steel.

In 2015, hot metal output dropped by 13% y-o-y to 8,050 thousand tonnes, as operations were significantly affected by the conflict in Eastern Ukraine, which escalated in the second half of 2014, and demand weakened in key sales markets. In particular, due to the conflict:

• Yenakiieve Steel was completely shut down from 7 February to 16 March 2015
• raw material supplies to Azovstal and Ilyich Steel were constrained
• natural gas supplies to the steel plants in Mariupol were interrupted on 12-14 June 2015, after artillery shelling damaged a key gas pipeline

 In terms of the individual steelmaking enterprises, in 2015, hot metal output decreased by 326 thousand tonnes at Azovstal, 643 thousand tonnes at Ilyich Steel and 194 thousand tonnes at Yenakiieve Steel.

In 2015, the decline in hot metal output caused a comparable fall in crude steel production, which dropped by 17% y-o-y to 7,669 thousand tonnes. Production fell by 393 thousand tonnes at Azovstal, 899 thousand tonnes at Ilyich Steel and 244 thousand tonnes at Yenakiieve Steel.

Metal product output [1]

('000 tonnes)	4Q 2015	3Q 2015	? ‘000 t	? %	2015	2014	? ‘000 t	? %
Semi-finished products	755	666	89	13%	2 581	2 820	-239	-8%
Pig iron	372	367	5	1%	1 181	1 132	49	4%
Slabs	244	197	47	24%	802	999	-197	-20%
Square billets	139	102	37	36%	598	689	-91	-13%
Finished products	1 239	1 569	-330	-21%	5 644	6 767	-1 123	-17%
Flat products	861	1 002	-141	-14%	4 010	4 625	-615	-13%
Long products	346	535	-189	-35%	1 475	1 765	-290	-16%
Railway products	12	12	0	0%	31	81	-50	-62%
Tubular products	20	20	0	0%	128	296	-168	-57%
Large-diameter pipes	1	0	1	0%	67	238	-171	-72%
Other pipes	19	20	-1	-5%	61	58	3	5%
TOTAL	1 994	2 235	-241	-11%	8 225	9 587	-1 362	-14%

In 4Q 2015, output of merchant semi-finished products grew by 13% q-o-q to 755 thousand tonnes, as production of slabs increased by 47 thousand tonnes and square billets by 37 thousand tonnes. Output of merchant slabs rose by 24% q-o-q, as internal consumption decreased due to a decline in production at Azovstal’s heavy plate mill in 4Q 2015 amid a lack of orders for flat products. At the same time, production of square billets rose by 36% q-o-q, due to a drop in output of long products at Yenakiieve Steel, caused by limited natural gas supplies and a decrease in shipments (26 thousand tonnes) for the production of sections at Promet Steel in Bulgaria.

In 2015, output of merchant semi-finished products decreased by 8% y-o-y to 2,581 thousand tonnes. Production of slabs fell by 197 thousand tonnes and square billets by 91 thousand tonnes, while that of merchant pig iron partly compensated, rising by 49 thousand tonnes. The lower output of slabs and square billets stemmed from the general decline in production of hot metal and its redistribution to make higher-margin pig iron.

In 4Q 2015, output of finished products dropped by 330 thousand tonnes q-o-q to 1,239 thousand tonnes.

In 4Q 2015, output of flat products decreased by 141 thousand tonnes q-o-q, reflecting a slump in demand in key markets. The Group’s Ukrainian plants reduced their output by 181 thousand tonnes, which was partly offset by an increase of 40 thousand tonnes at the European re-rolling plants. The latter followed lower production in 3Q 2015 due to annual maintenance conducted in August.

In 4Q 2015, output of long products dropped by 189 thousand tonnes q-o-q, as:

• the Makiivka branch of Yenakiieve Steel reduced output by 108 thousand tonnes due to limited natural gas supplies
• Azovstal decreased production by 43 thousand tonnes in response to weak demand in key markets
• Promet Steel lowered output by 39 thousand tonnes amid interruptions in square billet supplies from Yenakiieve Steel

In 4Q 2015, output of tubular products remained unchanged q-o-q at 20 thousand tonnes. Given a lack of orders, Khartsyzk Pipe has been idle since June 2015.

In 2015, output of finished products decreased by 17% y-o-y to 5,644 thousand tonnes, due to the conflict in Eastern Ukraine, which escalated in the second half of 2014, and weak demand in key markets.

• Flat product output fell by 615 thousand tonnes. Production of plates and coils declined by 493 thousand tonnes and 100 thousand tonnes respectively at Ilyich Steel and by 25 thousand tonnes at the European assets, while an increase of 3 thousand tonnes at Azovstal slightly compensated this.
• Long product output decreased by 290 thousand tonnes. This was due to a decline in production at Azovstal (94 thousand tonnes) caused by a lack of orders; the suspension of operations at Yenakiieve Steel and its Makiivka branch in February-March (182 thousand tonnes); and a decrease in production at Promet Steel (15 thousand tonnes), caused by interruptions in square billet supplies for re-rolling due to shutdowns at Yenakiieve Steel during 2015.
• Rail product output dropped by 50 thousand tonnes at Azovstal due to decreased demand.
• Tubular product output decreased by 168 thousand tonnes, driven mainly by a drop in production of large-diameter pipes of 171 thousand tonnes at Khartsyzk Pipe, which was partly offset by an increase in production of other pipes of 3 thousand tonnes at Ilyich Steel. The conflict in the region limited supplies of coating materials for pipes and shipments of finished goods. In addition, since June 2015, there has been a lack of orders. As such, the plant has been idle since.

