Severstal Q2 2015 Results

Russian steel company OAO Severstal reported that steel production in the second quarter of this year fell by 4 percent compared to the first quarter due to lower consumption of scrap metal in the steelmaking process and short-term repairs. Crude steel production in the second quarter was 2.85 million tonnes, down from 2.96 million tonnes in the first quarter. Pig iron production declined slightly over the period, by 1 percent, to 2.29 million tons from 2.31 million tons in the previous quarter.

However, total steel product sales increased 4 percent to 2.66 million tonnes from 2.54 million tonnes in the previous quarter, driven in part by increased seasonal demand in the Russian steel market and additional distribution in strong export markets. ... The proximity of Severstal's production facilities to export markets and flexibility in marketing allowed the company to increase its export volumes.

At the same time, the share of high value-added products in Severstal's product portfolio increased by one percentage point to 47 percent, which is associated with a 13 percent increase in sales of these products qoq and a decrease in sales of long products in the second quarter. This partially offset the 10% QoQ growth in hot-rolled sheet sales.

Severstal's coking coal concentrate sales in the second quarter increased 15 percent to 1,458,915 tonnes from 1,272,642 tonnes in the first quarter, despite a decline in Vorkutaugol production due to a scheduled longwall rewiring in June this year. The better result was achieved in large part due to the negative impact of adverse weather conditions in the first quarter, according to the company.

The company said that while the global pricing environment remains challenging, the average dollar-denominated selling prices for Severstal steel products were up qoq due to the strengthening of the Russian ruble. The company expects a gradual normalization of premiums at the end of the year.