About NLMK Group

05OURBUSINESSMODELA NEW PHASE OF DEVELOPMENT

2013 REPORTNLMK GROUP’S BUSINESSMODEL IS BASED ONA BALANCE IN OURPRODUCTION CHAIN,PRODUCT PORTFOLIO,AND SALES MARKETS.23NLMK is a vertically integrated groupwith a well-balanced value chain, providingcontrol over every stage of steel production,from the mining of raw materials to the saleof high-technology finished products toend users.At all stages of this process, we adhereto our commitment to corporate responsibility,seeking to ensure the well-being ofour staff, the local communities, and theenvironment.

ABOUT NLMK24NLMK GROUP’SVERTICALLYINTEGRATEDBUSINESS MODELNLMK has created a unique business model. A keyfactor is our ability to make the most of our strategicadvantages based on the geographical location ofour assets. Mining and steel production (the mostmaterial- and resource-intensive aspects of themetallurgical process) are concentrated in low-costregions, while finished products are manufacturedmuch closer to the Group’s client base. This allowsNLMK to minimize expenditure on production andlogistics while at the same time swiftly and flexiblyadapting to the changing requirements of our endusers and the situation in local sales markets.The key stages of our production chain are:1UPSTREAMOur Russian assets fully supply the Group’srequirements for iron ore concentrate, sinter ore,and coke, and the majority of our scrap and electricalpower needs. NLMK manages one of the mostefficient iron ore manufacturers in the world, whichis situated close to the Group’s main steel productionfacility and has reserves of over 6 billion tonnes.Novolipetsk and Altai-Koks have their own energygeneratingcapacities that run on by-product gasesand cover the companies’ energy needs. Altai-Kokseven sells excess energy to third-party consumers.A NEW PHASE OF DEVELOPMENT

2013 REPORT252MIDSTREAM3DOWNSTREAMNLMK has a flexible production chain. Approximately20% of our steel is produced using electricarc furnace (EAF-based) technology, and 80% ismanufactured using basic oxygen furnaces (BOF)at one of the most economically run companies inthe world: our site at Lipetsk.About 94% of our steelmaking capacity is locatedin Russia, next to our main sources of raw materialsand close to key end users of our products (about40% of our sales).Production and sale of our wide range of finishedproducts is evenly split between developing andmature markets, which ensures both growth andstability.A substantial proportion of finished products aremanufactured by NLMK rolling facilities close to ourwide client base, which has strict requirements interms of product quality and delivery deadlines.01 02 03 04 05 OUR BUSINESS MODEL 06 07 08

ABOUT NLMK1UPSTREAMOur extensive resource base issituated in a low-cost region (Russia)The extraction and processing of raw materialsused in steel productionIRON OREIron ore concentrate and sinter ore are the keyinput materials in pig iron and BOF steel production.ADVANTAGESStoilensky supplies all of the Group’s requirementsfor iron ore concentrate and sinter ore,and when our pelletizing plant is completed, itwill cover all NLMK’s needs for iron ore, includingiron ore pellets. In addition, its ferruginous sludge(waste) utilization technology will allow us tofurther reduce our consumption of iron ore.COKE AND COKING COALCoke is used as a raw material in the productionof pig iron. It is obtained by baking a blend ofseveral grades of ground coking coals.ADVANTAGESAltai-Koks and the coke batteries at the Lipetsksite supply more than 100% of the Group’srequirements for coke, which is used in the blastfurnaces to produce pig iron. In 2013, pulverizedcoal injection (PCI) technology was introducedat Novolipetsk’s Blast Furnace No. 5, partiallysupplanting expensive coke and natural gas witha far more cost-effective alternative. Anotherinnovation — the use of a petroleum coking additive— enabled us to improve the quality of the coke.The use of granulated tar pitch allowed us to reducethe amount of expensive coal grades in the charge.SCRAPSteel is fully recyclable. At the end of their usefullife, steel products can be used as input for smelting.Scrap is used in both EAF and BOF operations.A NEW PHASE OF DEVELOPMENT

