NLMK Group Q3 2013 Trading Update

In Q3 2013, NLMK Group steel output grew by 3% to 3.897 m t, driven among other factors by a 0.1 m t increase in output at NLMK Kaluga. Q3 steel product sales totaled 3.719 m t (-1.4% q-o-q). Finished product sales grew by 5.5% q-o-q to 2.896 m t; their share in total sales growing 5 p.p. to 78%. Sales of value added products¹ increased by 2.1% to 1.411 m t, accounting for c.50% of finished product sales.

Sales to the Russian market reached 43% (+5 p.p. q-o-q) of total sales with 1.610 m t (+14% q-o-q).

Traditionally, key export markets were Europe, USA, South-East Asia, as well as the Middle East.

Outlook

Q4 2013 steel output is expected to grow by 6% q-o-q to 4.1 m t, with approximately 290,000 t to be produced by NLMK Kaluga.

Finished product sales are expected to total approximately 3.9 m t (+5% q-o-q).

Crude steel production:³ 3.897 m t (+3.0% q-o-q⁴)

• Finished steel production: 2.806 m t (+1.6%)⁵

Steel product sales: 3.719 m t (-1.4%), including

• Finished steel: 2.896 m t (+5.5%), including
  • High value added products: 1.411 m t (+2.1%)
  • Flat steel: 2.360 m t (+3.7%)
  • Long steel and metalware: 0.535 m t (+14.4%)
• Slabs: 0.780 m t (-16.8%).

NLMK Group⁶

⁶Excluding inter-group operations and including sales of trading companies

⁷ Including billets. In Q3 2013, NLMK sold 34,000 t of billets. In previous periods, billet sales were insignificant.

NLMK Group highlights

In Q3, NLMK Group’s steel output grew by 112,000 t to 3.897 m t, driven by consistently high steelmaking capacity utilization rates and higher steel output at NLMK Kaluga launched in June 2013. Steelmaking operations were running at 96%, including 99% at Novolipetsk, 90% at NLMK Long Products, and 76% at NLMK’s international operations.

Total steel product sales were 3.719 m t, down 55,000 t q-o-q, due mostly to a 90% reduction (-82,000 t) in pig iron sales. Rolled product sales were up by 6% q-o-q to 2.896 m t driven by the seasonal increase in demand. Value added steel sales increased by 2.1% q-o-q to 1.411 m t. Long steel sales increased by 17%.

Sales in the Russian market increased to 1.610 m t (+14% q-o-q), due largely to a stronger demand for HRC and CRC.

Export sales from NLMK’s Russian assets to third parties were 31% of the Group’s total sales, or 1.170 m t
(-18% q-o-q).

Third party sales of slabs declined by 17% to 0.780 m t. This is attributable to higher flat steel sales
(+3.7% q-o-q) and a 0.933 m t increase in the sales to the EU and US-based rolling assets. Slab sales in Russia totaled 0.142 m t.

NLMK Group’s international rolling assets accounted for 25% (flat q-o-q) of the Group’s total steel product sales (0.940 m t), with NLMK Europe selling 0.485 m t (-4.7% q-o-q), and NLMK USA selling 0.451 m t
(+5.1% q-o-q).

Key export destinations for the Group’s products were Europe, the US, the Middle East and South-East Asia.