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MMK

October 27, 2010

MMK operational trading update for Q3 and 9 months 2010

MMK Operational Trading Update for Q3 and 9 months 2010

Group operational highlights

  • Crude steel output in 9 months 2010 amounted to 8,654 th. tons which is 22.6% higher y-on-y.
  • Steel products output in 9 months 2010 amounted to 8,183 th. tons, and increased by 21.6% y-on-y.
  • Coking coal concentrate output rose by 6.4% in 9 months 2010 y-on-y to 2,118 th. tons.
  • Steam coal concentrate output rose by 25.7% in 9 months 2010 y-on-y to 2,128 th. tons.
  • Iron ore output in 9M 2010 amounted to 3,674 th. tons and rose by 18.4% y-on-y. 
  • Average price of MMK finished steel products amounted to $632 per ton.
  • Domestic shipments share rose by 4% q-on-q in Q3 2010 and amounted to 69%.
  • HVA products share in MMKs product mix amounted to 33%.

MMK first vice-president for strategy and metallurgy Rafkat Takhautdinov said: We are satisfied with our performance in the 3 rd quarter and nine months of 2010. We managed to increase production volumes by more than 20% y-on-y due to focus on domestic sales and mastering new product types with high margins. 

 

Steel segment

Production, th. tons

Production

3Q10

2Q10

%

9m'10

9m09

%

Cast iron

2,315

2,320

-0.2%

6,871

5,924

16.0%

Crude steel

2,938

2,985

-1.6%

8,654

7,060

22.6%

Finishedproductsoutput, incl.:

2,661

2,623

1.5%

7,737

6,437

20.2%

Slabs and billets

83

115

-27.8%

198

2

n/a

Long products

336

203

65.5%

749

829

-9.7%

Flat hot-rolled products

1,371

1,397

-1.9%

4,276

3,903

9.6%

High value-added (HVA) products, incl.:

872

908

-4.0%

 2,514

1,704

47.5%

Thick plate (mill 5000)

245

228

7.5%

649

29

n/a

Flat cold-rolled products

277

306

-9.5%

834

798

4.5%

Downstream products, incl.:

349

374

-6.7%

 1,030

877

17.4%

Tin plate

41

66

-37.9%

166

170

-2.4%

Galvanized steel

153

157

-2.5%

430

374

15.0%

Colour-coated steel

67

52

28.8%

158

152

3.9%

Band

30

34

-11.8%

90

78

15.4%

Formed section

38

48

-20.8%

136

54

151.9%

Pipes

20

16

25.0%

51

48

6.3%

Shipments by market:

 

 

 

 

 

 

Domestic shipments

1,835

1,712

7.2%

5,112

3,581

42.8%

Export shipments

826

910

-9.2%

2,625

2,857

-8.1%

Average prices, USD

 

3Q10

2Q10

%

9m'10

9m09

%

Average price per ton:

 

 

 

 

 

 

Slabs and billets

410

484

-15.3%

455

390

16.7%

Long products

619

609

1.6%

595

432

37.7%

Flat hot-rolled products

529

568

-6.9%

525

382

37.4%

High value-added (HVA) products, incl.:

818

799

2.4%

789

611

29.1%

Thick plate (mill 5000)

887

831

6.7%

850

648

31.2%

Flat cold-rolled products

646

645

0.2%

617

438

40.9%

Downstream products, incl.:

906

905

0.1%

888

766

15.9%

Tin plate

964

971

-0.7%

955

927

3.0%

Galvanized steel

853

864

-1.3%

846

692

22.3%

Colour-coated steel

1,179

1,267

-6.9%

1,220

963

26.7%

Band

811

785

3.3%

770

596

29.2%

Formed section

768

719

6.8%

718

667

7.6%

Pipes

674

678

-0.6%

655

529

23.8%

 Average price per ton, incl.:

632

647

-2.3%

615

449

37.0%

Domestic sales

701

706

-0.7%

680

514

32.1%

Export sales

478

537

-11.0%

490

366

33.7%

 

