EVRAZ Q4 and FY 2016 production report

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EVRAZ Q4 and FY 2016 production report

EVRAZ plc (LSE: EVR; “EVRAZ” or the “Group”) today released its operational results for the fourth quarter and full year of 2016.

Q4 2016 vs Q3 2016 operational highlights:

  • In Q4 2016, EVRAZ’ consolidated crude steel output remained stable QoQ at 3.4 million tonnes, as production increased at its Russian steel mills and decreased at the North American and Ukrainian assets.
  • Consolidated output of steel products, net of re-rolled volumes, rose by 4.0% QoQ to 3.2 million tonnes. The main drivers were higher steel product output at the Russian steel mills due to market conditions and greater output at EVRAZ North America (higher volumes of slabs purchased from third parties were used in production).
  • The increase in steel product output at the Russian steel mills, net of re-rolled volumes, reflected higher volumes of semi-finished products, while output of construction products fell, reflecting market conditions and a seasonal slowdown in demand for construction products in Russia.
  • Railway product output at the Russian rail mills increased, driven by the completion of repairs at EVRAZ ZSMK’s rail mill in Q3 2016, which had impacted production volumes in that period, as well as higher demand in Q4 2016.
  • In North America, output of tubular products (large-diameter pipes (LDP), oil country tubular goods (OCTG) and small-diameter line pipes) improved, as demand picked up amid a decline in surplus inventories in the distribution channels. An increase in orders from major customers boosted output of railway products QoQ. Output of construction products decreased by 19.5% due to performed annual mainenace activities amid lower demand.
  • In Q4 2016, output of raw coking coal increased, primarily due to the completion of longwall moves at the Raspadskaya mine in September. Production of coking coal concentrate decreased by 4.6% QoQ, due to two factors: a temporary interruption in the supply of raw coking coal to coal-washing plants, caused by coal congelation in November amid severe weather conditions; and a temporary lack of cars on export routes, which limited shipments.

FY 2016 vs FY 2015 highlights:

  • In 2016, consolidated crude steel production and steel product output, net of re-rolled volumes, decreased by 5.7% and 6.1% respectively. This was mainly due to weak tubular and rail markets in North America, lower crude steel production at EVRAZ ZSMK due to planned capital repairs at blast furnaces in 2016, and the deconsolidation of EVRAZ Highveld Steel and Vanadium in April 2015.
  • Changes in the steel product mix reflected market conditions. Together with increased output at EVRAZ ZSMK’s rolling mill, this resulted in higher exports of railway products .
  • In North America, the fall in tubular product output was due to a market slump amid low oil prices and delays in pipeline projects. The decline in railway product output was attributable to lower demand from major customers.
  • Production of coking coal concentrate grew by 4.9% YoY. This was due to the completion of longwall moves and more favourable geological conditions at the Erunakovskaya-8 mine, improved productivity at the Uskovskaya and Osinnikovksya mines, and higher output at Mezhegeyugol following the launch of room-and-pillar mining operations in 2016.