Severstal Q1 2015 Operational Results

Severstal reports Q1 2015 operational results

Moscow, Russia - April 14, 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 Q1 2015.

Q1 2015 GROUP HIGHLIGHTS

● Crude steel production increased 2% q/q to 2.96 mln tonnes (Q4 2014: 2.89 mln tonnes) with the prior quarter impacted by scheduled maintenance at one of the BOFs. Lower hot metal production (down 1% q/q to 2.31 mln tonnes) reflects short-term maintenance at BF#5.

● Steel assets continued to run at near to full capacity, with the Balakovo mini-mill further ramping-up production.

● Consolidated sales of steel products declined 4% q/q as the Company built its internal stock of high value-added (HVA) products to normal levels after divesting inventories against strong demand in Q4 2014.

● There has been an increase in profitability for hot-rolled coil (HRC) export deliveries almost throughout the entire quarter on the back of RUB devaluation, which resulted in higher HRC sales volumes.

● The abovementioned factors resulted in a 6 ppts decrease of the share of HVA products in the sales portfolio, to 46% (Q4 2014: 52%).

● Coking coal concentrate sales volumes at Vorkutaugol decreased 13% q/q to 1.27 mln tonnes (Q4 2014: 1.47 mln tonnes) due to seasonal severe weather conditions in the region.

● Whilst the pricing environment remains challenging, the sharp RUB devaluation triggered a round of RUB-nominated price increases in Q1 2015 in order to catch up with export USD-nominated parity. This has partially mitigated the impacts of both the RUB devaluation and the global steel prices decline.

SUMMARY OF KEY PRODUCTION, SALES VOLUMES AND SELLING PRICES DATA

SEVERSTAL RESOURCES

● Iron ore pellets sales declined 6% q/q to 2.58 mln tonnes (Q4 2014: 2.75 mln tonnes). Sales volumes to external customers on the domestic market remained solid on restocking activity. Moreover, inventories of pellets at CherMk were returned to more normal levels on the back of increased internal procurement of pellets q/q.

● Iron ore concentrate sales volumes remained broadly flat q/q. At the same time, sharp RUB devaluation supported profitability at Olkon, resulting in higher q/q sales volumes to external customers.

● Coking coal concentrate sales volumes decreased 13% q/q to 1.27 mln tonnes (Q4 2014: 1.47 mln tonnes) primarily as a result of short-term production disruptions due to severe weather conditions during the period. The Company expect more typical production volumes in Q2 2015.

● Steam coal sales at Vorkutaugol increased 7% q/q reflecting seasonally strong domestic demand.

●As a result of Severstal's successful efforts to increase RUB-nominated prices since the beginning of the year, the Company has been able to partially mitigate the 15% q/q decline in the global iron ore benchmark as well as the negative impact of RUB devaluation. USD-nominated average selling prices for both iron ore pellets and iron ore concentrate decreased only 4% q/q and 11% q/q, respectively.

●The coking coal concentrate average selling price decline of 16% q/q is purely a function of the ca. 30% q/q RUB devaluation partially offset by another round of RUB-nominated price upgrades by the Company, which took place in the second half of Q1.

SEVERSTAL RUSSIAN STEEL

● RSD steel products sales decreased 4% q/q to 2.56 mln tonnes.

● RSD recorded an 8% q/q increase in sales volumes of semi-finished products due to strong domestic demand. HRC sales volumes increased 13% q/q reflecting an uptick in profitability for HRC export deliveries as well as a low base effect as production in Q4 2014 was impacted by the upgrade of HR Mill-2000. Severstal's proximity to export markets provided flexibility to shift between domestic and export deliveries. RSD increased the share of export sales to 38% in Q1 2015 (Q4 2014: 29%).

● Notwithstanding a decrease in sales volumes of cold-rolled coils (down 13% q/q), galvanized and metallic coated coils (down 17% q/q) and color coated coils (down 24% q/q), all the rolling facilities at CherMK ran at almost full capacity in Q1 2015. The latter facilitated an increase in stock to a normalized level after divesting inventories during Q4 2014 against strong demand. A portion of export sales volumes shipped during the quarter will be reflected in the Q2 2015 results due to a delayed recognition of shipments.

● On a separate note, sales of large diameter pipes (LDPs) decreased 19% q/q as a result of short-term scheduled maintenance at the Izhora Pipe Mill. Nevertheless, Severstal continued supplying LDPs for the Southern Corridor and Bovanenkovo-Ukhta pipelines, which resulted in a high utilization rate at the Izhora Pipe Mill. Moreover, Severstal won a tender to supply ca. 160kt of LDPs for Gazprom's Power of Siberia project.

● In line with the downward trend in global steel prices, average steel prices for steel products at RSD decreased between 7-28% q/q dependent on the product. Nevertheless, despite a seasonally soft market, RSD was able to proactively increase domestic RUB-nominated sales prices compensating for the RUB devaluation effect and catching up with the USD-nominated parity.

SEVERSTAL'S CONSOLIDATED SALES (NET OF INTERCOMPANY SALES)

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, Severstal Distribution and Severstal Invest data;

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

7) Group volumes and average selling prices for Q1 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 Q1 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