WOOD Flash – Severstal: 4Q17 trading update
Severstal reported its 4Q17 trading update this morning. Average steel prices were up 9% qoq, showing similar price trends to those reported by EVRAZ and NLMK in the past two days, and 4% above our forecast (which had not been updated to reflect the December rally). However, steel volumes were 5% lower than we expected, resulting in gross revenue for the steel division being 1% below our forecast vs. NLMK and EVRAZ beating our expectations. Mining production was mixed, with pellet volumes rising 39% qoq, due to a large shipment being delayed from 3Q17, in line with our forecast, and concentrate volumes rose 6% qoq, beating our forecast by 16% due to the consolidation of Yakovlevsky, a recent acquisition. However, coking coal output was down 10% qoq and 13% below our forecast, due to longwall repositioning, and thermal coal output was up only 12% qoq despite the start of the heating season (26% below our forecast and down 24% yoy). 2018 output guidance is in line with previous statements, except for the new guidance for 1.3mt of output from the new Yakovlevsky mine, which is not in our numbers currently. Overall, the results should be taken as neutral by the market, in our view.
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