Download PDF - Severstal

Russian SteelRussian Steel is Severstal’s largest segment by revenue. In 2008, it was the thirdlargest steel company in Russia by volume of crude steel production (16.1%) andthird in terms of rolled products (17.7%).Crude steel production in Russia, 2008Steel products production in Russia, 2008Russian Steel comprises:Cherepovets Steel MillThis mill specialises in steel production (with a totalsteelmaking capacity of 12 million tonnes a year).Output decreased due to its open-hearth furnaceclosing on November 1, 2008. The mill also produces awide range of flat and long-rolled products, includinghot and cold-rolled flat products, galvanized andcolour coated products, and long-steel applications.Rolling mill 5000, in Kolpino, produces hot-rolled platesand strips. ZAO Severgal, which became a workshopof Cherepovets Steel Mill in 2008, produces highqualitygalvanized steel for the automotive and otherindustries.A ferrous scrap metal recycling business operating inNorthwest and Central Russia, previously part of theMining segment, has transferred to Russian Steel.We acquired ZAO Trade House Severstal-Invest, awholesaler of rolled metal products, from its MajorityShareholder in December 2008. It is one of the largestnetworks of metal trading companies in Russia,and sells a wide range of steel products through itsbranches in the western Russian Federation.The consolidated financial statements for the year2007 were adjusted to account for the effect of scrapcompany transfers and the acquisition of ZAO TradeHouse Severstal-Invest.Scrap collection and processingWe sold participation in OAO Metallurgremont to aOur ferrous scrap metal recycling business providescompany controlled by its Majority Shareholder, andscrap metal to Cherepovets Steel Mill and otherOOO RTI Centre to a third party.Evraz18.9%Metallinvest9.1%Evraz19.7%Metallinvest9.9%companies.MMKSeverstal17.3%16.1%MechelOther7.5%18.8%MMKSeverstal19.5%17.7%MechelMAXI Group7.7%2.4%Trading and service companiesFor the purpose of structure and expensesoptimisation, OOO Severshtamp merged with OOONLMK12.3%NLMK14.1%Other9.0%This segment comprises trading companies in theSSM-Tyazhmash, and ZAO Neva-MetallTrans with ZAOSource: ChermetSource: ChermetRussian Federation and abroad.Neva-Metall.Russian Steel’s geographical location gives usWe produced 11.1 million tonnes of crude steel andThe main purpose of service companies is to maintainthe production processes of Cherepovets Steel Mill.Strategyfavourable access to raw materials, transportationnetworks and markets.10.1 million tonnes of semi-finished, rolled anddownstream products in 2008. Revenue was US$11.25Changes in of our steel businessRussian Steel’s main objectives are:billion, an increase of 33.3% compared to 2007. AndWe recently established ZAO Severstal Long Product• To increase output of high-margin productsWe produce a wide range of products through this partEBITDA was US$3.39 billion, up 29.7% on 2007.Mill Balakovo. Located in the Saratov region, it will• To increase its share in the most profitable marketof our business, including hot-rolled sheets, profiles,produce long products. However, the project is currentlysegments, namely:and cold-rolled coated sheets – encompassing special-on hold until the market situation improves.- Plate for pipes and shipbuilding industriesgrade sheets for the automotive industry, hot-rolled- Constructing mini-mills to manufacture rolledplates and long products. Most of our products are soldWe’ve also acquired Severstallat Silesia Spzoo,products for the construction industryto the domestic market, including Russian automotive,in Poland, which specialises in the resale of- High-quality products for engineering.construction, shipbuilding, engineering and otherrolled products. Its forecasted sales volumes are• To improve cost control and efficiency.industries.approximately 100 thousand tonnes.56 57