Asset development

Steel

Strategic goal. EVRAZ has an annual strategic target to generate cost-reduction initiatives in the amount of 2-3% of the cost base at every business unit across the Steel segment.

Overview. During 2016, the Group focused its cost-cutting efforts on production yields and auxiliary supply consumption improvements across its steel mills, labour optimisations and energy efficiency initiatives. These initiatives resulted in an EBITDA effect of US$134 million last year.

Outlook. In 2017, EVRAZ steel mills are going to implement a pig iron cost reduction programme, as well as continue to work on energy efficiency and procurement optimisations. The Group will also conduct most of the construction works for a new blast furnace project at the EVRAZ NTMK steel mill.

Coal

Strategic goal. The Group’s strategic goal in the coking coal business is to reduce costs by 3-7% of the cost base every year and remain in the first quartile of the global cost curve.

Overview. During 2016, the Group’s efforts to increase labour productivity, shorten mining equipment relocation periods and improve other operational efficiency measures had an EBITDA effect of US$94 million.

Outlook. In 2017, EVRAZ will continue to focus on improving mining and development productivity, as well as major equipment modernisation. The Group will also support current mining volumes by developing new seams at current mines and implementing a proactive degassing programme.

Steel, North America

Strategic goal. The Group’s strategic goal is to be the lowest-cost producer of rails, LD, OCTG pipes and plate products when delivered to the Western United States and Western Canada.

Overview. Last year, the Group implemented cost-cutting programmes at the Portland and Regina rolling mills, and also achieved a US$30 million reduction in G&A expenses across all production facilities and headquarters. Efficiency improvements and negotiations with suppliers resulted in the optimisation of scrap and ferroalloys purchases. Altogether, the EBITDA effect was US$89 million.

Outlook. The primary focus for 2017 will be on the successful finalisation of the Regina steelmaking upgrade project, which will reduce alloying costs and increase capacity. The Group also plans to execute power cost reduction projects and decrease expenses on maintenance.

See Retention of low-cost position page for KPIs and detailed tracking.