6th russian steel summit

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6th russian steel summit

  1. 1. 6th RUSSIAN STEEL SUMMIT 28 May 2008 Pavel Tatyanin Senior Vice President and CFOsteel is 1
  2. 2. Evraz at a glance ◦ World class steel and mining company, one of the top five most profitable steelmakers globally by ROCE and EBITDA margin ◦ Leader in the construction and railway steel products markets in Russia and CIS ◦ Global player with a strong position in flat products markets of Europe and the US ◦ The lowest cost producer of crude steel in Russia and CIS through high efficiency and vertical integration ◦ One of the leading global producers of vanadium products ◦ 2007 production of 16.4 million tonnes of crude steel, 12.6 million tonnes of pig iron and 15.2 million tonnes of rolled products ◦ Consolidated revenues of US$12.8 billion in 2007 and US$8.3 billion in 2006 ◦ EBITDA of US$4.3 billion in 2007 from US$2.6 billion in 2006. Our assets: ◦ Three leading steel plants in Russia: Nizhny Tagil, West Siberian and Novokuznetsk Iron and Steel Plants ◦ Steel plants in Ukraine, Italy, the Czech Republic, the United States, Canada, South Africa and China ◦ Iron ore mining and processing facilities in Russia (Evrazruda, KGOK and VGOK) and Ukraine ◦ Coal producers Yuzhkuzbassugol and Mine 12; an equity interest in the Raspadskaya coking coal producer ◦ Vanadium producers in the United States, South Africa, the Czech Republicsteel is 2
  3. 3. Evraz Globallysteel is 3
  4. 4. Russia As a Key Market for Evraz ◦ Over the last three years Evraz’s total sales in the Russian market increased by 25% to 7.7 million tonnes. ◦ In 2007, Evraz’s construction products sales in Russia increased by 35% to 3.6 million tonnes. ◦ No more exports of construction products since 2008. Sales in Russia Production and Sales of Rolled Products in Russia ‘000 tonnes ‘000 tonnes 8,000 8,000 100% 7,000 7,000 2,390 7,624 6,000 6,000 90% 2,695 6,942 1,851 6,909 6,190 5,000 5,000 5,483 1,576 4,000 4,000 5,037 81% 1,399 80% 1,537 3,000 79% 3,000 73% 2,000 3,636 2,962 2,000 70% 2,691 1,000 1,000 0 0 60% 2005 2006 2007 2005 2006 2007 Construction products Railway products Other Rolled products production Rolled products sales %steel is 4
  5. 5. Steel Consumption in Russia, 2000-2007 Rolled Products Consumption in Russia mln. tonnes 40,08 40 35,92 35 30,38 30 27,04 25,70 23,84 25 22,24 22,81 20 15 10 5 0 2000 2001 2002 2003 2004 2005 2006 2007 Sources: Metal Expert, Metal Couriersteel is 5
  6. 6. Russian Construction Products Market ◦ Steel consumption per capita in Russia is still below the world’s average ◦ Rebars market grew by 30% in 2006 and by 23% in 2007 ◦ Sections market rose 32% in 2007 due to increased investments in industrial construction and infrastructure Rebars (Russian Market) Sections (Russian Market) ‘000 tonnes ‘000 tonnes 7,000 4,000 3,800 5,886 3,500 6,000 2,886 3,000 2,715 5,000 4,860 2,516 2,500 4,000 3,730 3,276 2,000 3,000 1,500 2,000 1,000 1,000 500 0 0 2004 2005 2006 2007 2004 2005 2006 2007 Source: Evraz market estimatessteel is 6
  7. 7. Russian Market Price Dynamics Price for 12mm A500 Rebars (Moscow) Price for 14-16mm Channels (Moscow) roubles (CPT excl VAT) roubles (CPT excl VAT) 30,000 30,000 27,500 27,500 25,000 25,000 22,500 22,500 20,000 20,000 17,500 17,500 15,000 15,000 12,500 12,500 10,000 10,000 January February March April May June January February March April May June 2008 2008 Evraz Import parity Evraz Import parity Souce: Evraz market estimatessteel is 7
  8. 8. Russian Market Development Short term: Supply/demand disbalance pushes the market further upwards ◦ Current situation is exclusively a result of market factors. ◦ Alternatives: state regulation within the market or an analogue of the State Committee on Prices/State Planning Committee with rigid regulation and total neglect of the market? ◦ Regulation is mainly aimed at increasing supply of finished products in Russia. ◦ In case of 100% utilisation of Russian rolling capacities, duties imposed on raw materials and semis will not increase the internal supply and thus, will not affect the prices. Long term: Development of rolling capacities in Russia is the only solution to the supply/demand disbalance ◦ Increasing rolled products supply is the only way to balance the market in the conditions of continuously growing demandsteel is 8
  9. 9. Evraz’s Investments in Rolling Capacities to Increase Supply to the Russian Market By 2012, Evraz will supply additionally over 3 million tonnes of rolled products to the Russian market (+40% to 2007 volumes) Evraz’s investments in rolling capacity extension in order to satisfy the Russian growing demand will total US$1.8 billion over the next 5 yearssteel is 9
