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Sales and marketingThe Russian raw material marketThe coal businesses in our Mining segment are amongRussia’s top four coking coal producers (source: Rasmin).Sales by products, FCA based with discounts/price premium2008 2007 Change year-on-year %Thousand US$ million Thousand US$ million Thousand US$ milliontonnestonnestonnesCoking coal 746 38.7 2,167 69.9 (65.6) (44.6)Coking coal concentrate 4,504 650.5 5,795 486.6 (22.3) 33.7Steam coal 1,983 70.9 2,328 60.3 (14.8) 17.6Pellets 9,164 939.3 9,927 745.8 (7.7) 25.9Iron ore concentrate 4,763 341.6 4,562 267.7 4.4 27.6Ferroniobium (tonnes) 146 3.6 - - n/a n/aGold (tonnes) 6.7 190.4 - - n/a n/aTotal sales by products - 2,235.0 - 1,630.3 n/a 37.1Other and shipping - 217.7 - 218.8 n/a (0.5)Total sales - 2,452.7 - 1,849.1 n/a 32.6Inter-segment transactions (13,081) (1,379.5) (15,363) (1,099.1) n/a n/aSales by productsHigh-value-added products accounted for the largestpart of our sales in 2008. Pellets accounted for 38.3%of total sales, coking coal concentrate accounted for26.5% and iron ore concentrate accounted for 13.9%.Coking and steam coal accounted for 1.6% and 2.9% ofrevenue respectively.The negative economic environment affected the lastquarter of 2008, leading to a decline in demand foriron ore. Nevertheless, due to our incorporation of newassets, the expansion of our gold business, continuingefficiency measures, and a positive market environmentduring the first nine months of 2008, we managed toachieve higher sales figures for 2008 than for 2007.Coking coal sales fell by 65.6% in volume and 44.6% inrevenue in 2008, compared with 2007.Coal concentrate sales decreased by 22.3% in volumeand increased by 33.7% in revenue, resulting fromthe sale of Kuzbassugol (volumes) and the increasein prices (revenue). Sales of steam coal decreased by14.8% in volume in 2008, compared with the previousperiod, and grew by 17.6% in revenue. Again, thereasons for this were the sale of Kuzbassugol (volumes)and the increase in prices (revenue). Pellet sales fellby 7.7% in volume and increased by 25.9% in revenue.Iron ore concentrate sales increased by 4.4% in volumeand 27.6% in revenue. During 2008, we started to sellferroniobium and gold.Principal marketsRussian marketRussia is the principal market for our Miningbusinesses. Our main customer is Severstal’s RussianSteel segment.Domestic sales by products, FCA based with discounts/price premiumOur iron ore businesses, which produce iron oreconcentrate and pellets, are among the leaders in termsof extraction volumes in their respective markets.Our share of the overall Russian iron ore concentrateproduction increased from 8.5% in 2007 to 8.9% in2008. Our share of Russian pellet production increasedfrom 29.6% in 2007 to 34.1% in 2008 (source:Rudprom).We can guarantee our stable market position, as wehave the following competitive advantages:• We are the only mining business in Russia capableof offering the whole range of principal iron sources:iron ore pellets, iron ore concentrate, coking coaland ferroniobium.• We produce unique raw materials for steel plants inthe Russian market: fluxed iron ore pellets and highgradehard coking coal.• We have a quality resource base in Russia, allowingus to produce valuable grades of coal and highqualityiron ore products.• We offer a high level of client service, includingflexible pricing policies.• We have a convenient geographical location closeto our principal consumers, as well as favourablelogistics and a developed infrastructure close to ourmain assets.• Our Mining businesses are part of our verticallyintegrated metallurgic holdings, which means wehave greater access to financial, intellectual andprofessional resources.We forecast that, in spite of the downturn in economicactivity, our share of raw materials production formetallurgy (iron ore and coking coal) on the Russianmarket will increase in 2009. This will be due to ourintroduction of customer-oriented programmes, andchanges in the supply chain of our vertically integratedmetallurgical holdings.2008 2007 Change year-on-year %Thousand tonnes US$ million Thousand tonnes US$ million Thousand tonnes US$ millionCoking coal 673 32.4 2,086 66.8 (67.7) (51.5)Coking coal concentrate 3,933 599.0 4,981 424.1 (21.0) 41.2Steam coal 1,723 57.1 1,727 45.3 (0.2) 26.0Pellets 7,205 738.4 7,740 621.1 (6.9) 18.9Iron ore concentrate 4,612 328.7 4,562 267.7 1.1 22.8Ferroniobium (tonnes) 146 3.6 - - n/a n/aGold (tonnes) 3.3 94.3 - - n/a n/aTotal sales by products - 1,853.5 - 1,425.0 n/a 30.1Other and shipping - 161.0 - 151.4 n/a 6.3Total domestic sales revenue - 2,014.5 - 1,576.4 n/a 27.8Inter-segment transactions (12,287) (1,292.5) (15,006) (1,045.6) n/a n/aOur share of sales on the Russian market in 2008 was 82.1% of revenue. The largest part of our revenue on theRussian market resulted from sales of pellets (36.7%), coking coal concentrate (29.7%) and iron ore concentrate(16.3%).52 53