Review of operations by segment

Operations by Segment,US$ million
Steel Steel, North America Coal Other
2020 2019 2020 2019 2020 2019 2020 2019
Revenues 6,969 8,143 1,779 2,500 1,490 2,021 410 483
EBITDA 1,930 1,795 (28) 38 400 843 15 18
EBITDA margin 27.7% 22.0% (1.6)% 1.5% 26.8% 41.7% 3.7% 3.7%
CAPEX 401 394 92 128 154 227 10 13

Steel segment

Sales review

Steel segment revenues by product
2020 2019
US$ million % of total segment revenues US$ million % of total segment revenues Change, %
Steel products, external sales 6,079 87.2 6,637 81.5 (8.4)
Semi-finished productsIncludes billets, slabs, pig iron, pipe blanks and other semi-finished products. 2,479 35.6 2,528 31.0 (1.9)
Construction productsIncludes rebar, wire rods, wire, beams, channels and angles. 2,013 28.9 2,166 26.6 (7.1)
Railway productsIncludes rails, wheels, tyres and other railway products. 1,099 15.8 1,181 14.5 (6.9)
Flat-rolled productsIncludes commodity plate and other flat-rolled products. 146 2.1 386 4.7 (62.2)
Other steel productsIncludes rounds, grinding balls, mine uprights and strips. 342 4.9 377 4.6 (9.3)
Steel products, intersegment sales 37 0.5 168 2.1 (78.0)
Including sales to Steel, North America 26 0.4 154 1.9 (83.1)
Iron ore products 146 2.1 190 2.3 (23.2)
Vanadium products 349 5.0 648 8.0 (46.1)
Other revenues 358 5.1 499 6.1 (28.3)
Total 6,969 100.0 8,143 100.0 (14.4)
Sales volumes of Steel segment (thousand tonnes)
2020 2019 Change Change, %
Steel products, external sales 12,197 12,075 122 1.0
Semi-finished products 6,039 5,636 403 7.2
Construction products 3,944 3,800 144 3.8
Railway products 1,299 1,393 (94) (6.7)
Flat-rolled products 267 622 (355) (57.1)
Other steel products 647 624 23 3.7
Steel products, intersegment sales 67 318 (251) (78.9)
Total steel products 12,264 12,393 (129) (1.0)
Vanadium products (tonnes of pure vanadium) 18,696 19,334 (638) (3.3)
Vanadium in slag 6,129 6,451 (322) (5.0)
Vanadium in alloys and chemicals 12,534 12,883 (349) (2.7)
Iron ore products 1,732 1,895 (163) (8.6)
Sinter - 759 (759) (100.0)
Pellets 1,732 1,134 598 52.7
Other iron ore products - 2 (2) (100.0)
Geographic breakdown of external steel product sales, US$ million
2020 2019 Change Change, %
Russia 2,962 3,358 (396) (11.8)
Asia 2,200 2,028 172 8.5
Europe 221 492 (271) (55.0)
CIS 490 565 (75) (13.4)
Africa, America and rest of the world 206 195 12 6.3
Total 6,079 6,638 (558) (8.4)

In 2020, revenues from the Steel segment dropped by 14.4% to US$6,969 million, compared with US$8,143 million a year earlier. The segment’s revenues were impacted by a sharp reduction in sales prices for vanadium products, as well as a slight fall in construction sales prices and lower flat-rolled sales volumes, along with lower sales volumes in the North America segment.

Revenues from external sales of semi-finished products decreased by 1.9% amid a decline of 9.1% in average prices, which was partly offset by a 7.2% increase in sales volumes. The increase was driven primarily by change in the product mix in favour of higher slab and billets sales to export destinations following a decrease in demand in Russia amid the COVID-19 pandemic.

Revenues from sales of construction products to third parties fell by 7.1%: a 10.9% decrease was attributed to a reduction in average prices, which was partly offset by a 3.8% increase due to higher export sales volumes to Asia following a decrease in demand in Russia amid the COVID-19 pandemic.

Revenues from external sales of railway products fell due to a 6.7% decrease in volumes, which was coupled with sales price decline of 0.2%. A key driver of lower railway product sales volumes during the reporting period was lower demand for railway wheels on the Russian market, which was also attributable to the COVID-19 pandemic.

