Severstal reports Q1 2017 operational results

Severstal reports Q1 2017 operational results

Moscow, Russia - 13 April 2017 - PAO Severstal (MICEX-RTS: CHMF; LSE: SVST), one of the world's leading vertically integrat--ed steel and steel-related mining companies, today announces its operational results for Q1 2017.

Q1 2017 GROUP HIGHLIGHTS

· Hot metal output remained largely unchanged, decreasing only 1% to 2.34 mln tonnes (Q4 2016: 2.36 mln tonnes) compared with the previous quarter.

· Crude steel production declined 2% to 2.86 mln tonnes (Q4 2016: 2.92 mln tonnes). Crude steel output at CherMK was impacted by planned maintenance works at converters #2 and #3.

· Consolidated steel product sales declined 9% q/q to 2.53 mln tonnes compared with the previous quarter (Q4 2016: 2.78 mln tonnes). During Q1 2017, following record sales volumes achieved in previous quarter, the Company replenished inventories to normal levels and accumulated finished good stocks for subsequent realisation during 2017 as well as increased export sales in response to weaker domestic demand and lower activity from local traders.

· The proximity of key assets to the border also enabled the Company to shift sales to export, accordingly steel product export sales volumes grew to 42% (Q4 2016: 38%) of the sales mix.

· Following the refurbishment of the four-stand cold rolling mill at CherMK and the increase in production volumes, cold-rolled coil sales volumes continued to increase, and were up 14% q/q, following the increase of 15% q/q achieved in Q4 2016.

· Increased cold-rolled, large diameter pipes and colour-coated sales led to the share of high value-added (HVA) products within the sales portfolio increasing to 44% (Q4 2016: 40%).

· Supply disruptions in Australia boosted spot hard coking coal prices at the beginning of April 2017, after tropical cyclone Debbie led to closures of the main railway lines. Industry experts estimate it will take up to five weeks before normal operations are restored. Meanwhile the seaborne HCC market is experiencing a shortage thus boosting the spot price of coking coal. Whilst iron ore prices were supported by significant restocking in Q1 2017 they are now softening as port inventories have reached high levels.

SUMMARY OF KEY PRODUCTION, SALES VOLUMES AND SELLING PRICES DATA

SEVERSTAL'S CONSOLIDATED SALES (NET OF INTERCOMPANY SALES)

SEVERSTAL RESOURCES

· In Q1 2017 coking coal concentrate sales volumes from Vorkutaugol remained in decline, down 11% q/q to 0.71 mln tonnes (Q4 2016: 0.80 mln tonnes) impacted by scheduled long-wall repositionings at the Vorkutinskaya and Komsomolskaya mines. As anticipated, internal coking coal concentrate procurement decreased 2% and external sales volumes decreased by 90% reflecting the low base effect q/q.

· Steam coal sales at Vorkutaugol decreased by a marginal 2% q/q and remained relatively high in response to stronger demand from domestic consumers during the heating season.

· Iron ore concentrate sales volumes declined 13% q/q to 0.80 mln tonnes (Q4 2016: 0.92 mln tonnes) mainly impacted by planned maintenance works.

· Iron ore pellet sales decreased 8% and totaled 2.58 mln tonnes (Q4 2016: 2.79 mln tonnes). Iron ore pellet sales volumes were impacted by seasonal factors.

SEVERSTAL RUSSIAN STEEL ('RSD')

· RSD steel product sales declined 9% q/q to 2.54 mln tonnes due to the fact that during Q1 2017, after record sales volumes achieved in previous quarter, the Company replenished inventories to normal levels and accumulated finished good stocks for subsequent realisation during 2017 as well as increased export sales in response to weaker domestic demand and lower activity from local traders.

· This resulted in a decline in domestic deliveries within the sales-mix to 58% in Q1 2017 (Q4 2016: 62%).

· The share of HVA products within the sales mix improved to 44% (Q4 2016: 40%) fueled by cold-rolled, large diameter pipes and colour-coated sales growth.

· Cold-rolled coil sales improved further, by 14% q/q, following completion of the refurbishment of the four-stand cold rolling mill at CherMK in 2016. Moreover colour-coated coil seasonal stock was previously created in Q4 which resulted in a 6% sales increase q/q.

· Large diameter pipe (LDP) sales volumes increased 8% q/q driven by higher LDP sales from Izhora Pipe Mill for Gazprom projects. Meanwhile, Izhora Pipe Mill remains in full utilisation and continues to supply LDPs to Gazprom, Transneft and other customers.

· Average selling prices for all steel products increased between 8% and 21% q/q, depending on the specific product, reflecting an upward adjustment in global steel prices, driven by high raw material benchmarks during Q1 2017.

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, Severstal Distribution LLC and AO Severstal Distribution data;

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

Investor Relations

Evgeny Belov

T: +7 (495) 926-77-66 ext. 6445

[email protected]

Vladimir Zaluzhsky

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

[email protected]

Public Relations

Anastasia Mishanina

T: +7 (495) 926-77-66 ext. 6457

[email protected]

Severstal's financial communications agent - Hudson Sandler

Andrew Hayes / Elena Garside / 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, Italy and Poland. Severstal is listed on RTS and MICEX and the company's GDRs are traded on the LSE. Severstal reported revenue of $5,916 million and EBITDA of $1,911 million in 2016. Severstal's crude steel production in 2016 reached 11.6 million tonnes www.severstal.com