2013 REPORTADVANTAGESScrap processing businesses within NLMK Groupprovide about 85% of the ferrous scrap requiredby our Russian steelmaking plants. To supply theincreased demand for scrap (taking into accountthe rise in scrap consumption following the launchof NLMK Kaluga), the Group is continuing todevelop its scrap processing division. In 2013,NLMK’s scrap processing site in the city of Podolskcommissioned a shredder, thus expanding NLMK’sferrous scrap processing capacity and maintaininga high level of self-sufficiency after the launch ofNLMK Kaluga.FLUXESFluxes are used to manufacture refractories, andin sinter and BOF processes.ADVANTAGESStagdok (limestone) and Dolomit (dolomite)fully cover our flux requirements.ELECTRICITYElectricity is one of the main energy sources usedin steel production.ADVANTAGESNLMK has generating plants that run mainlyon by-product gases from coke and blast furnaceoperations. In 2013, the Lipetsk site was 53%energy self-sufficient. At Altai-Koks, enoughenergy is generated to meet all of the Company’srequirements, and the excess is sold to third-partyconsumers.27100 % +SELF-SUFFICIENCY IN COKE53 %SELF-SUFFICIENCYIN ENERGY *100 %SELF-SUFFICIENCY IN IRON ORECONCENTRATE AND SINTER ORE100 % +SELF-SUFFICIENCY IN FLUX85 %SELF-SUFFICIENCYIN SCRAP* At the Lipetsk site01 02 03 04 05 OUR BUSINESS MODEL 06 07 08

ABOUT NLMK2MIDSTREAMThis is the process of converting raw materials intothe components used to charge the furnaces, aswell as the production of crude steel and cast slabs.PROCESSThe Group’s steelmaking operations are wellbalanced, using different methods: the basic oxygenfurnace (BOF) route, representing over 80% (atthe low-cost Novolipetsk site), is complemented byelectric arc furnace (EAF) production, representingnearly 20% (at NLMK Russia Long, NLMK EuropePlate, and NLMK USA).ADVANTAGESThis balanced business model allows us to quicklyand flexibly adjust our production according tothe market situation. The steel produced by ourGroup in Russia is one of the lowest-cost productsin the world. This is facilitated by proximity to thesources of our raw materials, the relatively lowNLMK’s steelmaking capacities arelocated in close proximity to our rawmaterial assets.cost of energy and labour, and the highly efficienttechnology we use.Over the last few years, NLMK has been activelydeveloping its secondary metallurgy capacity.This has allowed us to expand our product mixto include high-quality grades of steel that are indemand on the market.Recently, this competitive advantage has allowedthe Group to further expand its low-cost productionbase in Russia: in 2011, we commissioned anew blast furnace and a basic oxygen furnace, thusincreasing our steelmaking capacity by over a third.In 2013, we commissioned a next-generation EAFplant, NLMK Kaluga, with a capacity of approximately1.5 million tonnes of steel.34817+80 / 20 %100 %US$ / TSLAB PRODUCTION COST ATTHE MAIN PRODUCTION SITEM T / YSTEEL PRODUCTIONCAPACITYBOF/EAF PRODUCTION RATIOOF STEEL UNDERGOESSECONDARY METALLURGYTREATMENTA NEW PHASE OF DEVELOPMENT

2013 REPORT3DOWNSTREAMWe roll steel close to our maincustomers.29This is the process of creating rolled steel,ready for sale.PROCESSNLMK’s steel processing plants are diversifiedboth geographically and in terms of the productsthey manufacture.ADVANTAGESNLMK’s strength is the proximity of its finishedproduct manufacturing sites to its end consumers.Russia, the EU, and the US have traditionally beenNLMK’s key sales markets, and it is in these regionsthat the Group’s rolling mills are located.Having set up an efficient production flowand flexible sales strategy, NLMK can adjust itsproduction programme according to the demandsof the market. When demand shrinks for highvalue added (HVA) products, NLMK can switch tostandard steel production with practically no losses,and direct sales to more profitable markets. Whendemand recovers, the Company can increase itsHVA product output, balancing out production.14+90 % +35 %80 %M T / YTOTAL ROLLINGCAPACITYOF STEEL PRODUCED CANBE PROCESSED AT OUR OWNROLLING MILLS IN RUSSIAAND ABROAD *SHARE OF HVA INFINISHED PRODUCTOUTPUTOF ROLLED STEEL ISSOLD CLOSE TO WHEREIT IS PRODUCED* Including NLMK Belgium Holdings(NBH) capacities01 02 03 04 05 OUR BUSINESS MODEL 06 07 08