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8 February 2016

NLMK increases its galvanized steel capacity

NLMK Group (LSE: NLMK), an international steel company with production facilities in Russia, the United States and the European Union, has finished hot-testing its continuous hot-dip galvanizing lines - HDG-1 at the Lipetsk production site following upgrades. HDG-1 is expected to reach full capacity (up to 500,000 tonnes per year) in April 2016.

The project boosted the line HDG-1 productivity by 30% to 500,000 tonnes per year; and increased Lipetsk site value added manufacturing capacity to produce HDG steel for the construction, automotive, and ‘white goods’ sectors, as well as for further use in the production of pre-painted steel, by 11% to 1.25 million tonnes.

This will enable NLMK to solidify its position in the high value added steel market, in which demand exceeds the capacity of Russian manufacturers and is covered by imports, including from far-away countries. Annual Russian imports of coated steels exceed 1 million tonnes.

The successful HDG-1 reconstruction is unique in the history of the company in terms of scope and lead times. In 90 days, a new automated control system was installed; the furnace section upgraded; and new process equipment assembled.

Alongside an increase in production, HDG-1 reconstruction will also result in:
  • a 25% reduction in natural gas consumption though installing furnace control and modernization systems;
  • a 15% reduction in electric energy consumption through optimizing equipment configuration;
  • a 30% reduction in air emissions through optimizing the natural gas afterburning system (the gas being used to fuel the furnace).
Konstantin Lagutin, NLMK Group Vice President for Investment Projects, said: “Following the HDG-1 reconstruction, we have one of the most efficiency hot-dip galvanizing lines. After it reaches design productivity, Lipetsk site capacity to produce HDG steel for the construction, automotive, and ‘white goods’ sectors will increase by 120,000 tonnes per year. As a result, NLMK will solidify its position in the high value added steel market, which is fully in line with our Strategy 2017 goals. Construction of a similar capacity-wise but a more modern HDG-5 line at the Lipetsk site will serve the same purpose. HDG-5 line will enable us to increase our capacity to produce hot-dip galvanized steel by 450,000 tonnes per year by 2018.”

Investment in the project totaled approximately 2 billion rubles; with a payback period of 2 years. NLMK is the leading producer of hot-dip galvanized steel in Russia with over 21% market share of domestic production in 2015. There are four continuous hot-dip galvanizing (HDG) lines in operation at the Lipetsk site with a total capacity of over 1.1 million tonnes in 2015 (1.25 million tonnes per year as of April 2016 following upgrades). This equipment supports the production of strip with a width of up to 1800 mm and thickness ranging from 0.4 mm to 4 mm. Hot-dip galvanized steel is used to manufacture roll-formed shapes, steel structures for construction and components for automotive and ‘white goods’.

About NLMK Group

NLMK Group is the largest steelmaker in Russia and one of the most efficient in the world. NLMK’s metal products are used in various industries, from construction and engineering to the manufacture of power-generating equipment and offshore wind turbines.

NLMK's production assets are located in Russia, Europe, and the United States. The Company’s liquid steel production capacity is over 17 million tonnes per year, of which about 16 million tonnes are produced in Russia.

NLMK has the most competitive cash cost among global manufacturers; and one of the highest profitability levels in the sector. The company generated $6.37 billion in revenue; $1.63 billion in EBITDA; and a net profit of $891 million in 9M 2015. Net Debt/EBITDA is 0.5.

NLMK’s ordinary shares are traded on the Moscow Stock Exchange (ticker symbol: NLMK), and its global depositary shares are traded on the London Stock Exchange (ticker symbol: NLMK:LI). The company has a BBB- credit rating.

About Novolipetsk (NLMK’s main production site in Lipetsk)

Novolipetsk is the main production site of NLMK Group, Russia’s leading manufacturer of steel and high value added rolled products, and one of the most efficient steelmaking companies in the world. Novolipetsk is the nucleus of NLMK Group’s single production chain, with assets in Russia, the EU and the USA.

The steel production volume of the Lipetsk site is approximately 18% of all steel produced in Russia, and approximately 80% of all steel products produced by NLMK Group.

Novolipetsk’s high-quality steel products are used in various strategically important industries, from construction and engineering to the manufacture of power-generating equipment and large-diameter pipes. Novolipetsk produced 12.85 million tonnes in 2015. This represents an all-time high over the 80 years of NLMK’s history. This record performance was supported by productivity improvements throughout the value chain of the site. With capacities running at 100%, production grew by 2.4% compared to 2014.