DJ PJSC Magnitogorsk Iron and Steel Works: MMK Group Trading Update for Q1 2021
PJSC Magnitogorsk Iron and Steel Works (MMK) PJSC Magnitogorsk Iron and Steel Works: MMK Group Trading Update for Q1 2021 14-Apr-2021 / 08:57 CET/CEST Dissemination of a Regulatory Announcement that contains inside information according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group. The issuer is solely responsible for the content of this announcement. =---------------------------------------------------------------------------------------------------------------------- MMK Group trading update for Q1 2021 PJSC Magnitogorsk Iron & Steel Works ("MMK", or the "Group") (MICEX-RTS: MAGN; LSE: MMK), one of the world's largest steel producers, is pleased to announce its Trading Update for Q1 2021. 14 april 2021 Magnitogorsk, Russia - Pig iron output increased by 2.0% quarter-on-quarter (q-o-q) to 2,572 thousand tonnes, driven by the continuing high steel demand. - Steel output remained broadly flat q-o-q at 3,300 thousand tonnes, reflecting favourable market conditions. HIGHLIGHTS Q1 2021 - MMK Group's sales of finished products totalled 2,904 thousand tonnes, down 4.6% q-o-q due to the build-up of metal products inventories ahead of the construction season. VS Q4 2020 - The Group's sales of premium products fell by 14.1% to 1,154 thousand tonnes due to the restocking ahead of the construction season and a decrease in Steel Turkey segment's sales. - MMK Coal's coal concentrate production amounted to 815 thousand tonnes, down 2.6% q-o-q due to convention loading restrictions and preparation of faces for re-mounting. HIGHLIGHTS - Pig iron output increased by 9.2% q-o-q due to the absence of overhauls in blast furnace operations Q1 2021 during the quarter. VS Q1 2020 - Steel output increased by 9.2% q-o-q, which was due to the absence of overhauls at converter facilities and completion of modernisation of Hot-Rolling Mill 2500. - MMK Group's sales of finished products increased by 5.8% year-on-year (y-o-y) driven by the high utilisation rate of Mill 2500 after the modernisation. - Premium products sales dropped by 11.8% y-o-y due to a change in thick plate order mix at Mill 5000 and an increase in intragroup sales of cold-rolled products on the back of the reconstruction of reverse Cold-Rolling Mill 1700. - Production of coal concentrate remained flat year-on-year at 815 thousand tonnes. Global steel products market: In Q1 2021, global prices continued to rise due to the undersupply in key regions. By late March, prices for flat products hit their record highs in the USA and the EU since 2008, and in Turkey since 2011. In March, the authorities of the Tangshan municipality, the largest steel production centre in China, presented a plan to reduce production at most local steel plants by the end of 2021. Fears of a decline in metal product supply have given a new impetus to price growth in both the Chinese domestic market and in exports. Russian steel products market: Prices for flat products continued to grow in Q1 2021 fuelled by high global prices for metal products, fluctuations in the rouble exchange rate and higher raw materials prices. There has been a correction in the rebar market, following the growth in late Q4 2020. Closer to the end of Q1 2021, prices for rebars began to recover due to renewed growth in scrap prices and improved demand ahead of the construction season. Global iron ore market: Average values of the 62% Fe iron ore index remained high in Q1 2021 (USD 165 - USD 170 per tonne CFR China). China's consumer demand for iron ore was low since the beginning of the year, with restrictions imposed in Tangshan in March further subduing demand for the raw materials and minimising the risks of physical shortages of iron ore in China in 2021. MARKET OVERVIEW Russian iron ore market: In the first quarter, demand for raw materials was quite strong both in the domestic and in key export markets. Since Q4 2020, iron ore exports from Russia to Europe and Turkey have been growing, with the rapid increase in prices in these markets further contributing to soaring prices for Russian consumers. Global coking coal market: The global market remained volatile in the first quarter due to China's ongoing ban on coal imports from Australia. Prices for alternative supplies to China consolidated around USD 200 - USD 220 per tonne, while prices for Australian imports returned to USD 110 - USD 120 per tonne FOB amid the ongoing glut in available raw materials. The likelihood that the ban will be lifted soon is no longer assessed as high by market players. Russian coking coal market: Prices in the Russian market grew by more than 50% in Q1 2021. This strong rise was driven by the low base effect of former prices. There are no any drivers for price changes for coking coal on the Russian market, which could lead to significant price fluctuations in Russia before the end of 2021. Russian metal scrap market: Scrap prices in the Russian market peaked in early 2021, but then declined due to the introduction of an increased duty on scrap exports from Russia. However, this decline was short-lived, with seasonality and high prices for metal products preventing scrap prices from falling significantly.
