Annual Report 2007 - Severstal

Sales by products
2007 2006 Change year-on-year %
Thousand US$ Thousand US$ Thousand US$
tonnes million tonnes million tonnes million
Semi-finished products 881 378.8 577 194.1 52.7 95.2
Hot-rolled flat products 5,020 3,242.9 4,658 2,582.6 7.8 25.6
Cold-rolled flat products 1,418 944.7 1,570 917.8 (9.7) 2.9
Galvanised and other
metallic coated sheet 751 690.7 694 577.8 8.2 19.5
Colour coated flat products 228 281.1 143 148.5 59.4 89.3
Long products 2,051 1,237.9 1,922 881.9 6.7 40.4
Others tubes and pipes,
formed shapes 494 391.7 471 320.4 4.9 22.3
Metalware products 47 37.4 59 42.6 (20.3) (12.2)
Total steel products 10,890 7,205.2 10,094 5,665.7 7.9 27.2
Other and shipping 763.8 651.8 17.2
Total sales by products 10,890 7,969.0 10,094 6,317.5 7.9 26.1
Inter-segment transactions (880) (647.9) (848) (392.7) n.a. n.a.
Principal markets
Russian market
The Russian market is the most important one for Russian Steel.
The share of the Russian market amounted to 71.4% of Russian
Steel revenues, compared to 69.1% in 2006. Besides low logistics
costs, the Russian market has one of the highest growth rates in
the world and allows for long-term relationships with customers.
In 2007, sales of rolled products to the Russian market rose
by 11.3% in volume terms, while rolled products revenues grew
by 31.4%. Hot-rolled products accounted for 40.4% of sales,
while long products accounted for 20.4%, cold-rolled products for
10.7%, galvanised sheet and colour coated sheet for 13.5%.
Russian Steel’s main domestic customers include pipe mills
and the automotive, machinery, construction and shipbuilding
companies.
We sold 21.7% more hot-rolled sheet in 2007 by volume
and 39.6% by revenue compared with 2006. For long products,
a 7.2% increase in shipments by volume in 2007 and increase in
average price by 34.0% led to a 43.7% growth in revenues.
Revenues from colour coated sheet increased by 78.9%, whereas
sales volumes were 52.3% higher than in 2006. This strong
growth was fuelled by booming demand for plate from pipe
makers and machinery, and long products for the construction
industry, resulting in higher average prices.
Shipment volumes of galvanised sheet fell by 8.4%, but this
had almost no negative impact on revenue due to higher prices.
Drop in volumes was due to the substantial growth in production
of polymer coated steel, where galvanised sheet is used as
a substrate.
Export markets
Export sales volumes remained virtually unchanged (up 1%), while
rolled products revenues grew significantly (by 17.7% in 2007
from 2006 due to the increase in prices for rolled steel products).
The main contributors to export revenues were hot-rolled products
(41.2%), semi-finished products (15.8%), cold-rolled products
(14.8%) and galvanised sheet (7.4%).
In 2007, we enjoyed strong prices for galvanised sheet in global
markets. With sales volumes growing by 124.1%, this led to an
increase in revenue for this product by 158.9% compared to 2006.
Another export leader was colour coated sheet, with revenues
217.8% higher than in 2006 as a result of sales volumes growing
by 145.5% and positive price dynamics. Good pricing for semifinished
products as well as sales volumes growth (48.2%) resulted
in an 89.6% increase in revenues for this product.
We are building long-term relationships in the CIS and the EU.
Deliveries to other regions are primarily carried out on a spot basis.
Sales by industry
Russian Steel focuses on selling to the pipe production, automotive,
machinery building and construction industries and steel service
centres (further referred to as regional distribution). In 2007 in
volume terms, regional distribution accounted for 52.4% of all
sales, pipe production for 23.0%, the automotive industry for
8.5%, and construction for 3.3%. A substantial share of regional
distribution’s customers at the end of 2007 was in construction.
We sold more products to our priority industries in 2007, with
significant sales growth registered by construction (39.1%), pipe
manufacturers (21.7%) and regional distribution (9.8%).
Sales growth in the pipe-making industry was principally
due to higher demand for pipes used in oil and gas pipelines,
water pipelines and public utilities. The higher sales to regional
distribution companies were due to the strong development of
the construction industry.
Revenues from sales to automotive companies were 6.2%
higher due to higher prices for hot and cold-rolled sheet. In physical
terms, the shipments decreased by 4.5% because of falling
competitiveness among Russian car manufacturers and insufficient
local operations by the foreign producers.
Revenue from sales to machinery building companies rose by
14.9% and to the railroad machinery industry by 41.3%. This was
due to Russia’s booming transportation industry and infrastructure.
Severstal Annual Report 2007 43