External revenues from flat-rolled products fell by 62.2%. A 57.1% decrease was attributed to a drop in sales volumes to Europe mainly due to disposal of EVRAZ Palini e Bertoli which took place in Q4 2019, and a 5.2% decrease due to lower sales prices.

The share of sales to the Russian market declined from 50.6% in 2019 to 48.7% in 2020, following increase of export sales to Asia.

Steel segment revenues from sales of iron ore products dropped by 23.2%. This was due to a 14.6% decrease in sales prices, as well as 8.6% reduction in sales volumes, primarily as a result of the absence of sinter sales to third parties, due to disposal of EvrazTransUkraina and greater requirements for own operations.

In 2020, around 63.2% of EVRAZ’ iron ore consumption in steelmaking came from the Group’s own operations, compared with 66.6% a year earlier.

Steel segment revenues from sales of vanadium products dropped by 46.0%, primarily due to a 42.7% downturn in sales prices in line with market trends. Ferrovanadium prices dropped in line with the London Metal Bulletin and Ryan’s Notes quotations, while vanadium slag prices fell along with vanadium pentoxide (V2O5) quotations.

Steel segment cost of revenues

Steel segment cost of revenues
2020 2019
US$ million % of segment revenue US$ million % of segment revenue Change, %
Cost of revenues 4,596 65,9 5,836 71.7 (21.2)
Raw materials 2,025 29.1 2,577 31.6 (21.4)
Iron ore 503 7.2 540 6.6 (6.9)
Coking coal 769 11.0 1,082 13.3 (28.9)
Scrap 442 6.3 542 6.7 (18.5)
Other raw materials 311 4.5 413 5.0 (24.7)
Auxiliary materials 339 4.9 366 4.5 (7.4)
Services 241 3.5 277 3.4 (13.0)
Transportation 407 5.8 457 5.6 (10.9)
Staff costs 477 6.8 501 6.2 (4.8)
Depreciation 233 3.3 227 2.8 2.6
Energy 398 5.7 439 5.4 (9.3)
OtherIncludes goods for resale, changes in work in progress and finished goods, taxes in cost of revenues, semi-finished products, allowance for inventory and inter-segment unrealised profit. 476 6.8 992 12.2 (52.0)

In 2020, the Steel segment’s cost of revenues decreased by 21.2% year-on-year. The main reasons for the increase were:

  • The cost of raw materials declined by 21.4%, mainly due to lower costs of coking coal (down 28.9%), due to the trend on global markets, as well as reduced use of more expensive coal concentrate, which was replaced with a cheaper form from Esaulskaya mine. Scrap costs declined by 18.5%, due to lower scrap price and lower share of scrap in metal-charge amid increased pig iron consumption. The decrease in raw material costs was also accompanied by a weaker rouble and reduced consumption due to cost-cutting initiatives.
  • Costs for auxiliary materials declined by 7.4%, amid lower consumption of auxiliary materials and auxiliary materials prices.
  • Service costs declined by 13.0%, primarily driven by the lower cost and volume of ferrovanadium processing, whose costs are linked to final product quotes.
  • Transportation costs declined by 10.9%, primarily due to lower shipment volumes due to the COVID-19 pandemic, national lockdowns, the global economic shock and a sharp decline in economic growth rates.
  • Energy costs were lower due to the weaker rouble, as well as higher own electricity generation and change in fuel structure.
  • Other costs were down by 52.0%, mainly due to the lower cost of goods for resale, amid a drop in vanadium purchase prices in 2020, compared to 2019. Other reasons were related to a reduction in the purchase price of goods, higher sales of own production scrap, and significant increases of semi- and vanadium stocks due to COVID-19.

Steel segment gross profit

The Steel segment’s gross profit increased by 2.9% year-on-year, as positive effects of lower cost outweighed the decrease in sales volumes and prices.

