Annual Report 2007 - Severstal

Mining segment, sales by products, FCA based with discounts/price premium
2007 2006 Change year-on-year %
Thousand US$ Thousand US$ Thousand US$
tonnes million tonnes million tonnes million
Coking coal 2,167 69.9 1,166 46.5 85.8 50.3
Coking coal concentrate 5,795 486.6 5,377 390.5 7.8 24.6
Steam coal 2,328 60.3 3,510 97.5 (33.7) (38.2)
Pellets 9,927 745.8 9,482 578.6 4.7 28.9
Iron ore concentrate 4,562 267.7 4,471 231.7 2.0 15.5
Scrap metal – 301.5 – 26.5 n.a. 1,037.7
Total products – 1,931.8 – 1,371.3 n.a. 40.9
Shipping and Other – 265.1 – 119.7 n.a. 121.5
Total sales by products – 2,196.9 – 1,491.0 n.a. 47.3
Inter-segment
transactions (15,363.0) (1,142.7) (15,081.0) (853.0) n.a. n.a.
Total amount is rounded.
Sales and marketing
The Russian raw material market
The coal businesses in our Mining segment are among Russia’s
top three coking coal producers.
Our iron ore businesses, which produce iron ore concentrate
and pellets, are leaders in terms of extraction volumes in their
respective markets. Our share of the overall Russian iron ore
concentrate production remained unchanged in 2007 at 9.1%.
Our share of Russian pellet production increased from 28.2% to
30.0%, due to less production at other Russian iron ore mines.
Our share of scrap metal deliveries increased to 4.8% after we
acquired our scrap collection and processing businesses. The market
is characterised by the growth of key players and the consolidation
of scrap iron collection businesses by steel producers.
We can guarantee our stable market position since we have
the following competitive advantages:
– We are the only mining business in Russia capable of offering
the whole range of principal iron sources: iron ore pellets, iron ore
concentrate, coking coal and scrap. In 2008, we also plan to start
selling ferroniobium
– We have a quality resource base in Russia, allowing us to
produce valuable grades of coal and high-quality iron ore
products
– We offer a high level of client service, including flexible price
policies
– We have an advantageous geographic location near to our
principal consumers, as well as optimal logistics and developed
infrastructure near our main assets
– Our Mining businesses are part of our vertically-integrated
metallurgic holding, which means we have greater access to
financial, intellectual and professional resources.
Sales by products
High-value-added products accounted for the largest part of our
sales in 2007: pellets accounted for 33.9% of total sales, coking
coal concentrate 22.1%, and iron ore concentrate 12.2%. Scrap
sales amounted to 13.7% of total revenue, showing the high
growth potential for this type of product. Coking and steam coal
accounted for 3.2% and 2.7% of revenue respectively.
The positive market environment in 2007 resulted in the
increase in sales compared to the previous year, both in revenue
and volume terms, for all our Mining products, except steam coal:
– Coking coal sales increased by 85.8% in volume and 50.3%
in revenue from 2006 to 2007
– Coal concentrate sales increased by 7.8% in volume and 24.6%
in revenue, validating our strategy of concentrating on
producing high-value-added products
– Sales of steam coal decreased from 2006 to 2007, by 33.7%
in volume and 38.2% in revenue, due to lower coal production
– Pellet sales increased by 4.7% in volume and 28.9% in revenue
– Iron ore concentrate sales increased by 2.0% in volume and
15.5% in revenue
– Scrap metal revenue grew more than 10-fold, after we acquired
a number of companies, including ZAO Vtorchermet, which
specialises in the scrap collection and exports.
Severstal Annual Report 2007 37