Portfolio managers from international investment funds visit NLMK Kaluga

On 25 July 2014, representatives of international investments funds, managing assets with a total value of approximately 1 trillion dollars, visited the new generation EAF steelmaking plant NLMK Kaluga (part of NLMK Group Long Products Division).

NLMK Kaluga is located on the territory of the Vorsino industrial park in Kaluga region not far from Moscow, the largest construction market in Russia. In 2013, the Central region of Russia accounted for approximately 30% of long product consumption nationwide, and only 9% of its production.

The representatives of the investment funds from Canada, the Netherlands and Great Britain visited NLMK Kaluga production facilities that were launched in July 2013, and discussed with the management the process of mastering new types of product; production plan implementation; and the conditions in key sales markets.

The site visit was organized by Bank of America Merrill Lynch.

Alexander Burayev, Director for Long Products and Metalware of NLMK Group, said:

“In the shortest possible time, we have been able to master products that are in high demand in the market, reaching full capacity as early as Q2 2014; and showing record daily output. Currently, the plant is running at 100%, and despite the fact that we only launched a year ago, we already have over 12% of the growing long steel market in the Central Federal District.”

NLMK Kaluga currently produces class A500C rebar with diameters of 12 mm, 14 mm, 16 mm, 18 mm, 20 mm, 22 mm and 25 mm, as well as billets. In 2014, the plant plans to master the production of approximately 20 new product types, including new dimensions of billets and rebar, as well as angles and channels.

In H1 2014 the Long Products Division of NLMK Group, that NLMK Kaluga is a part of, expanded steel production by 47% on the same period a year earlier, to 1.377 million tonnes. Steel product sales grew by 55% to 1.392 million tonnes, from 0.9 million tonnes in H1 2013. Rebar sales grew by 43.5% to almost 1 million tonnes.

About NLMK Kaluga

NLMK Kaluga is a next-generation EAF mill, part of NLMK Group’s Long Products Division. The opening of NLMK Kaluga in July 2013, was recognized as the most important event of the year in Russian steelmaking by the Metal-Expo 2013 international exhibition, held in Moscow.

The fundamental concept of the NLMK Kaluga project is the ‘mini-mill’ model, establishing a range of EAF and rolling production facilities near to both sources of raw materials and target customers. Investment in the construction of the plant totaled more than RUB 38 billion, of which around RUB 7.5 billion was spent on environmental protection measures.

The plant is located in the Volsino industrial park in Kaluga region, which has 33 companies among its residents. The plant is 73 km away from Moscow by road, and a little over 90 km by rail.

The plant is located in the centre of Russia’s largest long steel consuming region, the Central Federal District. The region accounts for approximately 30% of long steel consumption in Russia, and only 9% of its production. It has a surplus of scrap, NLMK Kaluga’s key raw material (2.7 million tonnes per year). Scrap is supplied by NLMK Group’s in-house scrap collecting network, Vtorchermet NLMK.

NLMK Kaluga’s steelmaking and long product capacities are 1.5 million tonnes and 0.9 million tonnes per annum, respectively. The enterprise is uniquely equipped in Russia to produce the widest range of premium-grade long products for use in construction.

The launch of NLMK Kaluga has helped to tackle the current shortage of steel facing the Central Federal District, and has provided high-quality, in-demand steel products to the construction industry in Moscow, Moscow Region, and the wider Federal District.

The mill outperforms similar Russian companies in terms of efficiency. Electricity consumption per tonne of finished product at the mill is 10% lower than the Russian average; natural gas consumption is 18% lower; and raw material usage efficiency is 4% higher.

NLMK Kaluga is equipped with the best environmental technologies. The mill’s purification systems trap more than 99% of atmospheric pollutants, which is several times better than the Russian average. The closed-loop water cycle completely eliminates any waste water discharge and significantly reduces water consumption when compared to similar systems. Production waste is recycled into inert materials used for applications such as road construction.

The launch of NLMK Kaluga has created 1,250 new, qualified jobs at the mill and 600 jobs in the service sector, and has provided work for related businesses in Kaluga Region.

About NLMK Long Products

NLMK Long Products (part of NLMK Group), is the leading manufacturer of long products and metalware in the Russian market.

NLMK Long Products companies make up an integrated production chain from the collection and processing of ferrous scrap to the manufacture of HVA steel products – rebar, wire rod and metalware.

NLMK Long Products key companies are NSMMZ (EAF steelmaking and long products) and NLMK Metalware (metalware) located in the Sverdlovsk region, and NLMK Kaluga (EAF steelmaking, rebar and sections) located in the Kaluga region.

Raw materials are provided by Vtorchermet NLMK – one of the largest associations of scrap-collecting companies in Russia operating in different regions across the country.

Long Products Division’s production facilities produce 2.2 million tonnes per year of liquid steel; 2 million tonnes per year of rebar and wirerod, that is both sold to the market and reprocessed at the companies in-house metalware operations with a capacity of 0.5 million tonnes per year.

In H1 2014, NLMK’s Long Products Division produced 1.377 million tonnes of steel, 47% up on the same period a year earlier. Steel product sales grew by 55% to 1.392 million tonnes from 0.9 million tonnes. For instance, rebar sales increased by 43.5% to almost 1 million tonnes.

About NLMK Group

NLMK Group is one of the leading steelmakers in the world, and the largest steel producer in Russia.

NLMK’s production facilities are located in Russia, Europe and the USA. The Company’s crude steel capacity is over 17 million tonnes per year, of which approximately 16 million tonnes are located in Russia. NLMK has modern production capacities that are on par with leading international manufacturers in terms of technology.

The Group’s vertical integration allows for control of the entire production chain, from mining to final processing and delivery to our customers.

The Group produces a wide range of flat and long steel products. NLMK is the world-leading supplier of slabs and transformer steel, and the largest Russian supplier of HVA products, including pre-painted steel, galvanized steel and electrical steel, as well as long products.

The Company has a diversified sales topography, delivering products to over 70 countries around the world.

NLMK has the most competitive cash cost among global manufacturers; and one of the highest profitability levels in the sector. The Company generated $10.9 billion in revenue and $1.5 billion in EBITDA in 2013.

NLMK is the only steelmaker in Russia with an investment grade credit rating from international rating agencies. It is included in the TOP10 for corporate governance and transparency among Russian public companies by international rating companies.

NLMK’s ordinary shares are traded on the Moscow Stock Exchange (ticker “NLMK”) and its global depositary shares on the London Stock Exchange (ticker “NLMK:LI”).

Based on NLMK Group information