Severstal Reports Q3 2015 Operational Results

Severstal reports Q3 2015 operational results

Moscow, Russia - October 13, 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 Q3 2015 and 9M 2015.

Q3 2015 GROUP HIGHLIGHTS 

● Crude steel production increased 2% to 2.89 mln tonnes (Q2 2015: 2.85 mln tonnes), while hot metal output increased 1% to 2.31 mln tonnes (Q2 2015: 2.29 mln tonnes) against the previous quarter, during which steel production was impacted by scheduled maintenance at the BOF#3 and continuous caster #2 and #4.

● Severstal's proximity to the border allowed the Company to flexibly relocate sales volumes from export market, with share of domestic deliveries within the sales mix increasing to 67% (Q2 2015: 59%).

● Consolidated sales of steel products increased 13% q/q with Severstal's steel assets continuing to run at near to full capacity. Steel consumption in Russia was stronger q/q despite less pronounced seasonality compared with previous years.

● Together this enabled the Company to reduce inventory levels and improve its receivables turnover ratio.

● The share of high value-added (HVA) products in the sales portfolio remained strong at 47% (Q2 2015: 47%) despite a 16% q/q increase in semi-finished products sales and a 9% q/q increase in hot-rolled coil sales.

● Coking coal concentrate sales remained flat q/q in spite of a decrease in ROM-coal output volumes in Q3 at Vorkutaugol on the back of scheduled long-walls repositioning activity during the period.

● Global steel prices continued to decline, largely impacted by concerns regarding the prospects of the Chinese economy. However, successful increases in RUB-denominated prices reflects improved buying activity on the domestic market, which has partially offset the impact of RUB devaluation.

SUMMARY OF KEY PRODUCTION, SALES VOLUMES AND SELLING PRICES DATA

SEVERSTAL RESOURCES

● Iron ore concentrate sales volumes increased 5% q/q to 1.13 mln tonnes (Q2 2015: 1.07 mln tonnes) mainly driven by an increase in external sales as profitability at Olkon was supported by RUB devaluation.

● Iron ore pellets sales increased 5% q/q to 2.73 mln tonnes (Q2 2015: 2.60 mln tonnes) reflecting both higher internal procurement and seasonally higher external sales on the domestic market.

● Coking coal concentrate sales volumes remained largely flat q/q at 1.46 mln tonnes (Q2 2015: 1.46 mln tonnes) despite a declined ROM-coal output q/q, which was driven by scheduled long-wall repositioning at the several mines at Vorkutaugol during the period. In 2015, Vorkutaugol will commission 5 new coalfaces across all of its mines.

● Steam coal sales at Vorkutaugol increased 37% q/q on the back of improved demand from domestic consumers prior to the heating season.

● Against a 6% q/q decline of the global iron ore benchmark in Q3, average selling prices of iron ore pellets at Karelsky Okatysh and iron ore concentrate at Olkon decreased 13% and 14%, respectively. This was largely driven by a ca. 20% q/q RUB devaluation against the USD during the period, which was partially offset by RUB-denominated price increases.

● Average coking coal concentrate selling prices decreased 30% q/q, which was a function of the weaker RUB q/q as well as a downwards revision of coking coal contract prices starting from July 2015. Moreover, there has been an increase in the share of semi-soft coking coal within the sales mix.

SEVERSTAL RUSSIAN STEEL ('RSD')

● RSD increased steel product sales by 13% q/q to 3.01 mln tonnes driven by improved domestic steel consumption and despite less pronounced seasonality this year.

● The share of domestic sales within the sales mix increased to 67% (Q2 2015: 59%) reflecting Severstal's ability to efficiently reallocate sales volumes between export and domestic markets and capture improved consumption trends on the domestic market.

● Rolling facilities at CherMK remained at almost full capacity in Q3 2015. Improved domestic flat steel consumption led to notable increases in galvanised and metallic coated coil and color coated coil sales volumes, of 44% q/q and 72% q/q respectively. This enabled RSD to maintain the share of HVA products within sales mix at 47% regardless an increase in semi-finished products and hot-rolled coil sales.

● Long products sales volumes increased 23% q/q as operational problems at Balakovo, which impacted production volumes in Q2 2015, were successfully resolved. In the meantime, it remains in a ramp-up mode.

● While Izhora Pipe Mill capacities were fully utilized in Q3 2015 large diameter pipes (LDPs) sales volumes declined 22% q/q. This mainly reflects change to product mix with higher share of Transneft maintenance projects deliveries q/q. In the meantime, Severstal continued supplying LDPs for the Power of Siberia project and Gazprom maintenance projects.

● Despite the continuing downward trend in global steel prices, a seasonal uptick in domestic demand enabled RSD to proceed with RUB-denominated price increases across almost all types of steel products. This helped to partially mitigate the impact of RUB devaluation in Q3 2015.

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, Severstal Distribution LLC and AO Severstal Distribution data;

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

7) 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 9M 2014 consolidated operational results

 http://www.rns-pdf.londonstockexchange.com/rns/0574C_-2015-10-13.pdf

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 RTS and MICEX and the company's GDRs are traded on the LSE. 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