Q2 2015 and H1 2015 Operational Results

Severstal reports Q2 2015 operational results

Moscow, Russia - July 15, 2015 - PAO Severstal (MICEX-RTS: CHMF; LSE: SVST), one of the world's leading vertically integrated steel and steel-related mining companies, today announces its operational results for Q2 2015 and H1 2015.

Q2 2015 GROUP HIGHLIGHTS 

● In Q2 hot metal production decreased 1% q/q to 2.29 mln tonnes (Q1 2015: 2.31 mln tonnes). At the same time, crude steel production decreased 4% q/q to 2.85 mln tonnes (Q1 2015: 2.96 mln tonnes). While this suggests lower consumption of scrap material in steelmaking process, it also reflects an impact of scheduled maintenance at the BOF#3 and continuous caster #2 and #4.

● Consolidated sales of steel products increased 4% q/q partially due to seasonal increase in demand, despite anticipated weaker steel consumption domestically. Moreover, Severstal's proximity to export markets allowed the Company the flexibility to allocate additional volumes for export.

● The share of high value-added (HVA) products in the sales portfolio improved 1 ppt to 47% (Q1 2015: 46%) largely due to a 13% q/q increase in downstream products sales and a reduction in long products sales q/q. These have partially offset a 10% q/q increase in hot-rolled coil sales.

● Coking coal concentrate sales increased 15% q/q in spite of a decrease in ROM-coal output volumes in Q2 at Vorkutaugol on the back of scheduled long-walls repositioning activity in June 2015. The former is largely a low-base effect with washing plant operations being negatively impacted by severe weather conditions in Q1.

● Whilst the pricing environment on the global markets remains challenging, Severstal average USD-nominated selling prices for steel products improved q/q owing to RUB appreciation. Specifically, after catching up with the USD-nominated parity, domestic prices reached an unusual premium vs. export prices. We would expect a gradual normalization of this premium later in the year.

SUMMARY OF KEY PRODUCTION, SALES VOLUMES AND SELLING PRICES DATA

SEVERSTAL RESOURCES

● Coking coal concentrate sales volumes increased 15% q/q to 1.46 mln tonnes (Q1 2015: 1.27 mln tonnes) due to a low-base effect with production in Q1 being negatively impacted by severe weather conditions in the region. In the meantime, ROM-coal output declined q/q, which was driven by scheduled long-walls repositioning in June 2015.

● Steam coal sales at Vorkutaugol decreased 7% q/q on the back of seasonally lower demand from domestic consumers.

● Iron ore concentrate sales volumes increased 9% q/q primarily reflecting seasonal increase in production and higher internal procurement of iron ore concentrate by CherMK.

● Iron ore pellets sales remained largely flat q/q at 2.60 mln tonnes (Q1 2015: 2.58 mln tonnes). Moreover, external sales volumes on both domestic and export markets improved on restocking activity.

● Average coking coal concentrate selling prices increased 42% q/q, this is primarily a result of several rounds of RUB-nominated price upgrades by the Company, which took place in the second half of Q1 already. Meanwhile, RUB strengthening of c. 15% q/q further supported USD-nominated price appreciation.

● The poor performance of the global iron ore benchmark in Q2 (down 6% q/q) was fully mitigated by RUB appreciation, with iron ore concentrate USD-nominated prices increasing 9% q/q. Prices for iron ore pellets were less resilient due to the geographical structure of sales. Iron ore pellet prices declined 2% q/q.

SEVERSTAL RUSSIAN STEEL ('RSD')

● Indicating seasonal uptick in demand both on domestic and export markets RSD increased steel products sales 4% q/q to 2.67 mln tonnes. The latter has been achieved despite less pronounced seasonality and existing problems with apparent steel consumption on domestic market this year.

● Severstal's proximity to export markets allowed it the flexibility to shift between domestic and export deliveries. Reflecting an increase of export share to 41% in Q2 2015 (Q1 2015: 38%) and change to the product mix RSD recorded a 10% q/q increase in HRC sales vs. 18% q/q reduced sales of semi-finished products.

● Long products sales volumes declined 8% q/q reflecting temporary production suspensions at Balakovo mini-mill due to an equipment defect and mastering of new rebar grades in Q2 2015.

● Rolling facilities at CherMK ran at almost full capacity in Q2 2015, while Balakovo remains in a ramp-up mode.

● Solid 13% q/q growth in downstream products sales volumes primarily reflects 37% q/q increase in sales of large diameter pipes (LDPs). This growth is partially a low-base effect given short-term scheduled maintenance at the Izhora Pipe Mill in Q1. In the meantime, Severstal continued supplying LDPs for the Southern Corridor and Gazprom maintenance projects. In addition, Severstal began supplying LDPs for the Power of Siberia project.

● Regardless of the downward trend in global steel prices and a comparatively soft domestic market, USD-nominated average steel prices for rolled products at RSD experienced a broad range of increases dependent on the product owing to RUB appreciation. That said, after catching up with the USD-nominated parity domestic prices switched to unusual premium in Q2 2015. We would expect gradual normalization of premium later in the year.

SEVERSTAL'S CONSOLIDATED SALES (NET OF INTERCOMPANY SALES)

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1) All production data is reported in metric tonnes;

2) Sales prices are stated on EXW basis;

3) Segmental data includes intercompany sales;

4) Semi-finished products include pig iron, slabs, billets, ingots, steel casting and forgings;

5) Metalware sales volumes and metalware average selling prices include Severstal Metiz, Cherepovets Steel Mill, SIA Severstal Distribution and AO Severstal Distribution data;

6) Large diameter pipes include all pipes with a diameter between 820 and 1420 mm;

7) Group volumes and average selling prices for H1 2014 reflect adjustments made in connection with the presentation of the discontinued operation.

8) On 19 August 2014, Severstal announced that it has completed the sale of PBS Coals Inc., a metallurgical coal producer located in Pennsylvania, USA, to Corsa Coal Corp., a Canadian public company. In regard to the sale and in full accordance with IFRS standards Severstal continues to report operational results of PBS Coals Inc. till 19 August 2014 - disposal date, which are included in the Group's H1 2014 consolidated operational results

Investor Relations

Vladimir Zaluzhsky

T: +7 (495) 926-77-66 ext. 6375

[email protected]

Public Relations

Elena Kovaleva

T: +7 (495) 926-77-66 ext. 6447

[email protected]

Severstal's financial communications agent - Hudson Sandler

Andrew Hayes / Maria Ignatova / Alex Brennan

T: +44 (0) 20 7796 4133

PАО Severstal is one of the world's leading vertically integrated steel and steel related mining companies, with assets in Russia, Ukraine, Latvia, Poland, Italy and Liberia. Severstal is listed on the Moscow Stock Exchange with GDRs being traded on the London Stock Exchange. Severstal reported revenue of $8,296 million and EBITDA of $2,203 million in 2014. Severstal's crude steel production in 2014 reached 11.3 million tonnes. www.severstal.com