|Home||Company overview||Strategy||Performance||Sustainability||Governance||Financial statements||Additional information|
|Home||Company overview||Strategy||Performance||Sustainability||Governance||Financial statements||Additional information|
COO statement CFO statement Business overview Severstal Resources Severstal Russian Steel
Key 2013 highlights: Key production facilities Operational and financial results Key performance indicators Production results Sales results Costs: Operational development in 2013 Outlook and strategic priorities for 2014Severstal International
Operational development in 2013
The Severstal Russian Steel capital expenditure programme is designed to increase productivity and efﬁciency, improve environmental protection, replace and refurbish major equipment, and develop the Division’s product mix further to produce higher-quality and value-added products, including galvanized steel and cold-rolled products. For example, at the beginning of 2013 we launched Coke Battery #7, giving us complete self-sufﬁciency in coke.
In 2013 the division’s cash capital expenditure was US$574 million.
Our key development projects:
For the construction industry:
Diversiﬁcation into the long products market and launch of steel brands
Severstal intends to capitalise on the fast-growing Russian construction market. In 2013, the Russian Steel Division’s key asset, the Cherepovets Steel Mill, achieved maximum volumes of long products production. The plant made 1,258,000 tons of long products, the highest production volume in the recent ﬁve years and a 14 per cent increase in production since 2012. This increase was delivered thanks to the organisational and technical initiatives that we introduced to increase billet production for long products and the performance of section mills, as well as the hard work, skill and dedication of our personnel.
In 2013, the Cherepovets Steel Mill saw a 27 per cent or 162,000 ton increase in shipments of long products to the construction industry, compared with 2012. In 2014, we will continue delivering long products to the Western High-Speed Diameter, one of the largest infrastructure projects currently under development. Fittings for the road’s construction are being delivered by the St. Petersburg branch of ZAO TD Severstal-Invest, which is part of the Distribution Network of Severstal’s Russian Steel division. Shipments began in August 2013 and will continue until February 2015.
When we launch the Balakovo mini-mill in the Saratov region in 2014, our total long products capacity in Russia will exceed 2.1 million tonnes a year. To date, we have installed all technological equipment, and the hot-end process and rolling lines assembly works are underway. The launch of the mill is scheduled for Q2 2014.
Balakovo is close to clients, in a scrap-rich area, and close to the sources of cheap energy. It will expand our presence on a promising market and diversify our product mix.
In 2013, the Cherepovets Steel Mill delivered record production of galvanized color-coated steel – around 450 thousand tonnes, an increase of 22 per cent compared with 2012. The output increase is due to a number of factors, including high-quality production using leading-edge technology, the use of high-quality zinc coating and the company’s cooperation with top European polymer producers. The launch of the new range of products under the Steel Silk brand this year has also helped us to increase sales. Steel Silk is a specialized galvanized colour-coated rooﬁng metal and Severstal is offering a warranty period of up to 25 years for this type of coating for the ﬁrst time.
The other steel brand we are marketing is called ArmaNorma, which represents high-quality rebar for construction.
Steel Solutions takes us into a new business area – designing and constructing pre-engineered buildings from steel components. This approach enables homes to be built 1.5 times quicker and 10 per cent cheaper than traditional construction technology. The homes are also more energy-efﬁcient. We have signed our ﬁrst contract and shipments have started. In 2012, we acquired Orel Metal Plant, which after upgrades and modernization will produce all steel products for the Steel Solutions’ projects.
For the automotive, “white goods” and small machinery sectors:
Growing shipments to the car industry
Severstal is a leading provider for international automotive producers operating in Russia. High quality steel products, technical support services and new types of steel developed in cooperation with our customers provide us a unique competitive advantage in this market segment.
Severstal’s international automotive clients operating in Russia include Renault-Nissan, HYUNDAI-KIA, Volkswagen, GM and PSA Peugeot Citroen. We have also increased deliveries of hot dip galvanized rolled products to GAZ Group, Russia’s largest automotive engineering group.
In 2013, Cherepovets Steel Mill increased its sales to the international automotive manufacturers operating in Russia by 14.5 per cent. Severstal-Gonvarri-Kaluga, a joint venture with Gonvarri, is investing in expanding its production capacity. The group has launched an extra line to produce die-cut blanks as well as building an additional 6,350 m2 production area, and increasing the rolled steel storage area by 4,000 m2 to 30,000 tonnes of rolled steel storage capacity. Capacity at Severstal-Gonvarri-Kaluga will increase by 72,000 tonnes per year as a result of this investment. The expansion will meet growing demand from the automotive sector, particularly at Gestamp-Severstal-Kaluga, where increased demand has been triggered by the expansion of Volkswagen production in the region.
At the beginning of 2014 we launched the Severstal-SMC-Vsevolozhsk, steel service center which is our joint-venture with the Japanese giant Mitsui. SMC already started commercial sales to the ﬁrst customers from the household appliances sector. The ﬁrst trial deliveries to the automotive industry are scheduled for Q1 2014.
Blank parts produced at SMC will be delivered to Gestamp-Severstal-Vsevolozhsk (a joint venture with Gestamp) for the production of stamped car body parts. The end customers of these products are expected to be the major international automotive producers operating in Russia’s North-Western region such as Ford, Nissan, Toyota and General Motors. The blank parts will also be delivered to machine-building companies.
