**Evraz Expecting To See Slight Production Increase In Fourth Quarter**
LONDON (Alliance News) – Steel company Evraz PLC (LON:EVR) Thursday reported a fall in production during the third quarter across most of its operations following a variety of maintenance work, but said it expects slight improvements in the fourth quarter.
Crude steel production decreased in the third quarter to 3.85 million tonnes, compared with 3.91 million tonnes in the second quarter, due to maintenance work at its ZSMK mill in Russia. Gross production of steel products was down 4% to 3.6 million tonnes, from 3.8 million tonnes in the second quarter, due to lower orders of railway products in Russia and annual maintenance work at its Pueblo rail mill in north America.
Steel production in Russia declined slightly, but production of semi-finished goods increased 10% compared to the second quarter, when it faced limited production due to maitenance at NTMK’s blast furnaces in May.
Production of railway products suffered the biggest hit, decreasing by 28% to 283,000 tonnes in the third quarter from 395,000 tonnes in the second quarter, a 27% decrease from the same period a year earlier. It was hit by lower orders by customers in Russia, including Russian Railways.
Construction products production decreased 5% from the second quarter to 1.1 million tonnes, mainly due to softer demand for the production of beams and a 22 day maitenance at NTMK.
“Prices for semi-finished goods slightly decreased in line with global prices. Higher prices for construction products reflected the seasonal peak in demand. Prices for railway products in US dollar terms decreased mostly as a result of the Russian rouble devaluation,” said Evraz.
The average price for semi finished goods fell to USD417 per tonne from USD427 per tonne in the second quarter. Construction prices saw an increase to USD623 per tonne from USD616 per tonne and railway products fell the most, to USD747 per tonne from USD807 per tonne in the previous quarter.
“Production of steel and total steel products is expected to increase in fourth quarter compared to the third quarter, albeit at the expense of a further shift in favour of production of semi-finished products due to seasonal change in demand. Prices for construction products are expected to be negatively affected by decreasing demand in Russia and the CIS and, in dollar terms, by the continuing weakening of the rouble,” said Evraz in a statement.
In North America, crude steel production increased 4% to 500,000 tonnes from 480,000 tonnes in the previous quarter. This is due to “healthy demand” in the region. Production of railway products also fell in north America to 128,000 tonnes from 139,000 tonnes.
Prices for flat rolled and tubular products increased to USD998 per tonne and USD1,352 per tonne respectively, compared to USD980 per tonne and 1,335 per tonne in the previous quarter. Prices for construction products dipped to USD795 per tonne from USD808 per tonne due to a decrease in scrap prices, it said.
“In the fourth quarter, crude steel output is expected to be generally in line with the third quarter supported by the order book for tubular and long products. A slight increase in rail volumes is expected compared to the third quarter following completion of the annual maintenance of the Evraz Pueblo rail mill in September,” it said.
In Ukraine, crude steel production increased to 269,000 tonnes, up 9% from the previous quarter due to a change in production method. Output of semi-finished goods decreased by 9% to 94,000 tonnes from 103,000 tonnes, but finished goods production increased by 7% to USD124,000 tonnes from 116,000 tonnes in the second quarter. It saw prices for construction products remain flat, whilst it experienced a slight rise in semi finished product prices due to limited supply in Ukraine.
In South Africa, output of pig iron decreased 17% in the third quarter to 154,000 tonnes from 191,000 tonnes and crude steel production decreased by 20% to 141,000 tonnes from 170,000 tonnes. Evraz said the decline was due to “operational restraints”. As a result, production of steel products decreased by 19% from the second quarter.
Its mining sector experienced reductions in iron ore production in Russia, a 3% decrease to 4.4 million tonnes from 4.5 million tonnes in the second quarter, but saw increases at its South African production.
“Production of iron ore at the Mapochs mine in South Africa in third quarter 2014 grew compared to both the previous quarter and year-on-year due to improved productivity of the crushing facilities of the mine after repairs performed in January-February 2014,” it said.
Its coking coal production increased by 6% in the third quarter to 5.3 million tonnes from 5 million tonnes in the previous quarter. The increase is due to a 12% increase in mining activity at its Yuzhkuzbassugol mine.
Production of vanadium slag fell 7% to 5,799 tonnes from 5,415 tonnes across Russia and South Africa. Production of oxides, vanadium aluminium and chemicals improved by 19% compared to the second quarter, but Nitrovan production fell to 515 tonnes from 734 tonnes, a 30% decline, whilst also experiencing lower prices.
Its European operations in Italy remain suspended due to market conditions since August 2013.
Evraz shares were down 2.7% at 117.50 pence early Thursday, the worst-performing stock on the FTSE 250.
By Joshua Warner; firstname.lastname@example.org; @JoshAlliance
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