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First Link
in the Value Chain

Annual Report 2016
Metalloinvest
Statement from the Chairman of the Board of Directors
Statement from CEO

Who We Are

#1
producer
of merchant HBI / DRI
5.7 million tonnes
produced in 2016
#2
by proven iron
ore reserves
14.2 billion tonnes
iron ore reserves
#2
producer of iron
ore pellets
25.2 million tonnes
produced in 2016
#5
producer of merchant
iron ore
40.7 million tonnes of concentrate
produced in 2016

Metalloinvest is an efficient metals and mining company covering all stages of the production chain: from the extraction and processing of iron ore to the output of high-quality steel products for a wide variety of industrial customers, both in Russia and abroad.

10 Years of Sustainable Development

Metalloinvest celebrated its first major anniversary in 2016. The past ten years have been a time of sustainable development, strengthening of the Company’s market position and increases in financial and operational efficiency. Metalloinvest has boosted its total output to 4.8 million tonnes, with a significant part of this growth coming from products with high added value.Metalloinvest celebrated its first major anniversary in 2016. The past ten years have been a time of sustainable development, strengthening of the Company’s market position and increases in financial and operational efficiency. Metalloinvest has boosted its total output to 4.8 million tonnes, with a significant part of this growth coming from products with high added value.
Today, Metalloinvest’s products are used in all sectors of industry in Russia and abroad. The Company’s steel and mining facilities supply customers with a wide range of steel grades, metallised products and iron ore raw materials, which meet the highest quality standards and unique project requirements.

Shipbuilding

Metalloinvest is a reliable supplier of high-quality shipbuilding steel and iron ore raw materials for the largest international and Russian shipbuilders. Our products undergo all the required tests, have a stable chemical composition, and are compliant with international standards and the requirements of the Russian Maritime Registry of Shipping and the Russian River Register.

Construction industry

Metalloinvest’s enterprises supply high-quality raw materials and metal products for the manufacturing of metalwork compliant with the highest standards. Our high-strength heavy plate for construction undergoes all the required thermomechanical tests and has a stable chemical composition.

Automotive industry

Metalloinvest collaborates with the leading carmakers to develop new steel grades. While continuously improving the chemical composition and technical properties of its metal using state-of-the-art technologies, Metalloinvest’s enterprises manufacture steel products that comply with the strictest standards of the automotive industry.

Pipe industry

The main consumer of our pipe products is the oil and gas sector. Russia’s trunk pipeline system, which at over 250,000 km is the longest in the world, connects its hydrocarbon deposits to domestic and foreign consumers.

Machine building

Metalloinvest supplies a wide range of steel grades for machineryproducing companies worldwide. Our products undergo multistage testing for compliance with the toughest industry requirements and are certified for their quality.

Bridge construction

Metalloinvest’s steel products are compliant with Russian standards and undergo multistage testing, and their quality considerably exceeds global bridge steel standards.

Read more at 10years.metalloinvest.com

High flexibility in responding to market conditions

In 2016, the Company significantly boosted the output of all its core products, with the output of iron ore, pellets, HBI / DRI and pig iron reaching a record high. Shipment volumes also grew, driven by HBI / DRI, pig iron and steel deliveries.

+1.2 mln t

Iron ore output

Performance Chart

+1.4 mln t

Pellet output

Performance Chart

+0.3 mln t

HBI / DRI production

Performance Chart

+0.5 mln t

Pig iron output

Performance Chart

+0.2 mln t

Steel output

Performance Chart


Strategic 
Priorities

  • Stronger Investment Case
  • Greater Shareholder Value
  • Improved Operational and Management Efficiency
  • Higher Sales Margins

Stronger Investment Attractiveness

In 2016, Metalloinvest continued to develop its corporate risk management system as planned. The Company has launched a mechanism to categorise possible risk events and issued guidelines and policies to regulate related processes. Metalloinvest is also introducing risk response procedures and implementing quantitative assessments of potential damage.

Long-term ratings confirmation

Cooperation with rating agencies is an integral part of the Company’s work to increase its investment appeal. In 2016, such agencies as Standard & Poor’s, Fitch, and Moody’s upheld their “BB” / “Ba2” long-term corporate credit ratings of the Company.

100% of Holding Company Metalloinvest transferred to the Russian jurisdiction

The full consolidation of JSC Holding Company Metalloinvest on the balance of USM Metalloinvest LLC was a key event of 2016. By streamlining our ownership structure, we will be able to improve the Company’s transparency and the quality of corporate governance.

