PAO Severstal, one of the world’s leading vertically integrated steel and steelmaking companies, announced its operating results for the third quarter and the first nine months of 2020 on October 9, 2020.

Third quarter indicators

Hot metal production increased by three percent to 2.40 million tons in the third quarter of 2020 (Q2 2020: 2.33 million tons), following the completion of maintenance work on blast furnaces in the previous quarter. Crude steel production increased by three percent to 2.89 million tons (Q2 2020: 2.81 million tons), supported by the growth in hot metal production.

Consolidated sales of steel products increased by 18 percent to 3.01 million tons in the third quarter of 2020 (Q2 2020: 2.55 million tons). This figure reflects production growth, a lower export share with a longer realization phase compared to the previous quarter, and a reduction in finished goods inventories.

In response to a recovery in demand in Russia in the third quarter of 2020, the company increased its share of domestic steel shipments to 63 percent (Q2 2020: 56 percent).

The share of high value-added (HVA) products in the sales portfolio was 49 percent (Q2 2020: 43 percent) due to the delayed demand for HVA products. The company thus reduced its inventory of HVA finished goods quarter-on-quarter.

Sales volumes of coking coal concentrate from Vorkutaugol decreased by five percent quarter-on-quarter to 1.22 million tons due to lower concentrate production and lower run-of-mine (ROM) at the Zapolyarnaya Mine.

Iron ore pellet shipments increased by three percent to 2.61 million tons (Q2 2020: 2.53 million tons), reflecting growth in iron ore pellet production and the sale of quarter-on-quarter inventories.

Sales of iron ore concentrate increased by three percent to 1.96 million tons (Q2 2020: 1.90 million tons), mainly due to higher production at Karelsky Okatysh and Olcon.

Indicators for nine months

Production of hot metal remained constant at 7.14 million tons in the first nine months of 2020 (9M 2019: 7.13 million tons). Crude steel production decreased to 8.55 million tons (9M 2019: 9.13 million tons) due to lower production volumes of EAF (electric arc furnace) steel following the disposal of the Balakovo mini-plant in July 2019.

The share of HVA products remained stable at 45 percent in the first nine months of 2020. The share of domestic shipments in 2020 was 58 percent, lower than in 2019 (9M 2019: 67 percent). This is the result of a slowdown in domestic demand in 2020 after it peaked during the previous year, as well as the divestment of the Balakovo mini-factory, which mainly served domestic markets.

Average steel sales prices for the first nine months of 2020 fell from 10 percent to 19 percent across the product range, reflecting the unfavorable price dynamics of global benchmarks.

Sales of iron ore concentrate increased by 14 percent to 5.33 million tons (9M 2019: 4.66 million tons), driven by production growth at Karelsky Okatysh and the Yakovlevskiy mine. The company anticipates total production of approximately two million tons of iron ore concentrate at the Yakovlevskiy mine in 2020.

Sales of coking coal concentrate from Vorkutaugol increased by three percent.

Severstal resources

Sales of coking coal concentrate from Vorkutaugol decreased by five percent quarter-on-quarter to 1.22 million tons due to lower concentrate production and lower ROM at the Zapolyarnaya mine.

ROM coal production at Vorkutaugol decreased by seven percent in the third quarter of 2020 compared to the second quarter of 2020.

Sales of iron ore pellets increased by three percent to 2.61 million tons (Q2 2020: 2.53 million tons), due to the higher production of iron ore pellets and the sale of inventories.

Sales of iron ore concentrates increased by three percent to 1.96 million tons (Q2 2020: 1.90 million tons), mainly due to higher production at Karelsky Okatysh and Olcon.

Severstal Russian Steel (RSD)  

Sales of RSD steel products increased by 18 percent to 3.02 million tons in the third quarter of 2020 (Q2 2020: 2.56 million tons). This reflects production growth, a lower share of export deliveries with a longer implementation phase compared to the previous quarter, and a reduction in finished goods inventories.

In response to the recovery in demand in Russia in the third quarter of 2020, the company increased its share of domestic steel shipments to 63 percent (Q2 2020: 56 percent).

The share of high value-added (HVA) products in the sales portfolio amounted to 49 percent (Q2 2020: 43 percent) due to delayed demand for HVA products, and the company reduced its inventory of HVA finished goods quarter-on-quarter.

Due to lower inventories at the Izhora (ITZ) pipe mill, LDP (large-diameter pipes) sales volume increased to 85,000 tons in the third quarter of 2020. In response to the decline in domestic demand, the company has shifted part of its sales to exporting countries in the third quarter of 2020.

The weighted average selling price for the entire range of steel products increased by two percent in the third quarter of 2020, reflecting positive price dynamics for steel in export targets and a higher share of HVA products in the quarter-on-quarter sales mix. Severstal’s customer-centric approach, the flexibility of its distribution channels, and the high proportion of HVA products in its portfolio enabled Severstal to successfully maintain average selling prices over the reporting period.