Severstal Russian Steel is a leading Russian steel producer, with a broad
product mix, self-sufﬁciency in raw materials and an extensive distribution
network. We focus on high value-added ﬂat steel products and the production of
long products for construction and downstream sales.
Our downstream assets include the production of large diameter pipes and
metalware for machinery, as well as service centres and stamping facilities for
exposed automotive parts. The division has the highest share of high
value-added products among its domestic peers, while our ﬂagship Cherepovets
Steel Mill is one of the lowest-cost steel mills in the world.
Located in north-west Russia, the division’s steel operations enjoy
convenient rail access to the Company’s mining operations and low-cost direct
river access to the Baltic ports, as well as being well positioned to serve the
industrial hubs around Saint-Petersburg and Moscow.
In 2015 Severstal Russian Steel’s average headcount totaled 37,543 persons
(including the corporate center).
1. Cherepovets Steel Mill
One of the world’s largest stand-alone integrated steelworks by capacity as
well as an excellently located low-cost steel producer. It produces a wide
range of ﬂat and long-rolled products, including hot and cold-rolled ﬂat
products, galvanized and colour-coated products and long-steel applications.
Rolling Mill 5000, located in Kolpino, near Saint-Petersburg, produces thick
plate for large diameter pipes, ship and bridge building and other
2. Izhora Pipe Mill
The mill in Kolpino specialises in manufacturing large diameter pipes from
plate, which are produced at the nearby Kolpino Mill-5000. It has a production
capacity of up to 600,000 tonnes of pipes per year, which is mainly used in oil
and gas pipeline projects.
3. Mini-Mill Balakovo
A new generation mini-mill focused on the production of long products for
the construction industry. Annual production capacity is one million tonnes of
Manufacturer of more than 50,000 product types, including low-carbon and
high-carbon wire rods, nails, cold-drawn steel, steel ropes, netting and
fastenings. Severstal-Metiz comprises several subsidiaries: the Cherepovets
site in north-west Russia, the Orel site in central Russia, the Volgograd site
in the Povolzhie region, as well as subsidiaries in Italy (Redaelli) and
Downstream production assets
- Severstal-SMС-Kolpino applies the primer to shipbuilding
plates, produces semi-ﬁnished products for machinery and large fabricated
sections for the construction industry. SMС-Kolpino has an automated steel
product preservation line, distinguished by its shot blasting and protective
prime coating, which are sheet metal processing methods designed to prevent
corrosion. It also has an automated beam welding line, which produces welded
structures such as T-bars and I-bars and automated plasma-beam cutting lines
which carry out sheet metal cutting, including those used for manufacturing
- Severstal-Gonvarri-Kaluga Steel Centre is designed to
produce 170,000 tonnes of rolled metal products per year for the automotive and
- Gestamp-Severstal-Kaluga Stamping Facility is equipped
with a number of press lines and produces all rolled steel products from coils
to car components for international car manufacturers. It has an annual output
of 13 million stamped parts and has the potential to expand production.
- Severstal-SMC-Vsevolozhsk service centre is a joint
venture with the Japanese company Mitsui. This centre prepares high-quality CRC
and galvanized steel, which will be further stamped at our joint venture with
Gestamp in Vsevolozhsk. The service centre’s capacity is 150,000 tonnes.
- Severtar, a joint venture with Rutgers, based at the
Cherepovets Steel Mill plant, will produce vacuum pitch, technical oils and
- TPZ-Sheksna was launched in 2010, and is designed to
produce up to 250,000 tonnes of electric-welded pipes of various diameters,
thicknesses and lengths for the construction industry, as well as square and
rectangular sections with different cross-sections. The plant uses semi-ﬁnished
steel products made at Cherepovets Steel Mill.
- Severstal Russian Steel’s domestic sales are made to regional and other
distributors, directly to end-users, or through AO Severstal
Distribution. AO Severstal Distribution has a wide network of metal
centers throughout the country. We conduct export sales principally through the
subsidiary Severstal Export GmbH, as well as through
SIA Severstal Distribution, Severstal Distribution LLC and
ZAO Severstal Distribution.
Ongoing operational efﬁciency improvements accompanied by our well-planned
maintenance and development investment program enabled the Russian Steel
division to further increase both hot metal and crude steel output.
Speciﬁcally, increased usage of higher Fe content pellets (produced by Karelsky
Okatysh), our upgraded coke battery and increased spread between pig iron and
scrap improved coke hot strength back to historical levels (above 50%), which
resulted in higher production and reduced coke consumption at BF#5.
