PJSC Magnitogorsk Iron and Steel Works (MMK) PJSC Magnitogorsk Iron and Steel Works: MMK Group Trading Update for Q3 and 9M 2021 13-Oct-2021 / 09:00 CET/CEST Dissemination of a Regulatory Announcement that contains inside information according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group. The issuer is solely responsible for the content of this announcement.
| MMK Group trading update for Q3 and 9m 2021 13 october 2021 Magnitogorsk, Russia | PJSC Magnitogorsk Iron & Steel Works ("MMK", or the "Group") (MICEX-RTS: MAGN; LSE: MMK), one of the world's largest steel producers, is pleased to announce its Trading Update for Q3 and 9M 2021. |
| HIGHLIGHTS Q3 2021 VS Q2 2021 | Pig iron output decreased slightly, by 0.6% quarter-on-quarter (q-o-q), to 2,624 thousand tonnes. | | | Steel output remained flat quarter-on-quarter at 3,390 thousand tonnes, reflecting favourable market conditions and the launch of the electric arc furnace facility at the Turkish asset. MMK Group's sales of steel products totalled 2,761 thousand tonnes, down 16.8% q-o-q, driven by an increase in exports with longer delivery lead times. Sales of the Group's premium products were down 12.1% to 1,224 thousand tonnes, driven by the scheduled overhaul of Mill 5000 and growth in exports of cold-rolled and galvanised steel with longer delivery lead times. MMK Coal's coal concentrate production moderately declined quarter-on-quarter to 867 thousand tonnes. | | | HIGHLIGHTS 9M 2021 VS 9M 2020 | Pig iron output increased by 14.8% year-on-year (y-o-y) to 7,836 thousand tonnes as blast furnace operations were not being overhauled during this period. Steel output increased by 22.1% y-o-y to 10,091 thousand tonnes, as no overhauls took place at converter facilities, as well as the completion of Hot-Rolling Mill 2500's modernisation. MMK Group's sales of finished products increased by 16.5% y-o-y to 8,985 thousand tonnes, driven by favourable market conditions and the high utilisation rate of Mill 2500 after its modernisation. Sales of premium products slightly decreased year-on-year to 3,770 thousand tonnes on the back of the scheduled overhaul of Mill 5000. | | | Production of coal concentrate increased by 15.1% y-o-y to 2,557 thousand tonnes, driven by stronger demand from MMK amid favourable market conditions. | | | MARKET OVERVIEW | Global steel products market: In Q3 2021, global steel supply continued to grow while consumer demand slackened to moderate. Prices for flat products in the Black Sea region have begun to retrace. In July and August, China's steel output decreased in line with the government's plans to keep output flat year-on-year, with the lower steel supply from this country benefitting global competition. Russian steel products market: In Russia, prices in the spot market for rolled steel were slipping quite fast throughout the third quarter, mainly due to a drop in exports amid the introduction of temporary export duties from August until the year-end and due to a slowdown in business activity at the domestic market. Global iron ore market: In the third quarter, the 62% Fe index halved to USD 100-120 per tonne CFR China. Caps on steel output introduced in China this year drove a year-on-year decrease in output by close to 10 million tonnes a month in 2H 2021, creating a glut in the previously undersupplied spot market for iron ore while also undermining the outlook for raw material demand until at least December 2021. Russian iron ore market: In the third quarter, demand for raw materials in Russia slightly weakened as the temporary duties on Russian steel products led to lower capacity utilisation by some steel mills. Meanwhile, exports of quality iron ore from Russia (blast furnace pellets and direct