Coke production[2]

('000 tonnes)	4Q 2015	3Q 2015	? ‘000 t	? %	2015	2014	? ‘000 t	? %
Coke production (total)	1 113	1 141	-28	-2%	4 087	4 795	-708	-15%
Coke (dry)	201	208	-7	-3%	834	1 104	-270	-24%

 In 4Q 2015, coke output dropped by 2% q-o-q to 1,113 thousand tonnes. This reflects the decision to ‘cold’-mothball Donetsk Coke (production loss of 19 thousand tonnes), a decrease of 19 thousand tonnes in production at Azovstal due to interruptions in coal supplies, and part-compensation from an increase in output of 10 thousand tonnes at Avdiivka Coke.

In 2015, coke production decreased by 15% y-o-y by 4,087 thousand tonnes, due to raw material supply constraints and unstable operations at Avdiivka Coke, Azovstal and Donetsk Coke amid the conflict in Eastern Ukraine.

On average, in 2015, the Group used around 80% of its overall coke output for own steel production.
 

MINING DIVISION

Iron ore concentrate and pellet output [3]

('000 tonnes)	4Q 2015	3Q 2015	? ‘000 t	? %	2015	2014	? ‘000 t	? %
Iron ore concentrate (total)	8 213	8 189	24	0%	32 208	34 888	-2 680	-8%
Iron ore products	5 525	4 663	862	18%	20 382	22 271	-1 889	-8%
Iron ore concentrate	4 379	3 145	1 234	39%	13 714	14 310	-596	-4%
Pellets	1 146	1 518	-372	-25%	6 668	7 961	-1 293	-16%

In 4Q 2015, overall production of iron ore concentrate increased marginally by 24 thousand tonnes q-o-q to 8,213 thousand tonnes. Northern GOK and Central GOK decreased output by 154 thousand tonnes and 86 thousand tonnes respectively, while Ingulets GOK increased output by 264 thousand tonnes. The lower production at Northern GOK and Central GOK resulted from a fall in accessible ore, as overburden rock was not removed. The increase at Ingulets GOK was due to numerous stabilisation measures undertaken in 3Q 2015 and a three-day overhaul in October.

In 4Q 2015, output of merchant iron ore products increased by 18% q-o-q to 5,525 thousand tonnes, as:

• output of merchant iron ore concentrate rose by 1,234 thousand tonnes, due to lower internal consumption (833 thousand tonnes) following declining production at the Group's steel mills, and a shift in production in favour of concentrate (401 thousand tonnes)
• output of merchant pellets decreased by 372 thousand tonnes amid a shift in the structure of merchant products towards higher-margin concentrate

 In 2015, total output of iron ore concentrate dropped by 8% y-o-y to 32,208 thousand tonnes. This was driven by high inventories in 1Q 2015, due to an inability to ship products and lower intragroup consumption amid the conflict in Eastern Ukraine (Yenakiieve Steel was idle in February-March, while Ilyich Steel and Azovstal decreased hot metal production).

In 2015, merchant concentrate output decreased by 4% y-o-y to 13,714 thousand tonnes. This was mainly driven by a fall in production of 1,184 thousand tonnes at Ingulets GOK due to high inventories in 1Q 2015, caused by an inability to ship products and the unsatisfactory technical condition of equipment at the iron ore enrichment and crushing factories. This was partly compensated by an increase in production of 583 thousand tonnes at Northern GOK and 5 thousand tonnes at Central GOK. Northern GOK boosted output of merchant concentrate by decreasing production of lower-margin pellets.

In 2015, merchant pellet production dropped by 16% y-o-y to 6,668 thousand tonnes due to lower total output of concentrate given the aforementioned reasons.

Coal concentrate production[4]

('000 tonnes)	4Q 2015	3Q 2015	? ‘000 t	? %	2015	2014	? ‘000 t	? %
Coal concentrate (total)	803	844	-41	-5%	3 285	4 098	-813	-20%
Coal concentrate	427	409	18	4%	1 715	1 196	519	43%

In 4Q 2015, coal concentrate output declined by 5% q-o-q to 803 thousand tonnes, as Krasnodon Coal reduced output by 33 thousand tonnes and United Coal by 8 thousand tonnes. The lower volumes at Krasnodon Coal were due to interruptions in inventory supplies to support operations, and a lack of rolling stock to ship finished goods.

In 2015, coal concentrate production decreased by 20% y-o-y to 3,285 thousand tonnes. Coal extraction at Krasnodon Coal fell by 1,176 thousand tonnes amid the conflict in Eastern Ukraine. This was partly offset by an increase of 363 thousand tonnes at United Coal, driven by:

• an increase in output of 81 thousand tonnes at the Affinity mine, which was idle in 1Q 2014
• a rise in production of 166 thousand tonnes at the Wellmore mines, following the launch of new coal mining capacity in late 2014
• an increase in output of 206 thousand tonnes at the Carter Roag mines due to improved geological conditions
• a decrease in output of 90 thousand tonnes at the Pocahontas mines due to downtime in 2015