Hello, ladies and gentlemen. My name is Alexander Erenburg.

I’m heading Vanadium division at EVRAZ. As for vanadium at EVRAZ, I would like to say that the prices fell down by approximately $40 quarter-on-quarter now actually reaching the level of around slightly above $40 in Europe, a little bit higher in China, and above $50 in North America.

We believe that, that level is close to the balance level for the market. That substantial decrease in prices was following the substantial increase in the fourth quarter due to some speculations about the new rebar standards in China.

The sales of vanadium products also fell 5% approximately in the first quarter of 2019, due to mostly destocking at the high price level. As for the second quarter, I believe we might see that balance the level of the prices and slight improvement in the volumes following that.

That, of course, depends on how quickly destocking will happen. Also, I would say that the trigger would be the rebar demand in China, which seems to be good enough for now and some other vanadium demand in products, such as automobiles, et cetera.

In the third quarter and fourth quarter, I believe we should get back to the normal balance level of vanadium. Most of the figures you see on the page, and I would now pass the word to Sergey Stepanov, Head of Coal division at EVRAZ.

Thank you, Alexander. Let me introduce two slides on the coal performance in the first quarter 2019.

First of all, prices have been more or less on the same level as the previous year. Currently, we see hard coking coal at slightly more than $200, this is current level and it was the same for the first quarter.

Semi-soft has declined now from the previous year level to $96, however, during the first quarter it was more or less okay like 100 tonne, approximately. As you see on the Slide 13, we are flat in the raw coking coal mines.

However, comparing to the quarter three, quarter two or quarter one to – for the year 2018, we are above our usual level. And if you see the chart on the right, coking coal concentrate production would produce less concentrate, but this was mainly due to inventories, concentrate stocks, which we have accumulated at the end of the year-end January and February.

So what we are facing now that Russian coal industry is going up and these high levels for the quarter four and quarter one is some new level for us in terms of logistic organization and sales organization. So that’s why we produce slightly less concentrate.

But we have sold concentrate from the stockpile, so it was mainly logistic problem. On the Slide 14, there are three thoughts to mention.

Number one, our external sales have been slightly down mainly due to these logistic and coal mix configuration for the first quarter. It was compensated by intersegment sales.

We have a policy of increasing internal supply and we are working on the producing coal grades, which are in high demand internally and in Russia. So we start to see first result of this in first quarter 2019.

And the last thing to mention is that beginning of April, approximately first April, we finally launched Raspadskaya-Koksovaya mine, which will produce K-grade, which we produced it in very small amount before. So it affected little bit negatively production of first quarter, but from April, we hope to produce twice more of this array of coal grade.

And at this point, let me pass the word to Alexander Vasiliev, who will update you on our steel North America operations.

Thank you, Sergey. Hello, everyone.

Please turn to Slide 16. Crude steel production for EVRAZ North America was 502,000 tonnes in Q1 of 2019, which is close to full utilization for both steel making full utilization for both steel making facilities that we have.

Shipments of construction products were impacted by poor weather conditions in the U.S., which delayed the start of construction season. This resulted in approximately 5% decrease in sales volumes versus previous quarter.

We expect stronger demand in the second quarter as a result of the start of the construction season. Rail sales went down by approximately 15% due to equipment failure in the rail mill, which resulted in almost two weeks of downtime, but didn’t lose any orders as a result and plan to recover these shipments in the second and third quarter of this year supported by strong rail demand in North America.

Flat-rolled product sales increased by approximately 5% on the back of higher service center demands after seasonal decline at the end of last year. At the same time, in the first quarter production and shipments were negatively impacted by planned outage and lack of rail cars.

Sales of Tubular products significantly decreased by approximately 19%, primarily as a result of the fire at our pipe coating facility in Regina. As a result, we had to redirect to redirect five shipments to third-party coaters, which delayed the recognition of some sales volumes.

We expect the coating facility to restart the operations in the first-half of 2019 Please turn to the next slide. As far as the implications of Section 232, our concerns, there is still not a U.S.

domestic market for slab and the tariff make the economics of our slab purchases more challenging. We are looking at other sources of slab other than captive, some of which don’t have the 25% tariff and carefully considered the economics of reaching that purchase.

At the same time, Section 232 has had a positive impact on prices of finished goods in the U.S. On April 1, 2019, the Canadian International Trade Tribunal recommended no final safeguard remedy on energy tubular products.

Based on this recommendation, Canadian government announced final decision last Friday that will institute tribunal determination. We’re currently evaluating potential impact of the decision on our order book.