  • Finished products output in Q3 2010 rose by 1.5% q-on-q and amounted to 2,661 th. tons. Main growth drivers are mill 5000 thick plates, colour-coated and long products. 
  • Share of slabs in products portfolio decreased by 28% in Q3 2010 which is in line with the policy pursued by the company to bring to zero production of semi-finished products and increase output of HVA products.
  • Q3 2010 long products production increased significantly (by 65%) q-on-q thanks to observed recovery in the domestic market demand buttressed by shortage of supply. Minimal July supply volumes and increased activity in the rebar market in August made traders to resume restocking.
  • Ramadan holiday in the Middle East, holiday season and continued unstable economic situation in Europe lead to reduced shipments and weaker prices for HRC.
  • HVA products share in MMKs product mix remained mainly unchanged q-on-q at the level of 33%.
  • In Q3 2010 MMK kept on increasing monthly production volumes of thick plate at mill 5000. Overall Q3 2010 production at mill 5000 amounted to 245 th. tons which is 7.5% higher q-on-q.
  • CRC shipments volume decreased because of reduced motor cars production in August, with Russian automakers being key consumers of this product type. In its turn motor cars output declined because of emergency situation as the result of continued fires in a number of Russian regions in Russia. This led to car-makers standing idle.
  • MMK continues to successfully compete in the segment of rolled steel products with coatings. The company managed to build up its coated steel output by 5% q-on-q despite peak import levels from China during summer months.
  • Domestic shipments share in Q3 2010 rose by 4% q-on-q and amounted to 69%. In absolute figures Q3 2010 domestic shipments rose by 123 th. tons (up 7.2%), while export shipments decreased by 84 th. tons (down 9.2%). These changes are in line with MMKs strategy of increasing presence in the attractive domestic market, suggesting price premium, i.a. by replacement of imported steel products.
  • Q3 2010 average price per ton of steel products changed from $647 to $632 mainly due to weaker prices in export markets.
  • Q3 2010 domestic market average price remained flat (around $700 per ton). Average export price went down to $478 in Q3 from $537 q-on-q.
  • Average price of HVA products in Q3 2010 went up by $19 or 2.4%. This growth also reflects increased average price for mill 5000 products which went up by $56 or 6.7%. The growth is mainly attributable to mastering of new steel grades and increased range of steel shipments to pipe producers (specializing on more sophisticated product types) in terms of plate thickness.

 

-Atakas

Production, th. tons

Production

3Q10

2Q10

%

9m'10

9m09

%

Finished steel products, incl.:

54

38

42.1%

111

21

428.6%

Flat hot-rolled products

29

20

45.0%

64

16

300.0%

Flat cold-rolled products

0

0,3

n/a

1

2

-50.0%

Galvanized steel

12

8

50.0%

21

3

600.0%

Colour-coated steel

13

10

30.0%

25

-

n/a

Average prices, USD

 

3Q10

2Q10

%

9m'10

9m09

%

Finished steel products, incl.:

774

793

-2.4%

784

569

44.6%

Flat hot-rolled products

634

627

1.1%

667

529

26.1%

Flat cold-rolled products

 

757

n/a

750

612

22.5%

Galvanized steel

796

812

-2.0%

803

735

9.3%

Colour-coated steel

1,062

1,104

-3.8%

1,076

-

n/a

  • Q3 2010 finished products output amounted to 54 th. tons, which is 42.1% higher q-on-q. The main growth drivers were commissioning and ramp-up of new production facilities.
  • Average realized price went down by 2.4% in Q3 2010 and amounted to $774 per ton because of market conditions.

