Sales at Severstal’s resources division were down by 9% in the first three months of 2012, compared with the previous quarter, on lower iron ore and coking coal demand both in Russia and globally, the company said on Thursday May 24.
The division’s first-quarter revenue stood at $811 million, down from $886 million in the fourth quarter of 2011. This was “due to weaker prices for iron ore and coking coal, as well as lower sales volumes in Russia and overall weaker global demand”, Severstal said.
The division’s earnings before interest, taxes, depreciation and amortisation (Ebitda) dropped by 6% quarter-on-quarter to $322 million, as a result of the slide in revenue and broadly flat costs, Severstal said.
Ebitda margin, however, was up to 39.7%, from 38.3% in the fourth quarter of last year.
A rise in total cash costs at Severstal’s largest coking coal-producing asset, Vorkutaugol in Russia, was balanced by a fall in total cash costs at the company’s US coal asset, PBS Coals.
At Vorkutaugol, total cash costs went up to $86 per tonne from $72 per tonne in the fourth quarter last year, “due to an annual increase in labour costs and a lower contribution of low-cost semi-soft coal in the total product mix”, Severstal said.
At PBS, total cash costs went down to $100 per tonne from $170 per tonne in the previous quarter, after being adjusted for non-cash, one-off items.
Iron ore cash costs at Severstal’s Russian assets in the first quarter saw mixed fortunes. They remained “largely unchanged” at Olcon at $51 per tonne, but came down to $60 per tonne at Karelsky Okatysh, the company said, but it did not provide any comparison figures.