of low-cost position

Key projects in 2016

During the year, our operations focused on adjusting controllable costs to bring them in-line with reduced volumes. Reduction of G&A costs saved US$42 million. A reduction in auxiliary material consumption and the use of industrial services helped lower costs by US$22 million. Repair work optimisations led to an additional cost savings of US$16 million. More efficient use of raw and basic materials saved US$5 million. Payroll expenses were also cut by US$4 million.

Optimisation of G&A, fixed cost, and Industrial Services

Workforce rationalisation and efficiency programme

Actions in 2016:

  • During 2017, an aggressive cost-reduction programme in the Portland and Regina rolling mills sites effectively reduced costs in-line with volumes, maintaining cost per ton unchanged from prior year.
  • The long division restructured the rail finishing area to reduce labour thanks to sustained improvements in operations.

2017 plan:

  • Continue streamlining incidental and non-value adding processes.

Optimisation of consumption of raw materials and basic materials

Raw and auxiliary materials

Actions in 2016:

  • Ferroalloys and other auxiliary materials declined faster than volumes thanks to a focused effort on realising efficiencies and achieving better pricing.
  • When comparing full year 2015 and 2016, raw material expenditures declined (41)% while auxiliary materials declined (30)%..

2017 plan:

  • Leverage Regina upgrade project to reduce alloying cost.
  • Flux and power reduction project in Regina steelmaking.

Optimisation of repair work

Reduction in maintenance CAPEX vs. prior year

Actions in 2016:

  • Despite carrying out significant maintenance activities in the Pueblo and Portland sites, maintenance CAPEX and OPEX decreased 30% and 22% respectively compared to 2015..

2017 plan:

  • Continue rationalisation on maintenance CAPEX in the long and tubular divisions to align to production volumes.