q2 2015 and h1 2015 operational results

Q2 2015 and H1 2015 Operational Results 15 July 2015

Table of Contents

3 Group Highlights

4 Severstal Resources Operational Results

9 Severstal Russian Steel Operational Results

Q2 2015 Group Highlights*

In Q2 hot metal production decreased 1% q/q to 2.29 mln tonnes (Q1 2015: 2.31 mln tonnes). At the same time, crude steel production decreased

4% q/q to 2.85 mln tonnes (Q1 2015: 2.96 mln tonnes). While this suggests lower consumption of scrap material in steelmaking process, it also

reflects an impact of scheduled maintenance at the BOF#3 and continuous caster #2 and #4.

Consolidated sales of steel products increased 4% q/q partially due to seasonal increase in demand, despite anticipated weaker steel consumption

domestically. Moreover, Severstal’s proximity to export markets allowed the Company the flexibility to allocate additional volumes for export.

The share of high value-added (HVA) products improved 1 ppt to 47% (Q1 2015: 46%) largely due to a 13% q/q increase in downstream products

sales and a reduction in long products sales q/q. These have partially offset a 10% q/q increase in HRC sales.

Coking coal concentrate sales increased 15% q/q in spite of a decrease in ROM-coal output volumes in Q2 at Vorkutaugol on the back of scheduled

long-walls repositioning activity in June 2015. The former is largely a low-base effect with washing plant operations being negatively impacted by

severe weather conditions in Q1.

Whilst the pricing environment on the global markets remains challenging, Severstal average USD-nominated selling prices for steel products

improved q/q owing to RUB appreciation. Specifically, after catching up with the USD-nominated parity, domestic prices reached an unusual

premium vs. export prices. We would expect a gradual normalization of this premium later in the year.

Production volumes, t Q2 2015 Q1 2015 Change,% H1 2015 H1 2014 Change,%

Crude steel (Total output): 2 847 753 2 959 389 (4%) 5 807 142 5 548 036 5%

Hot metal (Total output): 2 289 358 2 305 312 (1%) 4 594 670 4 472 728 3%

Sales volumes, t Q2 2015 Q1 2015 Change,% H1 2015 H1 2014 Change,%

Coking coal concentrate 1 458 915 1 272 642 15% 2 731 557 2 611 921 5%

Iron ore pellets 2 600 490 2 576 453 1% 5 176 943 5 122 128 1%

Iron ore concentrate 1 072 732 984 272 9% 2 057 004 2 310 441 (11%)

Total steel products (Consolidated) 2 658 122 2 544 868 4% 5 202 990 5 103 883 2%

Total steel products (Russian Steel) 2 671 598 2 558 524 4% 5 230 122 5 193 032 1%

* Group volumes for H1 2014 reflect adjustments made in connection with the presentation of the discontinued operation.

Severstal Resources

Severstal Resources Operational Results


Coal: 1 882 160 1 728 145 9% 3 610 305 3 581 963 1%

Coking coal concentrate: 1 458 915 1 272 642 15% 2 731 557 2 611 921 5%

Vorkutaugol 1 458 915 1 272 642 15% 2 731 557 2 195 356 24%

PBS Coals - - n.a. - 416 565 n.a.

Raw coking coal, Vorkutaugol - 561 n.a. 561 57 999 n.a.

Steam coal: 423 245 454 942 (7%) 878 187 912 042 (4%)

Vorkutaugol 423 245 454 942 (7%) 878 187 890 591 (1%)

PBS Coals - - n.a. - 21 452 n.a.

Iron ore: 3 673 222 3 560 725 3% 7 233 947 7 432 569 (3%)

Iron ore pellets 2 600 490 2 576 453 1% 5 176 943 5 122 128 1%

Iron ore concentrate 1 072 732 984 272 9% 2 057 004 2 310 441 (11%)

Sales price, $/tonne Q2 2015 Q1 2015 Change,% H1 2015 H1 2014 Change,%

Coking coal concentrate, Vorkutaugol 91 64 42% 78 95 (18%)

Coking coal concentrate, PBS Coals n.a. n.a. n.a. n.a. 107 n.a.

Raw coking coal, Vorkutaugol n.a. 18 n.a. 18 58 (69%)

Steam coal, Vorkutaugol 24 21 14% 22 36 (39%)

Steam coal, PBS Coals n.a. n.a. n.a. n.a. 68 n.a.

