NLMK releases Q1 2009 operational results

The Russian steelmaker Novolipetsk Steel (NLMK) has issued its operational results for the first quarter of 2009.
 
Accordingly, in Q1 2009 NLMK increased its steel output by 21 percent quarter on quarter to 2.1 million mt, following recommissioning at the main production site in Lipetsk of two of its three blast furnaces, idled for repairs in Q4 2008. In the first quarter, NLMK's capacities were run at approximately 77 percent, and at the same rate both at the Lipetsk and Maxi Group facilities.
 
NLMK's Q1 total sales increased by 3.5 percent quarter on quarter to 1.945 million mt, including 11,000 mt of pig iron - down 82 percent, 19,000 mt of billets - down 75.8 percent, 39,000 mt of metalware - up 21.4 percent, 229,000 mt of longs - down 7.3 percent, and 555,000 mt of slabs - down 16.9 percent primarily due to increased flats production and sales. In Q1 2009, NLMK registered a 37.4 percent increase quarter on quarter in its sales of flats, mostly HR and CR steel, to 1.093 million mt. This was driven by a slight recovery in demand which began in mid-February and continued into March, occurring primarily in the export markets, particularly in Southeast Asia, including China.
 
NLMK's domestic sales saw a revival in March 2009 (up 36 percent month on month), largely due to restocking at trading and manufacturing companies and improvements in real sector lending. Although the company cannot claim that demand in April for its entire product mix is stable in the domestic market, it can state that there is an increase in electrical steel sales, primarily in transformer steel.
 
As regards to future, NLMK expects a decrease its financial results, due to the pricing environment, which deteriorated in Q1 2009, in the core sales markets and due to low sales volumes. However, these adverse effects will be partially offset by lower production costs, conditioned by a decrease in prices for basic raw materials, coupled with management's efforts to reduce costs and enhance efficiency, as well as due to the devaluation of the ruble (a 30 percent decrease since October 2008).
 
According to NLMK, in Q2 and Q3 2009, the situation will remain challenging. Initiatives taken by governments, a seasonal revival in the construction sector and an increase in demand from steel intensive sectors may have a positive effect in sustaining steel demand in the mid and long term.