MMK GROUP'S CONSOLIDATED RESULTS
thousand tonnes Q1 2021 Q4 2020 % Q1 2021 Q1 2020 % Crude steel production 3,300 3,312 - 0.4 3,300 3,022 9.2 Pig iron production 2,572 2,521 2.0 2,572 2,355 9.2 Coal concentrate production 815 837 - 2.6 815 814 0.2 Iron ore production 631 638 - 1.0 631 658 - 4.0 Finished products sales, 2,904 3,045 - 4.6 2,904 2,745 5.8 including: Slabs and billets 53 0 - 53 0 - Long products 268 297 - 9.8 268 357 - 24.7 Flat hot-rolled products 1,428 1,404 1.7 1,428 1,080 32.2 Premium products, including: 1,154 1,343 - 14.1 1,154 1,308 - 11.8 Thick plate (Mill 5000) 165 202 - 18.3 165 231 - 28.6 Flat cold-rolled products 184 226 - 18.4 184 245 - 24.7 Downstream products, including: 805 916 - 12.1 805 833 - 3.4 Tinplate 43 38 14.9 43 42 4.1 Galvanised steel 439 460 - 4.6 439 443 - 1.1 Polymer-coated steel 150 200 - 24.8 150 140 7.3 Band 35 42 - 15.2 35 32 11.4 Formed section 26 36 - 28.0 26 44 - 41.9 Pipe 12 24 - 48.4 12 13 - 3.3 Metalware 97 111 - 12.2 97 108 - 9.8 Other metal products 2 6 - 72.0 2 11 - 84.8 Share of premium products 39.7% 44.1% 39.7% 47.7%
CONSOLIDATED PRICES
FOR METAL PRODUCTS
USD/tonne Q1 2021 Q4 2020 % Q1 2021 Q1 2020 % Average price per tonne: 713 575 24.0 713 591 20.6 Slabs and billets 568 - - 568 - - Long products 633 493 28.4 633 497 27.4 Flat hot-rolled products 638 514 24.1 638 520 22.7 Premium products, including: 832 657 26.6 832 675 23.3 Thick plate (Mill 5000) 667 593 12.5 667 688 - 3.1 Flat cold-rolled products 731 573 27.6 731 602 21.4 Downstream products, including: 889 691 28.7 889 692 28.5 Tinplate 736 672 9.5 736 773 - 4.8 Galvanised steel 853 659 29.4 853 651 31.0 Polymer-coated steel 1,121 852 31.6 1,121 827 35.6 Band 798 600 33.0 798 663 20.4 Formed section 863 621 39.0 863 760 13.6 Pipe 706 538 31.2 706 555 27.2 Metalware 820 627 30.8 820 659 24.4 Other metal products 1,100 777 41.6 1,100 692 59.0 + 24.0% Q-o-Q Average selling prices for Q1 2021 grew by 24.0% q-o-q in Q1 2021 to USD 713 per tonne, driven by a AVERAGE significant increase in global prices for metal products amid global supply constraints. Prices grew by SELLING PRICE 20.6% y-o-y driven by favourable pricing conditions in the global steel markets.