Iron ore pellets 52 53 (2%) 52 98 (47%)

Iron ore concentrate 35 32 9% 34 66 (48%)

Vorkutaugol (part of Severstal Resources) Coking coal concentrate sales volumes increased 15% q/q to 1.46 mln tonnes (Q1

2015: 1.27 mln tonnes) due to a low-base effect with production in Q1 being

negatively impacted by severe weather conditions in the region.

ROM-coal output declined q/q, which was driven by scheduled long-walls

repositioning in June 2015.

Steam coal sales at Vorkutaugol decreased 7% q/q on the back of seasonally lower

demand from domestic consumers.

Average coking coal concentrate selling prices increased 42% q/q, this is primarily a

result of several rounds of RUB-nominated price upgrades by the Company, which

took place in the second half of Q1 already. Meanwhile, RUB strengthening of c.

15% q/q further supported USD-nominated price appreciation.

Vorkutaugol coking coal concentrate sales volumes

Vorkutaugol average selling price dynamics, US$/t

Moscow

St. Petersburg

ROM coal production

2,7

60

3,3

96

3,3

02

2,4

65

2,3

27

2,5

38

4,0

30

3,7

56

3,3

15

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

Q213

Q313

Q413

Q114

Q214

Q314

Q414

Q115

Q215

RO

M c

oal

pro

du

ctio

n, k

t

145 152

143

120 120 119 117 110

101 102 96 93 94

76 64

91

0

20

40

60

80

100

120

140

160

Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15

Co

kin

g co

al p

rice

, US$

/t

Hard coking coal benchmark (FOB Australia) Vorkutaugol ASP

374 453 425 827

898 1,006

1,770

1,905

0

500

1,000

1,500

2,000

2,500

3,000

Q1 15 Q2 15 H1 14 H1 15C

oki

ng

coal

co

nce

ntr

ate

sal

es

volu

me

s, k

t Third party sales Internal consumption

Karelsky Okatysh (part of Severstal Resources) Iron ore pellets sales remained largely flat q/q at 2.60 mln tonnes (Q1 2015: 2.58

mln tonnes).

Moreover, external sales volumes on both domestic and export markets

improved on restocking activity.

Prices for iron ore pellets were less resilient to the global iron ore market

volatility than iron ore concentrate prices due to the geographical structure of

sales.

Iron ore pellets prices declined 2% q/q.

Moscow

St. Petersburg

Iron ore pellets sales volumes Karelsky Okatysh pellets export

structure, Q2 2015 Karelsky Okatysh average selling price (ASP)

dynamics, US$/t

67%

33%

Europe Middle East

134 135 121

103 90

74 62 58

93

108 107

89

73

55 53 52

0

20

40

60

80

100

120

140

160

Q32013

Q42013

Q12014

Q22014

Q32014

Q42014

Q12015

Q22015

US$

/t

Iron ore fines (CFR China) Karelsky Okatysh ASP

1,364 1,429

2,769 2,793

1,213 1,171

2,353 2,384

0

1,000

2,000

3,000

4,000

5,000

6,000

Q1 15 Q2 15 H1 14 H1 15

Iro

n o

re p

elle

ts s

ale

s vo

lum

es,

kt

Third party sales Internal consumption

Moscow

St. Petersburg

Olkon (part of Severstal Resources) Iron ore concentrate sales volumes increased 9% q/q primarily reflecting

seasonal increase in production and higher internal procurement of iron ore

concentrate by CherMK.

The poor performance of the global iron ore benchmark in Q2 (down 6% q/q)

was fully mitigated by RUB appreciation, with iron ore concentrate USD-

nominated prices increasing 9% q/q.