 

Mining segment

COAL

Belon

Production, th. tons

Production

3Q10

2Q10

%

9m'10

9m09

%

Coking coal

822

1,150

-28.5%

3,325

2,828

17.6%

Mined

747

1,078

-30.7%

3,026

2,753

9.9%

Purchased

75

72

4.2%

299

75

298.7%

Cokingcoalconcentrate

525

747

-29.7%

2,118

1,991

6.4%

Steam coal

628

887

-29.2%

2,481

1,758

41.1%

Mined

628

887

-29.2%

2,481

1,755

41.4%

Purchased

0

0

n/a

0

3

n/a

Steamcoalconcentrate

569

853

-33.3%

2,128

1,693

25.7%

Average prices, USD

 

3Q10

2Q10

%

9m'10

9m09

%

Cokingcoalconcentrate

146

139

5.0%

134

61

119.7%

Steamcoalconcentrate

46

40

15.0%

43

52

-17.3%

 

 

 

 

 

 

 

 

  • Q3 2010 coking coal concentrate production amounted to 525 th. tons, output of steam coal concentrate reached 569 th. tons.
  • This decrease in concentrate production is attributable to change of walls during Q3 2010, additional works to meet safety requirements, difficult geological and mining conditions and increased ash content. Starting from September 2010 production volumes recovered and are in line with production plans for 2010 year-end.

There is a persisting undersupply of fat-base coking coals after the explosion at Raspadskaya. At present Belon is one of the key suppliers of these coal grades. The company increased its share in the Russian market in 2010 to 10% from 8% in 2009.

 

IRON ORE

Production, th. tons

Production

3Q10

2Q10

%

9m'10

9m09

%

Ironoreproduction, incl.:

1,306

1,261

3.6%

3,674

3,102

18.4%

        Iron ore production (Bakal)

482

411

17.3%

1,289

735

75.4%

        Iron ore production (MMK base in Magnitogorsk)

354

390

-9.2%

1,119

1,068

4.8%

        Slag processing

470

460

2.2%

1,266

1,299

-2.5%

  • Iron ore production at Bakal in Q3 2010 went up by 17.3% q-on-q to reach 482 th. tons.
  • Increased production volumes for the 9m 2010 period y-on-y is the results of ramp-up of production at Sosnovsky deposit.

 

Development of MMK key investment projects

Mill 5000

Mill 5000 has reached full capacity and is now runs at 100% of utilization rate. Having mastered x70 steel grade steel, the company is now mastering grade x80. This strong steel grades are used in construction of trunk pipelines.

The main consumers of MMK thick plate are OMK (Vyksunsky steel mill), TMK (Volzhsky pipe mill) and ChTPZ.

As part of the acceptance process of supply for the Shtokman project companies Saipem, Samsung Heavy Industries and Shtokman Development AG paid a visit to MMK in October 2010. The implied supplies will include high grade steel plate up to 50 mm thick capable to serve at -60º .

In October 2010 MMK made a shipment of premium price class thick plate to the United Shipbuilding Company.

Mill 2000

MMK continues construction of its new cold rolling complex (Mill 2000) in order to benefit from the growing market of high- and ultra high-strength steel types. The complex will use state-of-the-art technologies to produce high quality cold-rolled and galvanized steel products for inner and outer car-body parts as well as for use in white-goods production and in construction industry.

Mill 2000 will produce 2 mln tons of finished steel products per year, including 700 th. tons of galvanized steel.

Cold rolling mill and pickling line will be commissioned in the middle of 2011, while full-cycle production at the facility will be commissioned by mid 2012. 

At the moment the building containing the cold rolling mill and the pickling line is 90% ready, ¾ of the equipment foundation is built and above ⅓ of equipment is installed.

-Atakas

In order to strengthen the footprint in the Middle East market MMK completes MMK-Atakas steel-making complex in Turkey.

February 2010 saw commissioning of the colour-coating line, April 2010 hot-dip galvanizing line. At the same time captive sea port of MMK-Atakas in Iskenderun started its operation. Construction works were completed at the cold rolling shop, scrap yard, water preparation shop and power station. On October 20, 2010 MMK-Atakas commissioned the cold-rolling mill. It is planned that all the production facilities of MMK-Atakas complex in Iskenderun and in Istanbul be commissioned in Q1 2011.

Outlook

Production volumes in Q4 2010 are expected to be at Q3 2010 levels, shipments to the domestic market are planned to increase.

MMK Group Q3 and 9 months 2010 results under IFRS will be published in the 1 st half of December 2010.

 

 

 

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