reduced iron pellets) to international markets remained strong, with Russian exporters able to sell in large volumes in these segments. Global coking coal market: In the third quarter, spot coking coal prices grew rapidly, driven by even more pronounced shortages of premium grades in China and a deteriorating lack of raw materials for consumers from other countries. Almost all coking coal exporters except Russia faced a range of problems with production, processing and logistics. Due to these shortages, indices for most coal grades almost doubled during the third quarter. Russian coking coal market: Driven by the global market, Russian prices grew 50%-70% in the third quarter, but the effect of the global price rise is not over yet, and domestic prices are expected to hit record highs. In the fourth quarter, the price growth may prove even stronger amid the competing trends in coal and rolled steel pricing. Russian metal scrap market: The downward trend in scrap prices dominated in the Russian market in the third quarter, following the trends in regional steel product prices. As major Russian mills have generally completed their stockpiling of raw materials for the winter, scrap prices are expected to continue declining in the fourth quarter. |
MMK GROUP'S CONSOLIDATED RESULTS | thousand tonnes | Q3 2021 | Q2 2021 | % | 9M 2021 | 9M 2020 | % | | Crude steel production | 3,390 | 3,401 | - 0.3 | 10,091 | 8,263 | 22.1 | | Steel segment Russia | 3,331 | 3,401 | - 2.1 | 10,033 | 8,263 | 21.4 | | Steel segment Turkey | 59 | - | - | 59 | - | - | | Pig iron production | 2,624 | 2,640 | - 0.6 | 7,836 | 6,823 | 14.8 | | Coal concentrate production | 867 | 874 | - 0.8 | 2,557 | 2,222 | 15.1 | | Iron ore production | 802 | 790 | 1.5 | 2,222 | 2,255 | - 1.5 | | Finished products sales,including: | 2,761 | 3,320 | - 16.8 | 8,985 | 7,710 | 16.5 | | Slabs and billets | 45 | 74 | - 39.3 | 172 | 20 | 774.6 | | Long products | 249 | 316 | - 21.4 | 834 | 977 | - 14.7 | | Flat hot-rolled products | 1,255 | 1,538 | - 18.4 | 4,220 | 2,913 | 44.9 | | Premium products, including: | 1,224 | 1,392 | - 12.1 | 3,770 | 3,800 | - 0.8 | | Thick plate (Mill 5000) | 164 | 251 | - 35.0 | 580 | 639 | - 9.3 | | Flat cold-rolled products | 186 | 203 | - 8.5 | 573 | 663 | - 13.6 | | Downstream products, including: | 875 | 938 | - 6.7 | 2,617 | 2,498 | 4.8 | | Tinplate | 42 | 43 | - 2.1 | 129 | 131 | - 1.3 | | Galvanised steel | 514 | 538 | - 4.5 | 1,490 | 1,275 | 16.9 | | Polymer-coated steel | 131 | 158 | - 17.1 | 439 | 517 | - 15.1 | | Band | 30 | 35 | - 13.7 | 100 | 89 | 12.9 | | Formed section | 21 | 17 | 22.3 | 64 | 87 | - 25.8 | | Pipe | 14 | 24 | - 41.1 | 51 | 59 | - 13.6 | | Metalware | 109 | 118 | - 7.8 | 333 | 307 | 8.5 | | Other metal products | 2 | 4 | - 48.2 | 10 | 33 | - 68.9 | | Share of premium products | 44.3% | 41.9% | | 42.0% | 49.3% | |
CONSOLIDATED PRICES FOR METAL PRODUCTS | USD/tonne | Q3 2021 | Q2 2021 | % | 9M 2021 | 9M 2020 | % | | Average price per tonne: | 1,057 | 944 | 12.0 | 904 | 551 | 64.1 | | Slabs and billets | 612 | 626 | - 2.2 | 604 | 255 | 136.9 | | Long products | 845 | 762 | 10.9 | 745 | 465 | 60.2 | | Flat hot-rolled products | 942 | 880 | 7.0 | 817 | 462 | 76.8 | | Premium products, including: | 1,237 | 1,073 | 15.3 | 1,052 | 643 | 63.6 | | Thick plate (Mill 5000) | 918 | 746 | 23.1 | 772 | 596 | 29.5 | | Flat cold-rolled products | 1,088 | 989 | 10.0 | 938 | 553 | 69.6 | | Downstream products, including: | 1,329 | 1,179 | 12.7 | 1,139 | 678 | 68.0 | | Tinplate | 1,109 | 849 | 30.6 | 897 | 722 | 24.2 | | Galvanised steel | 1,356 | 1,198 | 13.2 | 1,151 | 655 | 75.7 | | Polymer-coated steel | 1,605 | 1,482 | 8.3 | 1,395 | 786 | 77.5 | | Band | 1,207 | 1,028 | 17.4 | 1,000 | 610 | 63.9 | | Formed section | 1,156 | 1,149 | 0.6 | 1,038 | 675 | 53.8 | | Pipe | 1,004 | 969 | 3.6 | 915 | 514 | 78.0 | | Metalware | 1,058 | 893 | 18.5 | 926 | 629 | 47.2 | | Other metal products | 1,763 | 1,426 | 23.6 | 1,449 | 695 | 108.5 |