Iron ore concentrate sales volumes Olkon average selling price (ASP) dynamics, US$/t

127 134 135

121

103 90

74 62 58

79

63

77 70

63

49

36 32 35

0

20

40

60

80

100

120

140

160

Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015

US$

/t

Iron ore fines (CFR China) Olkon ASP

115 69 132 184

869 1,004

2,178 1,873

0

500

1,000

1,500

2,000

2,500

Q1 15 Q2 15 H1 14 H1 15Iro

n o

re c

on

cen

trat

e s

ale

s vo

lum

es,

kt

Third party sales Internal consumption

Severstal Russian Steel

Severstal Russian Steel Operational Results


Total steel products 2 671 598 2 558 524 4% 5 230 122 5 193 032 1%

Semi-finished products 88 151 106 891 (18%) 195 042 289 743 (33%)

Rolled products: 2 057 076 1 985 724 4% 4 042 800 4 060 340 0%

Hot-rolled coil 1 018 937 928 150 10% 1 947 087 1 945 577 0%

Hot-rolled plate 162 732 191 996 (15%) 354 728 423 540 (16%)

Cold-rolled coil 335 160 303 656 10% 638 816 721 450 (11%)

Galvanised and metallic coated coil 140 233 134 613 4% 274 846 258 589 6%

Color coated coil 85 361 84 459 1% 169 820 188 837 (10%)

Long products 314 653 342 850 (8%) 657 503 522 346 26%

Downstream products: 526 371 465 909 13% 992 280 842 949 18%

Metalware products 154 459 138 699 11% 293 158 322 909 (9%)

Large diameter pipes 166 514 121 512 37% 288 026 130 036 121%

Other tubes, pipes, formed shapes 205 398 205 698 0% 411 096 390 004 5%

Sales price, $/tonne Q2 2015 Q1 2015 Change,% H1 2015 H1 2014 Change,%

Semi-finished products 347 374 (7%) 362 448 (19%)

Hot-rolled coil 405 394 3% 400 485 (18%)

Hot-rolled plate 571 486 17% 525 764 (31%)

Cold-rolled coil 500 445 12% 473 581 (19%)

Galvanised and metallic coated coil 644 570 13% 608 770 (21%)

Color coated coil 863 736 17% 800 1 007 (21%)

Long products 402 374 7% 387 532 (27%)

Metalware products 906 823 10% 867 1 085 (20%)

Large diameter pipes 1 533 1 196 28% 1 391 1 546 (10%)

Other tubes, pipes, formed shapes 527 462 14% 495 639 (23%)

Severstal Russian Steel (RSD) Indicating seasonal uptick in demand both on domestic and export markets RSD increased steel

products sales 4% q/q to 2.67 mln tonnes. The latter has been achieved despite less pronounced seasonality and existing problems with apparent steel consumption on domestic market this year.

Severstal’s proximity to export markets allowed it the flexibility to shift between domestic and export deliveries. Reflecting an increase of export share to 41% in Q2 2015 (Q1 2015: 38%) and

change to the product mix RSD recorded a 10% q/q increase in HRC sales vs. 18% q/q reduced sales of semi-finished products.

Solid 13% q/q growth of downstream products sales volumes primarily reflects 37% q/q increase in sales of large diameter pipes (LDPs). Severstal continued supplying LDPs for the Southern Corridor and Gazprom maintenance projects. In addition, Severstal began supplying LDPs for the Power of Siberia project.

Regardless of the downward trend in global steel prices and a comparatively soft domestic market, USD-nominated average steel prices for rolled products at RSD experienced a broad

range of increases dependent on the product owing to RUB appreciation. That said, after catching up with the USD-nominated parity domestic prices switched to unusual premium in Q2 2015. We would expect gradual normalization of premium later in the year.

Share of high-value-added products* in total steel shipments, % Steel sales volumes by destination, %

* High-value-added comprises: plate; cold-rolled , galvanized and metallic coated, color coated sheet; metalware; large-diameter and other pipes.

Moscow

St. Petersburg

53% 58% 61% 65% 56%

65% 69% 62% 60% 64% 71% 71% 62% 59%

47% 42% 39% 35% 44%

35% 31% 38% 40% 36% 29% 29% 38% 41%

Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15

Russia Export

2.6 2.7

2.3 2.6 2.7 2.6 2.7

2.5 2.7 2.7 2.7 2.6 2.7

43% 46% 46% 43% 45% 50% 49% 47% 47%

52% 52% 46% 47%

0%

20%

40%

60%

80%

100%

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15

Total finished steel, mt (lhs) share of HVA, %

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similar expressions. Severstal cautions you that these statements are only predictions and that actual

events or results may differ materially. Severstal will not update these statements to reflect events

and circumstances occurring after the date hereof. Factors that could cause the actual results to differ

materially from those contained in projections or forward-looking statements of Severstal may

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which Severstal operates, market change in the steel and mining industries, as well as many other risks

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q2 2015 and h1 2015 operational results

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