  10. 10. Wheel-and-tire Mill Reconstruction at NTMK ◦ Realised projects: the 1st and the 2nd stages of mill’s reconstruction Project: The 3rd stage of mill’s reconstruction: a heat treatment and machine finishing shop ◦ Project aims: To ensure the required technical characteristics To expand the market To shift from production of billets to high value-added finished products ◦ Products: Railway wheels and tires with increased hardness (up to 360 HB) ◦ Capacity: 580,000 wheels p.a. ◦ Equipment: supplied by MAERZ - Gautschi Capex: approx US$215 million ◦ Putting into operation: December 2008 ◦ Reaching nominal capacity: June 2009steel is 10
  11. 11. Reconstruction of Rail Production at NTMK Project: reconstruction of the NTMK rail production with introduction of the rail head hardening technology ◦ Project aims: To satisfy RZD demand for longer high quality rails to be used in high speed railways To meet European and North American railways requirements ◦ Products: High quality 100 metre-long rails (up to 50% of total production) ◦ Capacity: Up to 950,000 tonnes of rails p.a. ◦ Equipment: Stangl Technik GmbH, MFL, Bronx International Incorporated, Koch, NDT Technologies Inc, Geismar, Hydrosystem Project a.s. ◦ Capex: approx €375 million ◦ Putting into operation: 2011steel is 11
  12. 12. Reconstruction of Rail Production at NKMK Project: NKMK rail production modernisation ◦ Project aims: To satisfy RZD demand for high quality rails To increase rail production volumes ◦ Products: 25-50 metre-long high quality rails ◦ Capacity: up to 750,000 tonnes of rails p.a. ◦ Equipment: Stangl Technik GmbH, MFL, Bronx International Incorporated, Koch, NDT Technologies Inc, Geismar, Hydrosystem Project a.s. Capex: approx €125 million ◦ Putting into operation: 2011steel is 12
  13. 13. New Rebar Capacity at NKMK Project: Construction of small section rolling mill 320 at the existing production facilities of NKMK ◦ Project aims: To satisfy the growing demand for construction products in Russia To create additional synergies with existing production of billets To optimise the utilisation and improve efficiency of existing facilities ◦ Products: ø14mm-ø40mm rebars ø5,5mm-ø12mm wire rod ◦ Capacity: 400,000 tonnes p.a. ◦ Equipment: a rolling mill made by TANAKA (Japan); Стан горячей прокатки производства компании «TANAKA» (Япония); a gas oven with walking beams; a PLC SIEMENS S7 mill control system; a thermohardening unit. ◦ Capex: approx US$80 million ◦ Putting into operation: June-July 2009steel is 13
  14. 14. New Construction Products Capacities in Siberia Project: Construction of a section rolling mill in Bratsk, Irkutsk region ◦ Project aims: To satisfy the growing demand for construction products in Russia To have additional synergies with existing production of billets To optimise the utilisation and to improve efficiency of existing facilities ◦ Products: ø10mm-ø36mm rebars ◦ Capacity: 400,000 tonnes p.a. ◦ Equipment: The tender is under way ◦ Capex: approx US$80 million – ◦ Putting into operation: April 2009steel is 14
  15. 15. Construction of a Small Section Mill in Kazakhstan Project: Construction of small section mill 350 in the brownfield of the Kostanaisk diesel engine plant (approx 200 km from Chelyabinsk) ◦ Project aims: To satisfy the growing demand for construction products in Russia and Kazakhstan To have additional synergies with existing production of billets To optimise the utilisation and to improve efficiency of existing facilities ◦ products: ø10mm-ø40mm rebars channels (up to 80), angles (up to 75) ◦ Capacity: 600,000 tonnes p.a. ◦ Equipment: The tender is under way Capex: approx US$160 million ◦ Putting into operation: June 2010steel is 15
  16. 16. New Heavy Plate Capacity at Zapsib Project: Construction of a heavy plate mill Quarto 3600 at Zapsib ◦ Project aims: To satisfy the growing demand for heavy plate in Russia’s Siberia and Far East To have additional synergies with existing production of slabs at Zapsib ◦ Products: 8-50mm plate Plate of up to 3600mm wide ◦ Capacity: 1st stage – 800,000-850,000 tonnes p.a. 2nd stage - 1-1.2 million tonnes p.a. ◦ Equipment - The tender is under way Capex: approx US$500 million Putting into operation: December 2010steel is 16
  17. 17. Evraz’s Strategy in Russia Maintaining leading market positions in Russia and CIS countries in construction and railway products Achieving leading positions in the Russian thick plate market Further considerable increase of production of rolled products from own semis (slabs and billets) at Evraz’s rolling capacitiessteel is 17
  18. 18. steel is 18

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