As a result revenue, margins and profits all grew strongly the Board was pleased to announce a return to the dividend list in the second half of the year. The Board continues to pay close attention to further improving standards of health and safety, with progress also made in this critical area.

Capital expenditure rose as we progressed initiatives across the Group. We focus our investment activities on areas where we see the greatest potential for growth and can operate our integrated model in a competitive way on the regional cost curve.

We made progress on major projects in Russia which will further strengthen our position in the higher growth automotive, construction and infrastructure sectors. These include the construction of a mini-mill at Balakovo in the Saratov region, due to be completed in 2013, with a production capacity of one million tonnes a year.

We took the decision to refocus our North American operations on our Dearborn and Columbus facilities. These are amongst the most efficient in the region and are integrated with our PBS Coals operation, while being well positioned to supply the buoyant automotive sector. After the year end, we announced the sale of our Warren, Wheeling and Sparrows Point facilities. In Europe we also decided that Lucchini does not fit our preferred integrated model and we, therefore, classified it as held for sale.

We continued to achieve high returns from our mining activities, with higher prices and expanded production over the year. We also laid the foundations for future growth with major new greenfield initiatives, including winning licences for new projects in coking coal in Russia and iron ore in Africa.

The development of Nordgold demonstrates that we can also generate returns by using our mining and regional competences selectively for other high value minerals.

In December we announced a Memorandum of Understanding to establish a joint venture to build an integrated steel plant at Karnataka in India, one of the world’s most attractive growth markets. The joint venture will operate to our integrated model, with self sufficiency in coking coal and locally mined iron ore.

Severstal remains committed to high standards of corporate governance. The Board is well balanced between executive and non-executive Directors and scrutinises management’s performance against agreed goals. We also seek to continuously evolve the senior management team. In September we announced that Alexander Grubman would assume the role of CEO of Severstal Russian Steel and Vadim Larin the role of CEO of Severstal Resources. Both have extensive experience across our operations and are, therefore, well qualified to ensure we continue to drive efficiency and capture the maximum benefit from our vertically integrated model.

We were very saddened to report the untimely death in December of Anatoly Kruchinin, aged only 50. He joined Severstal in 1982 and gave almost thirty years of distinguished service, culminating in his work as CEO of Severstal Russian Steel. Anatoly was a highly respected and popular colleague who we will miss greatly. The Board would like to express its condolences to his family and friends.

We finished 2010 with good momentum, which bodes well for our continued development in 2011. We believe the steel market is likely to remain strong as a result of high raw material pricing and steel product re-stocking. With an increased focus on higher growth market segments, high levels of self sufficiency in coking coal and iron ore, and an expanding emerging market dimension, Severstal is well placed to achieve another year of good progress.

Christopher Clark
Chairman of the Board of Directors