Metalloinvest continuously enhances its public disclosure and interaction with the investment community in a bid to comply with international best practices of disclosure. At present, the Company discloses information on its financial and operating performance, social and other activities in a level of detail and within the timeframes common for public companies.

Metalloinvest participates in international conferences organised by investment banks and holds its Investor Day annually in Moscow, continuously expanding its base of existing and potential investors.

Metalloinvest projects in the field of investor relations and corporate communications were highly appreciated by the expert community in 2016.

Growth in shareholder value

Stability in highly volatile conditions

Metalloinvest successfully weathered the sharp fall in iron ore prices at the end of 2015 and the start of 2016, demonstrating resilience in an unfavourable market environment. The Company demonstrated the viability and effectiveness of its business model when faced with unstable external conditions.

Metalloinvest continued to pursue its strategic priorities, aimed at growing the long-term value of the business. The Company reduced costs, introduced new technological developments to optimise its operations and cut unit costs. Metalloinvest’s broad, diversified product range enabled it to react flexibly to changes in domestic and international markets.

$4.15 billion – gross debt in 2016: lowest level in five years

The Company’s strong business profile, clear development strategy and high level of transparency for investors has allowed Metalloinvest to restructure its debt portfolio and maintain financial stability in highly volatile market conditions. The Company manages its expenses and debt load effectively and reaches its operational and financial targets.

2016 was a difficult year but it showed that Metalloinvest has strength in depth and is able to react flexibly to external challenges without substantial losses in efficiency.

Increase in operational and management efficiency

Metalloinvest is increasing the efficiency of its iron ore deposit developments, reducing ore mining and development costs, as well cutting expenditure associated with the production of metallised and steel products.

Up to 70.4% - iron content of high quality concentrate produced at Lebedinsky GOK since 2016

The Company is implementing projects to construct a crushing and conveyor complex at Mikhailovsky GOK and continuous cycle ore mining technology at Lebedinsky GOK. Metalloinvest is constantly upgrading its beneficiation equipment, which enabled it to bring new products to market in 2016, including: high quality concentrate with iron content of over 70% and high basic pellets with iron content of 65.8%.

Metalloinvest is in the first quartile of the cost curve among global producers of pellets and HBI/DRI

Pellet and HBI/DRI production costs* at Metalloinvest’s enterprises are significantly lower than at the Company’s global competitors. In 2016, Metalloinvest maintained its position in the first quartile of the cost curve among global producers of these products.

Metalloinvest is increasing efficiency and productivity by automating business processes. The Company is implementing a project that will introduce an automated planning and management system using ERP technology. This project will enable Metalloinvest to boost the overall efficiency of interrelated management processes, switch to a rolling planning system, and allow customers to track their orders.

In order to increase the efficiency of Metalloinvest’s business units, the Company is creating a unified centre for planning and management of maintenance works. The unified centre will enable the Company to optimise maintenance works, standardise planning processes and repair activities, and create a unified system to co-ordinate repair schedules.

As part of its efforts to become more customer-focused, Metalloinvest is carrying out initiatives to develop its customer service and improve interaction with consumers. The Company regularly holds coordination meetings with key customers, obtains certification for its products in accordance with international and Russian standards, and develops new steel grades.

*Excluding shipping costs

Margin growth

Focus on products with high added value

№ 1

global producer of merchant HBI

Metalloinvest is continuing to strengthen its position in the global market for products with high added value, mainly hot briquetted iron (HBI) and pellets, as well as high-quality rolled steel.

The launch of the Company's third hot briquetted iron plant (HBI-3) will allow Metalloinvest to increase output of HBI to 4.5 million tonnes per year and secure its leading position in the global market.

№ 2

global producer of pellets

№ 5

steel producer in Russia

Mikhailovsky GOK’s Pellet Plant #3 reached its target output in 2016, increasing Metalloinvest’s total pellet production capacity by 5 million tonnes per year.

The implementation of a number of investment projects at OEMK and Ural Steel will allow the two enterprises to launch new products, such as: round billets, merchant cast rail and moulded billets, as well as increase the quality of SBQ, which will consolidate Metalloinvest’s position in the high-quality rolled steel market.

Optimal supply routes

Metalloinvest selects sales markets based on regional market conditions and economic growth prospects. The Company’s wide range of products and flexible logistics chain (routes to Asia and Europe through ports in the Black Sea and the Baltic Sea) enable it to compete successfully in its major markets with both leading global suppliers and local producers.