On November 1, 2019, EVRAZ released its trading update for Q3 2019.

Q3 2019 versus Q2 2019 highlights

In the third quarter of 2019, EVRAZ’s consolidated crude steel output decreased by 3.4 percent quarter-on-quarter, mainly due to lower production volumes at EVRAZ ZSMK (West Siberian Metallurgical Plant) amid scheduled capital repairs. Production was also impacted by reduced output at EVRAZ’s U.S. and Canadian mills following scheduled downtimes and by a weaker demand.

Total steel product sales remained flat quarter-on-quarter. Sales of semi-finished products increased by 5.6 percent quarter-on-quarter due to better market conditions. This was partly offset by a 3.1-percent quarter-on-quarter drop in finished products due to lower sales of flat-rolled products (decreased production at EVRAZ Palini e Bertoli, as well as a weaker demand from service centers in North America) and railway products (capital repairs at EVRAZ ZSMK and EVRAZ NTMK (Nizhny Tagil Metallurgical Plant).

The production of raw coking coal decreased by 9.7 percent quarter-on-quarter mainly following the decision to reduce production at the Razrez Raspadsky open-pit as a response to substantial accumulated stockpiles of raw coal.

External sales volumes of coking coal products remained flat quarter-on-quarter. External sales of iron ore products decreased by 73 kt (thousand tons), or 31.1 percent, quarter-on-quarter, as production volumes of pellets were down amid capital repairs at EVRAZ KGOK (Kachkanar Mining and Processing Plant) roasting machine No. 2.

Sales of final vanadium products rose by 9.8 percent quarter-on-quarter, mainly due to increased demand in China. This was a result of robust infrastructure sector development, as well as ferrovanadium re-stocking in the rest of the world due to lower prices. 

Steel segment

In the third quarter of 2019, EVRAZ’s pig iron output rose by 1.8 percent quarter-on-quarter, mainly following the completion of capital repairs in April at EVRAZ NTMK’s blast furnace No. 5. Crude steel production volumes fell by 1.8 percent quarter-on-quarter, primarily due to scheduled capital repairs from July to August 2019 at EVRAZ ZSMK.

Total output of steel products remained almost flat quarter-on-quarter, with a 14.8-percent quarter-on-quarter increase in production volumes at EVRAZ NTMK due to lower re-rolled volumes of slabs in the steel segment in North America. EVRAZ Caspian Steel boosted production by 11.7 percent following higher demand from customers. This was partly offset by production at EVRAZ Palini e Bertoli, which went down by 12.9 percent due to unscheduled downtime in August 2019. 

Iron ore products output fell by 6.1 percent quarter-on-quarter, mainly due to capital repairs in August-September 2019 at EVRAZ KGOK’s roasting machine No. 2. In the third quarter of 2019, external sales of steel products were up 2.8 percent quarter-on-quarter. Sales of semi-finished products rose by 8.1 percent quarter-on-quarter, primarily due to better market conditions.

Sales of finished products fell by two percent quarter-on-quarter. Sales of railway products were down 14.4 percent quarter-on-quarter amid capital repairs at EVRAZ NTMK’s rail and beam mill and EVRAZ ZSMK’s electric-arc furnace shop. In addition, sales of flat-rolled products dropped by 19.4 percent quarter-on-quarter, primarily due to a decline in production volumes at EVRAZ Palini e Bertoli.

Inter-segment sales declined by 76.5 percent quarter-on-quarter due to lower sales of slabs to the steel segment in North America following a decline in customer demand.

Sales of iron ore products fell by 31.1 percent quarter-on-quarter after a reduction in pellet production volumes due to capital repairs from August to September at EVRAZ KGOK’s roasting machine No. 2. 

Sales of final vanadium products rose by 9.8 percent quarter-on-quarter, mainly due to increased demand in China. This was the result of robust infrastructure sector development, as well as ferrovanadium re-stocking in the rest of the world due to lower prices.

