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Severstal (SVST) |
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WIKI ANALYSIS
Business Overview
Severstal is one the world's top vertically integrated steel producers[1]. In 2010 the company produced close to 17 million metric tonnes of steel, placing it amongst the top ten steelmakers in the world.
The company is run by Alexey Mordashov, a Russian steel industry oligarch who is also a main shareholder.
Business and Financial Metrics
Consolidated Severstal Group revenue in 2010 was $13.5 billion. EBITDA for this period was $3.3 billion[2].
Business Segments
The Severstal Group operates in three main segments. These are:
- The Russian Steel Division, which is the biggest division accounting for some 65% of sales. It mainly comprises the Cherepovets steel plant that produces ~9 million tonnes of steel per year, the Kolpino plate mill [850 kt / year of heavy steel plate] and the Izhora Pipe Mill [~600 kt / year of large diameter pipe].
- The Resources Division. This produces coking coal in Russia of ~ 8 mt / year, plus iron ore pellets and concentrate amounting to Russian output of some 14 million tonnes of iron ore per year. PBS Coals in Pennsylvania (a leading provider of ~1.5 mt / year of metallurgical coal and of ~1 mt/year of thermal coal - located by the U.S. east coast) is within this division. Gold mining assets in Russia, Kazakhstan and in West Africa [with production of ~ 590 k oz gold in 2010] are also within the Resources division.
- The International Division. Following the March 2011 sale by Severstal North America of steel making facilities at Warren, OH, Wheeling, WV and Sparrows Point, MD to the Renco Group, the International Division now mainly comprises US assets that include the 2.3 million tonne crude steel per year flat rolled steel plant at Dearborn, MI [auto cold rolled steels] and the 1.5 million tonne per year crude steel per year Columbus steel plant in Mississippi (formerly known as Severcorr).
Trends and Forces
Some of the trends impacting the Company include:
- Internationalization of the production base, which is pushing many large steel companies to new geographies in order to match the geographic breadth of key clients (e.g. in the automotive sector).
- Domestically, the evolution of the steel distribution network - with emergence of modern steel service centers and increasingly more sophisticated steel stockholding operations in Russia - which represents both a threat and an opportunity to Severstal.
- Increasing geographic polarisation between melting and rolling of steel. This is the result of[3]:
- increasing environmental and emissions costs in regions such as the European Union, which is pushing steelmaking into countries such as Russia
- the desire for adding value through hot and cold processing of steel, which is pushing rolling operations towards industrialised markets.
Competition
Within its core business of steelmaking, it should be noted that Severstal has a major competitive advantage from being almost fully self-sufficient in supply of key steelmaking raw materials that include iron ore and coking coal. This strong vertical integration gives Severstal a marked cost advantage in the production of steel. As a result, Severstal is ranked as being amongst the lowest cost producers of hot rolled steel coil, ranking in terms of cost performance with steelmakers in the top decile on the world cost curve for hot rolled coil.
Important competitors include EvrazHolding in Russia, the Novolipetsk Metallurgical Kombinat (NLMK) in Russia, the Magnitogorsk Iron and Steel Works in Russia and ArcelorMittal's Termitau production plant in Kazakhstan.
References
- ↑ History of Severstal
- ↑ Severstal Corporate Presentation, Page 3 "Severstal Overview", June 2011
- ↑ [NLMK Presentation, 'Europe and the CIS: What does the future Hold?' SBB European Steel Conference, Barcelona, May 2011]
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