Annual Report & Accounts 2013
Severstal Annual Report 2013 Home > Strategy > Case 2 – Smart CAPEX
 

Case 2 – Smart CAPEX

Severstal is pursuing a continuous reduction of CAPEX and prudent control over maintenance costs. Greenfield investments are concept development and feasibility studies only, requiring no major investment.

Our CAPEX Priorities

Optimization of Maintenance CAPEX:

  • Prudent control over repair costs

Higher efficiency of Development CAPEX:

  • Focus on projects with the highest return
  • Targeting over 20% IRR for all projects
  • No additions in crude capacities after the Balakovo Mini-Mill launch
  • Investments limited to low-risk, quality/efficiency raising projects

Prudent approach to greenfields within our strategic framework

Medium term CAPEX target is $1.0 bn

We approach CAPEX from two sides: making our maintenance as efficient as possible; and limiting our development CAPEX to some US$400 million a year, giving priority to the highest return projects that help us to remove bottlenecks and decrease costs. We believe that US$1 billion is a sustainable level of our total annual CAPEX in the medium term and do not currently intend to exceed that amount. This still allows Severstal to grow at a speed that is reasonable in this market environment.

Smart CAPEX

Continuous reduction of CAPEX

  • Development projects in mining to be completed in 2014
  • Only reconstruction of the 4-stand mill remains among the large-scale development projects in Steel
  • Prudent control over maintenance costs
  • Greenfields investments into concept development/feasibility study only

Total Capital Expenditure, $bn

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