| + 12.0% Q-o-Q AVERAGE SELLING PRICE | Average selling prices for Q3 2021 grew by 12.0% q-o-q to USD 1,057 per tonne amid the ongoing upward trend in global prices for metal products. Year-on-year, prices grew by 64.1% to USD 904 per tonne, driven by favourable market dynamics and due to last year's low base. |
MMK GROUP'S PERFORMANCE ACROSS CORE SEGMENTS STEEL SEGMENT RUSSIA | thousand tonnes | Q3 2021 | Q2 2021 | % | 9M 2021 | 9M 2020 | % | | Crude steel production | 3,331 | 3,401 | - 2.1 | 10,033 | 8,263 | 21.4 | | Pig iron production | 2,624 | 2,640 | - 0.6 | 7,836 | 6,823 | 14.8 | | Finished products sales,including: | 2,692 | 3,288 | - 18.1 | 8,833 | 7,336 | 20.4 | | Slabs and billets | 45 | 74 | - 39.3 | 172 | 20 | 774.6 | | Long products | 249 | 316 | - 21.4 | 834 | 977 | - 14.7 | | Flat hot-rolled products | 1,396 | 1,721 | - 18.9 | 4,687 | 3,038 | 54.3 | | Premium products, including: | 1,014 | 1,177 | - 14.8 | 3,141 | 3,301 | - 4.9 | | Thick plate (Mill 5000) | 164 | 251 | - 35.0 | 580 | 639 | - 9.3 | | Flat cold-rolled products | 199 | 203 | - 2.1 | 586 | 673 | - 13.0 | | Downstream products, including: | 641 | 723 | - 11.3 | 1,975 | 1,989 | - 0.7 | | Tinplate | 42 | 43 | - 2.1 | 129 | 131 | - 1.3 | | Galvanised steel | 325 | 350 | - 7.3 | 945 | 897 | 5.4 | | Polymer-coated steel | 97 | 131 | - 25.6 | 353 | 386 | - 8.5 | | Band | 30 | 35 | - 13.7 | 100 | 89 | 12.9 | | Formed section | 21 | 17 | 22.3 | 64 | 87 | - 25.8 | | Pipe | 14 | 24 | - 41.1 | 51 | 59 | - 13.6 | | Metalware | 109 | 118 | - 7.8 | 324 | 307 | 5.6 | | Other metal products | 2 | 4 | - 49.4 | 8 | 32 | - 76.1 | | Share of premium products | 37.3% | 35.8% | | 35.6% | 45.0% | |
| - 18.1% Q-o-Q sales of finished products | Sales of finished steel products in Q3 2021 were down 18.1% q-o-q to 2,692 tonnes, due to the increase in exports with longer delivery lead times. The 20.4% y-o-y increase in sales to 8,833 thousand tonnes in Q3 2021 was due to the completion of Hot-Rolling Mill 2500's modernisation. | | - 21.4% Q-o-Q sales of long products | Sales of long products in Q3 2021 were down 21.4% q-o-q to 249 thousand tonnes reflecting a slowdown in business activity and replenishment of inventories. Year-on-year, sales decreased by 14.7% to 834 thousand tonnes amidst scheduled repairs of rolling equipment. | | - 18.9% Q-o-Q sales of hot-rolled products | Sales of hot-rolled products decreased 18.9% q-o-q in Q3 2021 to 1,396 thousand tonnes, due to the increase in exports with longer delivery lead times. The 54.3% y-o-y increase in sales for 9M 2021 to 4,687 thousand tonnes was driven by the production growth at Hot-Rolling Mill 2500 following its modernisation. | | - 14.8% Q-o-Q sales of premium products | Sales of premium products in Q3 2021 decreased by 14.8% q-o-q to 1,014 thousand tonnes due to the increase in exports with longer delivery lead times. The share of premium products grew to 37.3% of the sales portfolio. Year-on-year, sales decreased by 4.9% to 3,141 thousand tonnes as inventories were being replenished. | | - 35.0% Q-o-Q sales of Mill 5000 products | Sales volumes of thick plates from Mill 5000 were down 35.0% q-o-q to 164 thousand tonnes, held back by the scheduled overhaul during the quarter. Y-o-y sales for 9M 2021 fell 9.3% to 580 thousand tonnes, following a change in the order mix and equipment repairs. | | - 2.1% Q-o-Q sales of cold-rolled products | Sales of cold-rolled products in Q3 2021 were down by 2.1% q-o-q to 199 thousand tonnes, due to an increase in