Annual Report 2007 - Severstal

Costs
2007 2006
US$ % of US$ % of
Cost of sales structure million Total million Total
Materials
Coal 606 12.5 489 12.9
Coke 34 0.7 49 1.3
Iron ore 508 10.5 442 11.6
Pellets 465 9.6 287 7.5
Scrap metal 798 16.5 616 16.2
Ferroalloys and
non-ferrous metals 463 9.6 343 9.0
Other materials 433 9.0 352 9.3
Total materials 3,307 68.4 2,578 67.8
Energy
Natural gas 150 3.1 119 3.1
Electric power 181 3.7 149 3.9
Other energy resources 75 1.6 58 1.5
Total energy 406 8.4 326 8.6
Staff costs 554 11.4 416 10.9
Depreciation and amortisation 317 6.6 226 5.9
Other 253 5.2 259 6.8
Total 4,837 100.0 3,805 100.0
Costs of sales rose in 2007 by US$1.032 billion, due to the
US$269 million growth in production volumes, a US$286 million
benefit from exchange rate movements, a US$362 million growth
in prices of materials, a US$49 million increase in energy prices
and a US$137 million increase in labour costs. A number of factors
had a decreasing effect of US$70 million on costs of sales. These
included a US$27 million reduction in raw materials consumption
rates and a US$43 million effect of change in the structure of used
raw materials.
Principal cost-cutting initiatives
– Consistent outsourcing of services
– Improving industrial efficiency through energy and raw
material savings
– Scrap capacities expansion
– Using modern technological materials and decisions
– Optimisation of purchasing costs.
Severstal Annual Report 2007 45