Notwithstanding a 12% year-on-year decrease in Russian steel consumption,
the Russian Steel division was able to respond to market headwinds and increase
steel products sales volumes 3% versus the previous year to 10.9 million
tonnes. The favourable location of the main producing asset supported the
division’s sales strategy allowing prompt relocation of sales volumes between
domestic and export markets.
Existing steel overcapacity issues and stagnating steel consumption globally
put pressure on steel prices with Russian HRC export price declining by 38%
from US$436/t in January 2015 to US$271/t as at the end of 2015.
Production volumes (million tonnes)
Sales volumes (million tonnes)
Russian Steel division average selling price (US$/t)
Revenue breakdown by
Sales volumes breakdown by
Reﬂecting the abovementioned factors divisional revenue (US$ million) was
down 23% versus the previous year.
Dynamics of revenue by products
Our key domestic customers include construction companies and pipe mills,
machinery and automotive clients. Therefore our product mix covers a wide range
of products of various speciﬁcations.
Severstal Russian Steel beneﬁts from its proximity to export routes. Our
share of export varies depending on the health of the Russian market and the
alternative attractiveness of international sales options. In 2015 our export
sales volumes comprise 37% of total sales. Having well-established sales chains
and the required product certiﬁcation, we can quickly and ﬂexibly redistribute
our sales between domestic and export markets.
Sales and cost of sales ﬁgures in the charts below are presented in USD as a
per cent of the total sales or cost of sales of the Severstal Russian Steel
Sales by industries
Export sales structure by regions
We consistently work to maintain our leading cost position through labour
and energy productivity and operational enhancements. In 2015 raw materials
account for 65% of total costs. Labour and energy costs are ranked second and
third with a share of 13% and 10%, respectively.
Cost of sales structure
EBITDA drivers in 2015 (US$ million)
Key developments in 2015:
In order to capture new markets Severstal is actively pursuing certiﬁcation
of its products in full compliance with global standards. Speciﬁcally, in
January 2015, Severstal received the SFS1268 certiﬁcate permitting it to make
shipments of rebar to Finland and other Baltic countries. Moreover, in April
2015, Severstal has been approved by the German Certiﬁcation Authorities to
deliver 10-16 mm steel reinforcing bar products in compliance with DIN 488
requirements. The Izhora Pipe Mill has successfully completed the
recertiﬁcation audit of its corporate environmental management system and
safety system for compliance with ISO 14001:2004 and OHSAS 18001:2007
requirements. With these products now certiﬁed, Severstal is able to expand its
target markets and further enhance distribution efﬁciency.
Russian Steel made a number of advancements in 2015 to increase our share
across product markets and target more prospective product niches, that have
competitive conditions and an attractive supply-demand balance:
- Severstal Metiz launched a new cold rolling mill to launch production of
high-precision proﬁles at Cherepovets.
- The Company started an upgrade of the four-stand continuous tandem cold
rolling mill 1700, which is scheduled to launch in 2016. This project, with a
total cost of 3.2 billion roubles, will increase production of cold-rolled ﬂat
products by 200,000 tonnes per year and potentially increase sales to the
Strategic priorities for 2016 and beyond
Fully in accordance with both our prudent approach to investments and the
“defensive growth” development model Russian Steel division will continue
further enhancing its product mix as well as implementing efﬁciency improvement
large-scale projects. Planned investment across the Severstal Russian Steel
division in 2016 is approximately 26 billion roubles.
- In 2016-2018 the № 4 coke oven battery will be refurbished, and auxiliary
facilities will be modernised to ensure ﬁxed assets are maintained. This will
help to reduce the purchase cost of coke. The estimated cost of the project is
more than 5 billion roubles.
- The company also plans to construct a ladle furnace complex for steel
production at CherMK. The new furnace will have capacity of 4.8 million tonnes.
The aim of the project is to increase converter steel production to 10.3
million tonnes per year. Record annual converter steel production currently
stands at 9.5 million tonnes. Increasing production capacity by building a
second ladle furnace will ensure that 100% of the smelting furnace treatment
takes place within one unit. This will signiﬁcantly reduce costs and improve
product quality. The total investment will be more than 2.5 million
- In long steel production, construction of a second unit producing grinding
balls for raw material companies is planned. The new unit will increase
grinding ball production by 30,000 tonnes a year. Total investment in the
project is approximately 0.3 billion roubles.
- In 2017 Severstal plans to launch a new hot dip galvanizing unit with an
annual capacity of 400,000 tonnes and a metal polymer coating unit with an
annual capacity of 200,000 tonnes. This will be the mill’s third metal polymer
coating unit. The total estimated cost of the project is 7.6 billion
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