exports. The 13.0% y-o-y decrease in sales for 9M 2021 to 586 thousand tonnes was due to higher sales of coated steel amid higher margins and the replenishment of inventories. | | - 2.1% Q-o-Q sales of tinplate | Sales of tinplate in Q3 2021 decreased by 2.1% q-o-q to 42 thousand tonnes amid ongoing highs in equipment utilisation. Sales of tinplate for 9M 2021 decreased slightly year-on-year to 129 thousand tonnes. | | - 7.3% Q-o-Q sales of galvanised steel | The decrease in the sales of galvanised steel in Q3 2021 by 7.3% q-o-q to 325 thousand tonnes was due to the increase in exports with longer delivery lead times. For 9M 2021, sales increased by 5.4% y-o-y to 945 thousand tonnes, supported by favourable market conditions. | | - 25.6% Q-o-Q SALES OF POLYMER-COATED STEEL | Sales of polymer-coated steel decreased by 25.6% q-o-q to 97 thousand tonnes, reflecting last quarter's high base and slowdown in the business activity of major consumers. Year-on-year, sales were down 8.5% to 353 thousand tonnes, due to the increase in sales of galvanised steel promising higher margins. |
STEEL SEGMENT TURKEY | | Q3 2021 | Q2 2021 | % | 9M 2021 | 9M 2020 | % | | Crude steel production | 59 | - | - | 59 | - | - | | Finished products sales,including: | 249 | 221 | 12.9 | 665 | 522 | 27.7 | | Flat hot-rolled products | 26 | 6 | 359.0 | 35 | 12 | 181.6 | | Premium products, including: | 223 | 215 | 3.6 | 631 | 509 | 24.0 | | Flat cold-rolled products | - | - | - | - | - | - | | Downstream products, including: | 223 | 215 | 3.6 | 631 | 509 | 24.0 | | Galvanised steel | 189 | 187 | 0.8 | 545 | 378 | 44.1 | | Polymer-coated steel | 34 | 27 | 23.2 | 86 | 131 | - 34.5 | | Share of premium products | 89.4% | 97.4% | | 94.8% | 97.6% | | | Intersegment sales from Steel segment Russia | 180 | 189 | - 4.6 | 514 | 147 | 249.3 |
| + 12.9% Q-o-Q SALES OF FINISHED PRODUCTS | The sales of finished products in the Turkish steel segment in Q3 2021 were up 12.9% q-o-q to 249 thousand tonnes, reflecting the favourable market conditions and the launch of the hot-rolling complex in July. At the same time, exports remained high and exceeded domestic sales in Turkey. Sales were up 27.7% y-o-y to 665 thousand tonnes driven by the release of pent-up demand that built up throughout the pandemic and the lockdown restrictions of 2020. |
COAL MINING SEGMENT | thousand tonnes | Q3 2021 | Q2 2021 | % | 9M 2021 | 9M 2020 | % | | Coking coal mining | 1,232 | 1,098 | 12.3 | 3,612 | 3,168 | 14.0 | | Coking coal processing | 1,483 | 1,496 | - 0.9 | 4,336 | 3,886 | 11.6 | | Mined | 1,206 | 1,068 | 12.9 | 3,452 | 3,568 | - 3.3 | | Purchased | 212 | 358 | - 40.8 | 683 | 318 | 114.6 | | Toll | 66 | 70 | - 6.6 | 201 | - | - | | Coking coal concentrate | 867 | 874 | - 0.8 | 2,557 | 2,222 | 15 |
| + 12.3% Q-o-Q COKING COAL PRODUCTION | Coking coal production in Q3 2021 amounted to 1,232 thousand tonnes, up 12.3% y-o-y, due to the completion of face transfer operations at the Kostromovskaya mine. Coking coal production increased by 14.0% y-o-y to 3,612 thousand tonnes as MMK's demand for concentrate grew. | | - 0.8% Q-o-Q COKING COAL CONCENTRATE PRODUCTION | Coking coal concentrate production in Q3 2021 slightly increased quarter-on-quarter to 867 thousand tonnes. Coal concentrate production was up 15.1% y-o-y to 2,557 thousand tonnes amid higher demand from MMK. |
MMK GROUP'S SUSTAINABILITY PERFORMANCE (ESG) | HIGHLIGHTS | In August 2021, MMK's sustainability report made it into the top five among global steelmakers. The ESG Reporting Awards 2021 by ESG Investing recognised MMK Group's non-financial reporting among the world's best in the Metals & Mining category. On 19 August 2021, MMK published its full ESG Data Pack affirming its commitment to openness and transparency in engagements with all external communities, from buyers and suppliers to investors, authorities, employees and other stakeholders. | | | On 16 September 2021, MMK and SMS group GmbH signed a Memorandum of Understanding that states both companies' intention to cooperate in order to reduce - potentially to zero - CO2 emissions. |