In the fourth quarter of 2019, pig iron production volumes are expected to edge down quarter-on-quarter due to capital repairs in October at EVRAZ NTMK’s blast furnace No. 5. This will be partly offset by a quarter-on-quarter uptick in pig iron production volumes following the completion of capital repairs in July-August 2019 at EVRAZ ZSMK.

Steel, North America segment

In the third quarter of 2019, crude steel production dropped by 13.2 percent quarter-on-quarter. The reduction was made at EVRAZ Regina facility in anticipation of weaker demand for both OCTG (oil country tubular goods) and line pipe in the upcoming months, as well as by lower production at EVRAZ Pueblo, which came as a result of scheduled downtimes and unplanned repairs.

Sales of semi-finished products (slabs) fell by 39.2 percent quarter-on-quarter, driven primarily by the timing of customer orders, which fluctuate throughout the year.

Sales of construction products decreased by 4.3 percent quarter-on-quarter with continued sluggish demand caused by substantial customer inventories and imports of wire rod and rebar.

Sales of railway products were down 13.1 percent quarter-on-quarter in the reporting period due to planned major maintenance outage in September.

Flat-rolled product sales went down by 9.2 percent quarter-on-quarter as a result of a weakening demand from the service center. End user demand did not decrease in the third quarter of 2019.

Tubular product sales volumes were almost flat (down 0.5 percent) quarter-on-quarter, as the Canadian OCTG market remains soft. 

Prices for construction products decreased in the reporting period, driven primarily by falling scrap pricing and a sluggish market demand. Prices for flat-rolled products dropped further as service centers continued to curtail purchases amid rapidly falling scrap prices and market uncertainty driven by soft demand. Prices for tubular products were almost flat in the third quarter of 2019 (up 0.5 percent quarter-on-quarter) thanks to higher priced large-diameter pipe (LDP) orders, although this was offset by a continued softening on the OCTG markets and lower line pipe prices.

In the fourth quarter of 2019, crude steel output is expected to climb by as much as five percent compared to the average level for the second quarter and the third quarter of 2019. Tubular sales volumes are expected to rise quarter-on-quarter, driven by increased recognition of current LDP orders and higher line pipe sales volumes. The sales of flat-rolled products are forecast to remain flat or marginally decline quarter-on-quarter, driven by continued softness in the market along with the usual seasonal decline in demand at the end of the year.

Coal segment

In the third quarter of 2019, overall raw coking coal output fell by 9.7 percent quarter-on-quarter mainly following the decision to reduce production at the Razrez-Raspadsky open-pit as a response to substantial accumulated raw coal stockpiles. In addition, production volumes were lower quarter-on-quarter due to the longwall move at the Uskovskaya mine during the reporting period.

The output of coking coal concentrate dropped by 5.9 percent quarter-on-quarter, primarily due to higher sales of raw coal from the Uskovskaya mine.

In the third quarter of 2019, external sales volumes of coking coal products remained flat quarter-on-quarter. Raw coking coal sales volumes surged by 65.8 percent quarter-on-quarter due to higher sales at the Uskovskaya mine to match customer needs. This was partly offset by lower coking coal concentrate sales volumes due to logistical limitations of shipments to Russia’s Far East as a result of maintenance works at the railroads. 

In the third quarter of 2019, coking coal selling prices moved in line with global benchmarks. In the fourth quarter of 2019, raw coal production is expected to remain flat quarter-on-quarter, as the effect from the completion of the longwall move at the Uskovskaya mine will be partly offset by the longwall move at the Erunakovskaya mine.

Semi-finished products include slabs, billets, pipe blanks, and other semi-finished products.

Construction products include beams, channels, angles, rebars, wire rods, wire and other construction products.

Railway products include rails, wheels, tires, and other railway products.

Flat-rolled products include commodity plate, specialty plate, and other flat products.

Tubular products include large-diameter line pipes, ERW (electric resistance welding) pipes and casings, seamless pipes and other tubular products.

Other steel products include rounds, grinding balls, mine uprights, strips, etc. They also include railway products for Ukraine.