Two more lines will be launched in 2014 to produce welded blanks and cut-to-length line (mini-CTL) from feed metal 0.4 mm to 2.3 mm thick. Initial trial runs are scheduled for Q1 2014 with SMC-Vsevolozhsk’s production expected to reach approximately 150 000 tonnes at full capacity.
Dmitry Goroshkov, Marketing and Sales Director of Severstal’s Russian Steel Division, commented: “Approximately 60% of SMC-Vsevolozhsk products will be delivered to autoproducers, with the remainder sold to construction and machine building companies and the household appliances sector.”
In October 2013, the Cherepovets Steel Mill entered into an agreement to supply rolled steel for the production of Nissan’s Almera model. Cold rolled steel produced by Severstal will be used in the production of both the internal and external parts of Nissan Almera cars. Deliveries of rolled steel under this agreement began in July 2013 and will continue until March 2014. Nissan Almera cars are produced in Togliatti, Russia’s Samara region, on the BO production line, built by Renault-Nissan and AvtoVAZ Alliance.
In January 2014, Severstal was approved to supply Ford Sollers with rolled
steel for 30 car parts used in various Ford models to be manufactured in Russia
in 2014. Rolled steel will be supplied for cutting face and non-face blank
parts stamped at Gestamp-Severstal-Vsevolozhsk (a joint venture with Gestamp),
OOO Piterform (part of Magna Cosma International), and at Coskunoz, a Turkish
company located in Tatarstan.
Severstal has the technical competence to increase shipments to the mechanical engineering industry. We offer our customers new products with a broad range of applications and have developed new high-tensile steels with higher performance indicators for mechanical engineering. In 2013, Cherepovets Steel Mill Increased its shipments to the Russian engineering industry by almost 40,000 tonnes. Shipment growth was mainly due to increased deliveries to companies producing appliances and packaging.
In 2013, the Company developed new technology for the production of S500MC grade steel used in truck frame manufacture and characterised by its high strength and good weldability. The ﬁrst preproduction S600MC and S700MC grade steel batches have been produced. The Company has also developed two innovative grades of high-tensile heavy-gauge СВС-690 and S690QL steel which reduced the metal content and cost of the ﬁnal product.
For the heavy machinery sector:
In 2013, we increased sales volumes of special steel to the shipbuilding industry by 11%. Special cold-resistant steel grades АK and АB are used primarily for making navy vessels.
For the oil & gas industry:
Severstal delivered 1,800,000 tonnes of rolled steel to Russia’s pipe manufacturers in 2013, a 10 per cent increase compared with 2012. The growth was mainly due to increased shipments to manufacturers of medium and small diameter water and gas pipes used in the construction industry. Rolled steel manufactured by the Cherepovets Steel Mill was used extensively for major Russian infrastructure projects during this period.
Severstal partnered with pipe manufacturers on major oil and gas pipeline construction projects in the Southern Corridor, the Arctic Circle-Purpe pipeline and the Central Asia-China gas pipeline.
We take a proactive approach by consistently offering the latest engineering solutions to Russia’s pipe-makers to improve pipe performance and meet the requirements of their customers. This year the Russian Steel division’s technical development and quality centre will continue working on a high-strength anti-corrosive coating for pipes used in the oil and gas industry.
In January 2014, Severstal won a tender to supply about 100 thousand tonnes of 813 mm diameter pipes for the South Stream Offshore Pipeline. The pipes are to be manufactured by Izhora Pipe Mill, a part of Severstal’s Russian Steel division.
Sergey Toropov, CEO of Severstal’s Russian Steel division, commented: “We have worked very hard to be a part of this hugely important project, which has served as a driving force for further innovation and the continued development of our production. In order to take part in the tender we have successfully implemented an ambitious investment program on our slab-plates-pipe production chain.”
The combined efforts of specialists from the Russian Steel division’s Technical development and Quality Centre, plate rolling shop No.3 and Izhora Pipe Mill allowed Severstal to develop the market-leading technologies required to produce DNV450 SFDU grade plates with 39.0 mm wall thickness for further production of pipes.
Severstal’s investment into its large diameter pipes production at Izhora Pipe Mill amounted to 1.3 billion rubles. More than ten projects were implemented as part of this investment program, primarily aimed at improving product quality and product mix. Amongst these investment projects are the commissioning of a new ﬁnishing press and the installation of an automated system for measuring pipe geometrics.
Plates, pipes, external and internal coatings manufactured at Severstal’s facilities have successfully passed all of South Stream Transport B.V’s necessary testing, conﬁrming Severstal’s ability to meet the project’s complex technical and technological requirements.
Investments in environmental activities in 2013 amounted to 2.39 billion rubles (US$75 million), 2 times more compared to 2012. The construction of a new system for capturing fugitive emissions from the steelmaking process is in progress according to plan. The investment, totalling more than 3 billion rubles (US$96 million), is scheduled to be completed by the end of 2014.
Among major programmes continued this year were an upgrade of the gas cleaning of shaft furnace. No. 1 in the steelmaking process, installation of a system for cleaning aspiration air in the sintering process and others. We implemented a total of 11 projects aimed at minimising our impact on the environment at Cherepovets Steel Mill. Two of projects were put into operation in 2013.