Steel, North America segment

Sales review

Steel, North America segment revenues by product
2020 2019
US$ million of total segment revenue US$ million of total segment revenue Change, %
Steel products 1,679 94.4 2,372 94.8 (29.2)
Semi-finished products 109 6.1 121 4.8 (9.9)
Construction productsIncludes beams, rebar and structural tubing. 183 10.3 200 8.0 (8.5)
Railway productsIncludes rails and wheels. 326 18.3 405 16.2 (19.5)
Flat-rolled productsIncludes commodity plate, specialty plate and other flat-rolled products. 323 18.2 518 20.7 (37.6)
Tubular productsIncludes large-diameter line pipes, ERW pipes and casing, seamless pipes, casing and tubing and other products. 743 41.8 1,128 45.1 (34.1)
Other revenuesIncludes scrap and services. 95 5.6 128 5.1 (21.9)
Total 1,779 100.0 2,500 100.0 (28.8)
Sales volumes of steel products at Steel, North America segment (thousand tonnes)
2020 2019 Change Change, %
Semi-finished products 144 192 (48) (25.0)
Construction products 262 256 6 2.3
Railway products 404 441 (37) (8.4)
Flat-rolled products 382 523 (141) (27.0)
Tubular and other steel products 537 795 (256) (32.3)
Total 1,729 2,207 (476) (21.5)

The segment’s revenues from the sale of steel products dropped, due to a decrease of 21.7% in volumes, as well as a decrease of 7.5% in prices. This was mainly attributable to lower demand on the tubular and flat-rolled market.

Revenues from the sale of semi-finished products decreased by 9.9%, due to a decline in sales volumes of 25.0%, following the fulfilment of a contract with a key customer, albeit partly offset by an increase in prices of 15.1%.

Construction product revenues fell by 8.5%, due to a 10.8% reduction in prices, partly offset by a 2.3% increase in sales volumes as a result of improved market conditions.

Railway product revenues fell by 19.5%, driven by a decline in prices of 12.1%, along with lower sales volumes by 8.4%, due to reduced demand driven by the COVID-19 pandemic.

Revenues from flat-rolled products decreased due to declines of 10.6% in prices and of 27.0% in sales volumes, as a result of weakening market demand amid the COVID-19 pandemic.

Revenues from tubular product sales fell by 34.1% year-on-year, due to a drop of 32.5% in volumes. This was driven by turbulence on the oil and gas markets, which led to falling demand, resulting in the idling of the OCTG mills in Canada and the US.

Steel, North America segment cost of revenues

Steel, North America segment cost of revenues
2020 2019
US$ million % of segment revenue US$ million % of segment revenue Change, %
Cost of revenues 1,604 90.1 2,204 88.1 (27.2)
Raw materials 454 25.5 686 27.4 (33.8)
Semi-finished products 238 13.4 396 15.8 (39.9)
Auxiliary materials 172 9.7 222 8.9 (22.5)
Services 145 8.2 190 7.6 (23.7)
Staff costs 240 13.5 319 12.8 (24.8)
Depreciation 100 5.6 109 4.4 (8.3)
Energy 90 5.1 117 4.7 (23.1)
OtherPrimarily includes transportation, goods for resale, certain taxes, changes in work in progress and fixed goods, and allowances for inventories. 165 9.3 165 6.6 -

In 2020, the Steel, North America segment’s cost of revenues dropped significantly year-on-year driven by declined sales volumes. The main changes related to:

  • Raw material costs fell by 33.8%, primarily because of lower production volumes and lower cost of scrap.
  • The cost of semi-finished products was down 39.9%, due to the reduction of consumption at Portland Flat.
  • Auxiliary material costs fell by 7.6%, driven by lower production levels at Pueblo and in Canada.
  • Service costs went down by 23.7% , driven primarily by lower production volumes and mill idling.
  • Staff costs decreased by 24.8%, mostly driven by the idling of OCTG mills in Canada and the US, an overall decrease in production levels for other products and a rotating furlough schedule for salaried employees.
  • Energy costs fell by 23.1%, primarily due to reduced production levels and lower natural gas prices.
  • Other costs remained broadly flat year-on-year.

Steel, North America segment gross profit

The Steel, North America segment’s gross profit totalled US$175 million for 2020, down from US$296 million a year earlier. The decline was driven primarily by lower sales volumes for flat-rolled and OCTG, due to worsening market conditions, which was partly offset by lower prices for raw materials, purchased semi-finished products, staff costs, auxiliary materials and services.

