Evraz steel production falls in first quarter, seen rising in second

Russian steel-maker Evraz reported a fall in production in the first quarter but mined a larger amount of coal.

Total crude steel production of 3.36m tonnes in the first three months of 2018 was down 5.5% on the fourth quarter of 2017 and 8.7% lower than the first.

The fall was attributed to lower pig iron production due to severe weather in January and February affecting iron ore supply logistics as well as the technical condition of blast furnaces no. 1 and no. 3 at its consolidated West-Siberian metallurgical plant, shutdown of the blast furnace no.6 at the vast, old Nizhny Tagil plant in the Urals and the disposal of its DMZ steel mills last month.

The FTSE 100 group, where shares have been hit by read-across after economic sanctions were imposed on several Russian oligarchs and their assets earlier this month, sold 3.2m tonnes of steel product during the first quarter, down 5.7% on the fourth and 7.2% on the first quarters last year, due to the lower crude steel production.

Sales of semi-finished products fell 16.6%, primarily due to reduced pig iron and crude steel production, though this was partly offset by a 5.7% increase in the output of finished products for the construction industry.

Raw coking coal mining production from the Yuzhkuzbassugol unit increased 6.7% on the preceding quarter to 6.0m tonnes following the completion of scheduled work at the Alardinskaya and Uskovskaya mines. Coal product sales fell 10.0% compared to an unusually high number at the end of 2017 amid higher sales prices.

Iron ore product sales fell 4.3% due to restocking of pellets, while vanadium sales dropped 17.0% due to lower FeV and oxide sales, resulting from reduced oxide availability and reduced slag conversion at third parties. Evraz said the aim is to increase conversion of the slag produced in 2018 and accumulated from 2017 later in the year.

The second quarter is expected to see crude steel output rise slightly on the first, with tubular product volumes up 5-10%, flat-rolled products to climb 5-10% and construction products and rail to remain strong.

Raw coal production is expected to slightly decrease quarter-on-quarter due to scheduled work at the Raspadskaya mine started from the end of Q1 2018 and is expected to be completed by Q3 2018.

Pig iron production is seen rising around 9% in the absence of major repairs and the launching of blast furnace no.7 at NTMK, while pellet production at KGOK is expected to decrease 2% due to the scheduled repairs in June.