MMK GROUP'S PERFORMANCE
ACROSS CORE SEGMENTS
STEEL SEGMENT RUSSIA
thousand tonnes Q1 2021 Q4 2020 % Q1 2021 Q1 2020 % Crude steel production 3,300 3,312 - 0.4 3,300 3,022 9.2 Pig iron production 2,572 2,521 2.0 2,572 2,355 9.2 Finished products sales, 2,853 2,933 - 2.7 2,853 2,597 9.8 including: Slabs and billets 53 0 - 53 0 - Long products 268 297 - 9.8 268 357 - 24.7 Flat hot-rolled products 1,570 1,505 4.3 1,570 1,095 43.3 Premium products, including: 961 1,131 - 15.0 961 1,145 - 16.1 Thick plate (Mill 5000) 165 202 - 18.3 165 231 - 28.6 Flat cold-rolled products 184 226 - 18.4 184 245 - 24.7 Downstream products, including: 612 703 - 13.0 612 670 - 8.6 Tinplate 43 38 14.9 43 42 4.1 Galvanised steel 270 298 - 9.1 270 311 - 13.1 Polymer-coated steel 126 150 - 16.1 126 109 15.3 Band 35 42 - 15.2 35 32 11.4 Formed section 26 36 - 28.0 26 44 - 41.9 Pipe 12 24 - 48.4 12 13 - 3.3 Metalware 97 111 - 12.2 97 108 - 9.8 Other metal products 2 6 - 72.1 2 11 - 85.1 Share of premium products 33.7% 38.5% 33.7% 44.1% - 2.7% Q-o-Q sales of finished products - 9.8% Q-o-Q sales of long products Sales of finished steel products in Q1 2021 decreased by 2.7% q-o-q to 2,853 thousand tonnes mainly due to the build-up of metal products inventories ahead of the construction season. The 9.8% y-o-y increase in sales was due to the completion of modernisation of Hot-Rolling Mill 2500. + 4.3% Q-o-Q sales of hot-rolled Sales of long products in Q1 2021 were down by 9.8% q-o-q to 268 thousand tonnes due to the restocking products ahead of the construction season. Sales declined by 24.7% y-o-y driven by the scheduled repairs to rolling equipment and an increase in inventories ahead of the construction season. In Q1 2021, sales of hot-rolled products grew by 4.3% q-o-q to 1,570 thousand tonnes as a result of the - 15.0% Q-o-Q growing export sales supported by favourable situation on global markets. The 43.3% y-o-y increase in sales was driven by the production growth at Hot-Rolling Mill 2500 after its modernisation. sales of premium Sales of premium products in Q1 2021 decreased by 15.0% to 961 thousand tonnes due to the restocking products ahead of the construction season and an increased share of export sales of thick plates from Mill 5000 with longer selling periods. The share of sales of premium products in the portfolio was 33.7%. Sales decreased by 16.1% y-o-y, reflecting the change in order mix for Mill 5000 thick plates and higher intragroup sales of cold-rolled products amid the reconstruction of the reverse Cold-Rolling Mill 1700. Mill 5000 sales decreased by 18.3% q-o-q to 165 thousand tonnes due to an increase in the share of export orders with longer selling periods. The 28.6% y-o-y decrease in sales was caused by a change in - 18.3% Q-o-Q the order mix. sales of Mill Sales of cold-rolled products in Q1 2021 were down by 18.4% q-o-q to 184 thousand tonnes, due to an 5000 products increase in intragroup sales. The 24.7% y-o-y decrease in sales was due to an increase in intragroup sales and the reconstruction of the reverse Cold-Rolling Mill 1700. The increase in tinplate sales in Q1 2021 by 14.9% to 43 thousand tonnes was due to the completion of - 18.4% Q-o-Q scheduled equipment repairs. The 4.1% y-o-y increase in tinplate sales reflects higher equipment performance driven by the changes in order mix. sales of cold-rolled Sales of galvanised steel in Q1 2021 decreased by 9.1% q-o-q to 270 thousand tonnes, driven by the products build-up of inventories in the distribution network ahead of the construction season. Sales of galvanised steel were down by 13.1% y-o-y. + 14.9% Q-o-Q Sales of coated steel in Q1 2021 decreased by 16.1% q-o-q to 126 thousand tonnes due to pre-season sales of build-up of inventories and a more attractive pricing environment for galvanised steel. Sales were up tinplate 15.3% y-o-y, reflecting the low 2020 base amid the spread of the pandemic. - 9.1% Q-o-Q sales of galvanised steel - 16.1% Q-o-Q SALES OF POLYMER-COATED STEEL
STEEL SEGMENT TURKEY
thousand tonnes Q1 2021 Q4 2020 % Q1 2021 Q1 2020 % Finished products sales, 196 220 - 10.9 196 167 17.0 including: Flat hot-rolled products 3 7 - 58.9 3 4 - 31.5 Premium products, including: 193 213 - 9.3 193 163 18.2 Flat cold-rolled products - - - - - - Downstream products, including: 193 213 - 9.3 193 163 18.2 Galvanised steel 168 163 3.5 168 132 27.4 Polymer-coated steel 25 50 - 50.8 25 31 - 20.8 Share of premium products 98.5% 96.8% 98.5% 97.5% Intersegment sales from Steel segment Russia 145 108 34.8 145 19 648.5 - 10.9% Q-o-Q SALES OF The sales of finished products in the Turkish steel segment in Q1 2021 decreased by 10.9% q-o-q to 196 FINISHED thousand tonnes, reflecting the shortage of semi-finished hot-rolled stock amid unscheduled repairs by PRODUCTS key third-party contractors and challenging weather conditions in Russia and in Turkey in the first quarter, which increased the delivery time of sea cargo. A 17.0% y-o-y increase in sales reflects a low 2020 base amid the spread of the pandemic and lockdown restrictions.
