Annual report and accounts 2012

The right strategy in the right markets

Global steel demand is expected to exceed 2 billion tonnes by 2023, driven by construction demand and middle class consumption in emerging economies, according to some experts. Severstal is principally based in Russia, a leading emerging market economy expected to grow from US$2 trillion in 2011 to more than US$3.2 trillion in 2017, according to market research, with significant increases in demand for infrastructure projects, consumer goods and automobiles. In the US, our other major sphere of operations, the economy is poised for recovery and growth, with new vehicle registrations expected to climb 6.6% in 2013, say local experts.

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Severstal is one of the few international steel companies with a strong position in both iron ore and coking coal. This provides cost advantages and reduces exposure to raw material price fluctuations. In addition, Severstal also benefits from relatively lowcost supplies of electricity and natural gas. Historically, Russia is a low-cost steel producer, and as one of the largest producers of steel in Russia, Severstal benefits from economies of scale. To maintain its cost competitiveness, Severstal makes capital investments to improve productivity and efficiency.

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Cherepovets Steel Mill production cash cost of slab, $/t

Severstal is the Russian leader in high-value-added (HVA) steel production with product mix including 44 per cent HVA products in 2012. So in recent years we have invested strategically in the production facilities needed to support the growing number of contracts for these higher margin products.

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Severstal Russian Steel sales by product, %

2012 HIGHLIGTS

CRUDE STEEL PRODUCTION, tonnes

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CEO'S STATEMENT

Global economic conditions remain uncertain for the steel industry, but I am confident Severstal has the right strategy to address our marketplace in 2013

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OUR BUSINESS MODEL

The Severstal’s business model shows the component strengths which differentiate the company from its competitors.

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