Coal segment

Sales review

Coal segment revenues by product
2020 2019
US$ million % of total segment revenue US$ million % of total segment revenue Change, %
External sales
Coal products 929 62.4 1,251 61.9 (25.7)
Coking coal 74 4.9 148 7.3 (50.0)
Coal concentrate 853 57.3 1,103 54.6 (22.7)
Steam coal 2 0.2 - - 100.0
Intersegment sales
Coal products 536 35.9 730 36.1 (26.6)
Coking coal 101 6.8 124 6.1 (18.5)
Coal concentrate 435 29.2 606 30.1 (28.2)
Other revenues 25 1.7 40 2.0 (37.5)
Total 1,490 100.0 2,021 100.0 (26.3)
Sales volumes of Coal segment (thousand tonnes)
2020 2019 Change Change, %
External sales
Coal products 12,336 11,053 1,283 11.6
Coking coal 2,233 1,928 305 15.8
Steam coal 37 1 36 n/a
Coal concentrate and other products 10,066 9,124 941 10.3
Intersegment sales
Coal products 6,986 6,569 417 6.3
Coking coal 2,323 2,044 279 13.6
Coal concentrate 4,663 4,525 138 3.3
Total, coal products 19,322 17,622 1,700 9.6

Revenues from external sales of coal products fell, amid a 37.3% reduction in prices, partly offset by an 11.6% increase in sales volumes. Coking coal revenues fell by 50.0% and coking coal concentrate revenues dropped by 22.7% amid lower pricing, but were offset in part by higher sales volumes. These were driven by strong demand for coal on the Russian market, as well as growth in demand for coal from China. Long-term partnerships with Japanese, Korean and European clients have minimised the impact of declining demand on these markets.

Revenues from internal sales of coal products were down 26.8%, mainly due to a 33.1% reduction in sales prices, which was partly offset by a 6.3% uptick in volumes. Coking coal volumes rose by 22.4%, due to increased sales of K and KS grades.

In 2020, the Coal segment’s sales to the Steel segment amounted to US$537 million (36.0% of total sales), compared with US$730 million (36.1%) in 2019.

During the reporting period, roughly 78.0% of EVRAZ’ coking coal consumption in steelmaking came from the Group’s own operations, compared with 74.1% in 2019.

Coal segment cost of revenues

Coal segment cost of revenues
2020 2019
US$ million % of segment revenue US$ million % of segment revenue Change, %
Cost of revenues 1,027 68.9 1,046 51.8 (1.8)
Auxiliary materials 110 7.4 159 7.9 (30.8)
Services 53 3.5 97 4.8 (45.4)
Transportation 294 19.7 351 17.4 (16.2)
Staff costs 200 13.4 223 11.0 (10.3)
Depreciation 163 10.9 171 8.5 (4.7)
Energy 43 2.9 51 2.5 (15.7)
OtherPrimarily includes goods for resale, certain taxes, changes in work in progress and finished goods, allowance for inventory, raw materials and inter-segment unrealised profit. 164 11.0 (6) (0.3) 100.0

The main drivers of the year-on-year increase in the Coal segment’s cost of revenues were as follows:

  • The consumption of auxiliary materials decreased by 30.8% due mainly to lower volumes of preparation at third-party plants, the idling of production at the Raspadsky open pit in Q2-Q3 2020, and a decrease in the production volumes at Raspadskaya mine.
  • Costs for services dropped by 45.4%, due mainly to lower volumes of preparation at third-party plants, the idling of production at the Raspadsky open pit in Q2-Q3 2020, and a decrease in production volumes at Raspadskaya mine.
  • Transportation costs fell by 16.2% during the reporting period, primarily due to the idling of production at the Raspadsky open pit mine in Q2-Q3 2020, the use of in-house transportation equipment instead of third-party contractor equipment, lower volumes shipped.
  • Staff costs fell by 10.3% because of lower mining volumes as well as rouble depreciation.
  • Other costs increased during the reporting period, mainly due to higher sales of accumulated stock, partially offset by higher work-in-progress, and the lower cost of goods for resale and lower mineral extraction tax payments, due to reduced production levels.

Coal segment gross profit

In 2020, the Coal segment’s gross profit was US$464 million, down from US$975 million a year earlier, primarily due to lower sales prices.

Nikolay Ivanov Chief Financial Officer