COAL MINING SEGMENT
thousand tonnes Q1 2021 Q4 2020 % Q1 2021 Q1 2020 % Coking coal mining 1,282 1,246 2.9 1,282 1,238 3.6 Coking coal processing 1,356 1,404 - 3.4 1,356 1,442 - 5.9 Mined 1,177 1,208 - 2.6 1,177 1,358 - 13.3 Purchased 114 159 - 28.2 114 84 35.1 Toll 65 37 74.7 65 - - Coking coal concentrate 815 837 - 2.6 815 814 0.2 + 2.9% Q-o-Q COKING COAL PRODUCTION Coking coal production in Q1 2021 increased by 2.9% q-o-q to 1,282 thousand tonnes. Coking coal production decreased by 3.6% y-o-y due to the challenging mining and geological conditions at the Chertinskaya-Koksovaya mine. - 2.6% Q-o-Q Coking coal concentrate production in Q1 2021 decreased by 2.6% q-o-q due to convention loading COKING COAL restrictions and preparation of faces for re-mounting. The output of coal concentrate remained flat CONCENTRATE year-on-year. PRODUCTION
MMK GROUP'S
SUSTAINABILITY PERFORMANCE (ESG)
- On 21 January 2021, BSI issued a report confirming the reliability of MMK's statement on its greenhouse gas emissions. This is the first BSI verification among Russian and other CIS companies to HIGHLIGHTS the latest version of ISO 14064-1:2018. - In March 2021, the ISS international rating agency changed its ESG Corporate Rating outlook for MMK from "D+" to "C". The rating upgrade reflects the Group's continued strong performance and commitment to UN corporate responsibility and sustainability initiatives. Q1 2021 Q4 2020 % Q1 2021 Q1 2020 % LTIFR 1.20 0.53 126.4 1.20 1.09 10.1 Gross air emissions, thousand tonnes 47.5 50.5 - 5.9 47.5 42.8 11.0 Specific air emissions, kg/tonne 14.4 15.2 - 5.3 14.4 14.2 1.4 + 10.1% Y-o-Y ltifr The LTIFR for Q1 2021 increased by 10.1% y-o-y to 1.20, reflecting the increased number of accidents on the back of adverse weather conditions (icy conditions of roads). The Group continues to implement initiatives to address the root causes of accidents and improve the production safety culture. Specific air emissions in Q1 2021 increased by 1.4% y-o-y to 14.4 kg per tonne due to an increase in air + 1.4% Y-o-Y emissions from power facilities as a result of the colder winter period of 2021. SPECIFIC AIR In Q4 2020, specific air emissions decreased by 5.3% q-o-q to 14.4 kg per tonne driven by the EMISSIONS implementation of measures to decrease dust emissions. - The favourable conditions in global markets coupled with seasonal growth in demand in Russia will positively impact the Group's sales in Q2 2021. In May 2021, the reverse Cold-Rolling Mill 1700 is expected to be commissioned, which, given our 100% utilisation of premium products, will positively impact the structure of the Group's sales portfolio. - The beginning of the construction season in Russia and positive dynamics of global prices for metal OUTLOOK products amid the continued shortages in foreign markets will support the growth of prices for MMK Group's metal products in Q2 2021. - CAPEX for Q2 2021 is expected to grow q-o-q, in line with the implementation schedule for projects
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