| | Q3 2021 | Q2 2021 | % | 9M 2021 | 9M 2020 | % | | LTIFR | 0.61 | 1.16 | - 47.4 | 0.98 | 0.67 | 46.3 | | Gross air emissions, thousand tonnes | 47.2 | 46.6 | 1.3 | 141.4 | 122.8 | 15.1 | | Specific air emissions, kg/tonne | 14.2 | 13.7 | 3.4 | 14.1 | 14.9 | - 5.1 |
| + 46.3% Y-o-Y ltifr | | - 5.1% Y-o-Y SPECIFIC AIR EMISSIONS |
| | The LTIFR for 9M 2021 increased by 46.3% y-o-y to 0.98, reflecting an increase in the number of ice-related accidents amidst more abrupt temperature changes in early 2021 as compared to 2020. The Group continues to implement initiatives to address the root causes of accidents and improve the production safety culture. | | Specific air emissions for 9M 2021 decreased by 5.1% y-o-y to 14.1 kg per tonne, driven by an increase in the share of scrap in the charge on the back of increased steel output by the EAF Shop. Specific air emissions increased by 3.4% to 14.2 kg per tonne due to an increase in sinter production as no equipment repairs were carried out during the quarter. |
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| OUTLOOK | A retracement started in the global market, which, coupled with the seasonal business slowdown in Russia, will exert pressure on the Group's sales in the fourth quarter. However, the increase in output by the Turkish asset will support sales. High utilisation of equipment that manufactures premium products will be beneficial for the Group's sales portfolio, including an increase in capacity utilisation rate of Mill 5000 amid higher demand from pipe industry. CAPEX for Q4 2021 is expected to grow q-o-q, in line with the implementation schedule for projects pursued under the Group's strategy. Operational excellence measures implemented under MMK's updated strategic initiatives will further boost the Group's profitability in Q4 2021. |
| ABOUT MMK MMK is one of the world's largest steel producers and a leading Russian metals company. The Group's operations in Russia include a large steel-producing unit encompassing the entire production chain, from the preparation of iron ore to downstream processing of rolled steel. MMK turns out a broad range of steel products, with a predominant share of premium products. In 2020, MMK produced 11.6 mln tonnes of crude steel and sold 10.8 mln tonnes of commercial steel products. ММK is an industry leader in terms of production costs and margins. Group revenue in 2020 totalled USD 6,395 mln, with an EBITDA of USD 1,492 mln. MMK boasts the industry's lowest debt burden. Net debt/EBITDA ratio was -0.06х at the end of 2020. The Group's investment-grade rating is confirmed by the leading global rating agencies Fitch, Moody's and S&P. MMK's ordinary shares are traded on the Moscow Exchange, while its depositary receipts are traded on the London Stock Exchange. Free float amounts to 20.2%. | Subscribe to our official MMK channel on Telegram to be the first to know about key MMK news. |
| INVESTOR RELATIONS DEPARTMENT Veronika Kryachko +7 915 380 6266[email protected] ESG DEPARTMENT Yaroslava Vrubel +7 982 282 9682[email protected] COMMUNICATIONS DEPARTMENT Dmitry Kuchumov+7 985 219 2874[email protected] Oleg Egorov+7 903 971 8837[email protected] | | KEY UPCOMING EVENTS IN 2021 Financial calendar | | 25 October | Q3 and 9M 2021 IFRS financials | | 26-28 October | Non-deal roadshow (NDR), online |
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