Severstal reports Q3 & 9M 2018 operational results

Severstal reports Q3 & 9M 2018 operational results

Moscow, Russia - 11 October 2018 - PAO Severstal (MICEX-RTS: CHMF; LSE: SVST), one of the world's leading vertically integrat­­ed steel and steel-related mining companies, today announces its operational results for Q3 & 9M 2018.

Q3 2018 GROUP HIGHLIGHTS

• Hot metal output increased 2% in Q3 2018 to 2.30 mln tonnes (Q2 2018: 2.26 mln tonnes) compared with the previous quarter after short-term maintenance works at BF#4 and BF#5. Crude steel production increased 2% to 3.06 mln tonnes (Q2 2018: 3.00 mln tonnes) in line with pig iron production growth.

• Consolidated steel product sales declined 5% to 2.71 mln tonnes in Q3 2018 compared with the previous quarter (Q2 2018: 2.84 mln tonnes), due to short-term maintenance works at rolling-mill facilities. The share of domestic sales remained high at 65% (Q2 2018: 64%).

• The share of high value-added (HVA) products within the sales portfolio increased two ppts to 48% (Q2 2018: 46%), driven by an increase in sales volumes of colour-coated and large diameter pipe (LDP) products. At the same time Severstal reduced semi-finished and hot-rolled coil (HRC) sales.

• Coking coal concentrate sales volumes from Vorkutaugol grew 27% largely driven by higher production volumes of "2ZH", "GZHO" and "Concentrate K" grades following the long-wall repositionings at Komsomolskaya and Vorkutinskaya mines in Q2.

• Iron ore pellet sales decreased 18% to 2.55 mln tonnes (Q2 2018: 3.12 mln tonnes) after the realisation of a share of finished goods in transit in Q2, carried over from the previous quarter.

• Iron ore concentrate sales increased to 1.42 mln tonnes (Q2 2018: 1.36 mln tonnes) driven by growth in production at the Olcon and Yakovlevskiy mines.

9M 2018 GROUP HIGHLIGHTS

• Hot metal output increased 1% to 6.91 mln tonnes in 9M 2018 compared with the previous period (9M 2017: 6.81 mln tonnes), due to fewer maintenance works in 9M 2018 and declining idle time at BF's. Crude steel production increased 5% to 9.10 mln tonnes (9M 2017: 8.64 mln tonnes), driven by an improvement in steel production efficiency following the launch of ladle furnace #2 in July 2017 as well as higher production volumes from Balakovo mini-mill. Meanwhile, the Company continues its efficiency programmes aimed at decreasing raw material consumption ratios in the steel production process.

• Consolidated steel product sales improved to 8.42 mln tonnes in 9M 2018 (9M 2017: 8.14 mln tonnes), primary reflecting growth in sales of semi-finished products compared with the previous year. The high share of HVA products remained flat at 46% in 9M 2018 (9M 2017: 46%).

• Average selling prices for the majority of steel products grew substantially, between 6%-20%, for 9M 2018, reflecting global trends as well as sales and marketing initiatives run by Severstal.

• The higher iron ore concentrate sales y-o-y for 9M 2018 partially reflects the consolidation of the Yakovlevskiy mine.

SUMMARY OF KEY PRODUCTION, SALES VOLUMES

SEVERSTAL'S CONSOLIDATED SALES (NET OF INTERCOMPANY SALES)

SEVERSTAL RESOURCES

• Coking coal concentrate sales volumes from Vorkutaugol grew 27%, largely driven by higher production volumes of "2ZH", "GZHO" and "Concentrate K" following the repositioning of long-walls at the Komsomolskaya and Vorkutinskaya mines in Q2. Internal coking coal concentrate procurement declined to 88% in Q3 2018 as the Company increased sales to third parties due to a favourable pricing environment in the local market.

• Steam coal sales at Vorkutaugol declined 11% q/q reflecting a lower production rate at Vorgashorskaya mine in Q3 and seasonally weaker domestic demand.

• Iron ore pellet sales declined by 18% and totalled 2.55 mln tonnes (Q2 2018: 3.12 mln tonnes) after the realisation of a share of finished goods in transit in Q2, carried over from the previous quarter.

• Iron ore concentrate sales increased to 1.42 mln tonnes (Q2 2018: 1.36 mln tonnes) driven by production growth at the Olcon and Yakovlevskiy mines.

SEVERSTAL RUSSIAN STEEL ('RSD')

• RSD steel product sales declined to 2.72 mln tonnes compared with the previous quarter (Q2 2018: 2.86 mln tonnes) due to short-term maintenance works at rolling-mill facilities. Domestic sales remained high at 65% (Q2 2018: 64%).
• The share of high value-added (HVA) products within the sales portfolio increased two ppts to 48% (Q2 2018: 46%) as the company increased colour-coated and large diameter pipe product sales. At the same time Severstal reduced semi-finished and hot-rolled coil (HRC) sales.
• Semi-finished product sales decreased as a result of lower volumes of slab sold, due to maintenance works at rolling mills in Q3. At the same time, the decrease in semi-finished product sales q/q reflects a "high-base" effect of billet sales in Q2 2018.
• Severstal increased colour-coated sales, which resulted in lower sales of hot-dip galvanised (HDG) and cold-rolled coil volumes.
• LDP sales volumes grew 49% q/q as a result of higher production volumes of LDP and a sell-off of finished goods at the Izhora Pipe Mill. In March 2018, the Izhora Pipe Mill was awarded a tender to supply approximately 165 thousand tonnes of LDPs for Gazprom projects during 2018-2019.
• Average selling prices for the majority of steel products declined in Q3 2018 in line with global benchmarks. The decline in LDP average selling price in 9M 2018 was offset by higher sales volumes of thick plate.

1) All production data is reported in thousands of tonnes;

2) Sales prices are stated on EXW basis;

3) Segmental data includes intercompany sales;

4) Semi-finished products include pig iron, slabs, billets, ingots, steel casting and forgings;

5) Large diameter pipes include all pipes with a diameter between 820 and 1420 mm.

Investor Relations

Evgeny Belov

T: +7 (495) 926-77-66 ext. 6445

evgenii.belov@severstal.com

Public Relations

Anastasia Mishanina

T: +7 (495) 926-77-66 ext. 6457

anastasia.mishanina@severstal.com

Severstal's financial communications agency - Hudson Sandler

Andrew Hayes / Emily Dillon / Dan de Belder

T: +44 (0) 20 7796 4133

PАО Severstal is one of the world's leading vertically integrated steel and steel related mining companies, with assets in Russia, Ukraine, Latvia and Poland. Severstal is listed on RTS and MICEX and the company's GDRs are traded on the LSE. Severstal reported revenue of $7,848 million and EBITDA of $2,577 million in 2017. Severstal's crude steel production in 2017 reached 11.7 million tonnes www.severstal.com