The final item, antidumping rate on Canadian large diameter line pipe was announced by the U.S. Department of Commerce.

It was reduced to 12% from preliminary rates of 24%, which was in place since August 2019. With that, that’s the end of our presentation, and I believe we are ready to switch to Q&A.

Thank you.

Good day. Thank you very much for the presentation.

I have two questions today. Firstly, could you please discuss vanadium demand outlook in the near term?

You mentioned the implementation of rebar standards as one of the key moving factors, could you chat on this in more details, please? And secondly, could you please comment on progress on key new CapEx projects that were announced at late of the Capital Markets Day.

When shall we expect start of new big things like slab facility or if there are some kind of value investments and others? Thank you.

So [Multiple speakers]

Yes.

Yes.

Yes, wonderful.

Yes, sorry. Yes.

It is Alexander Erenburg. I probably take – I probably will take the first question regarding the vanadium demand.

Just to remind all of you gentlemen, the new rebar standards in China was – the introduction of that standard was announced early in 2018, I guess, it was February. The rebars was actually starting from November 2018, most of the demand, most of the accumulation of the stock to prepare for that was done before.

You can probably even see it on our sales when you see on the second and third quarter of 2018 that was the peak of the demand. Together with the peak, of course, there wasn’t any substantial increase in the prices reaching up to $127 or even higher in China.

That affected the global demand, it was quite a big shock to the whole industry. Therefore, we see the backward movement now.

I believe as for now, we reached the balance in volumes, I also believe that most of the destockings have already happened. The current level of about $40 is comfortable for the whole industry.

It allows the steelmakers to produce rebar with vanadium without trying to avoid usage of vanadium in any kind, which was not the case, let’s say, in December 2018 or January 2019. Together with that, that level of prices is adequate for the – some other demands for vanadium, such as vanadium flow batteries, which was flushed away by the peak in prices.

So as for EVRAZ, we believe that’s a good price for the industry. Of course, there is a question how quickly industry will get to that, but again, our belief that the third and fourth quarter will be quite comfortable for sales – for vanadium product sales at EVRAZ repeating second and third quarter of 2018.

Second quarter, we expect to be higher than the first quarter in 2019. But I probably would try to avoid the specific figures here.

Thank you. And for the CapEx projects, I guess, would pass the word to Aleksey.

Yes, absolutely.

As you remember at the Investor Day, we announced four major investment projects. They are rail mill construction at Pueblo U.S., flat mill at EVRAZ ZSMK, reconstruction of rail mill at Nizhny Tagil and construction of new continuous casting machine at Nizhny Tagil.

As for Pueblo mill, we have selected the supplies and their construction party. And currently, we are – we have contracts with them, and we are at the design stage.

So – and the execution stage will be agreed by the end of this year. So for the rest of three, I mentioned projects, they’re all on the tendering stage.

So we are trying to select the appropriate suppliers. And our target is to finalize that by the middle of this year.

After that, we will – our intention is to fix contracts with them and entering into the design stage. Thank you.

May I have just a short follow-up question about the CapEx side. Is everything going in line with previously planned time lines or you see some delays in the tendering process, which might result in lower CapEx for the full-year than expected previously?

Yes, a little bit in delay. Yes.

But we will not…

Thank you very much.

…yes, we will not guide you with exact numbers, but we are a little bit behind our schedules trying to optimize our CapEx and receiving good proposals from suppliers.

Good evening, ladies and gentlemen. Thank you for presentation and for this opportunity to ask questions.

I have two, if I may. First is on your slab cash cost.

As I noticed it was up 14% quarter-on-quarter. Could you please describe by factors, actually what caused such increase?

Because your 14% is actually a large gain. And the second one is, could you provide a bit more detail from the decline of coking coal concentrate production?

Thank you.

Could you repeat the second question, please? Sorry.

Second question, I guess [Multiple Speakers].

Okay. So let me – it’s Sergey Stepanov.

Let me start from your second question. So, Nikanor, if you see the slide – sorry, the Slide 14, Slide 14 – on the Slide 14, we see information on sales.

So if you see sales from quarter four, it’s basically it’s two column, it’s 2.77 and 1.47. So if you will add up these – the same two columns for the first quarter 2019, you would see that sales of concentrate approximately the same of concentrate and the raw coal production.

So basically the same amount, but part of the concentrate, we sell from stock. So in the quarter number four, in December basically, we generated stock of concentrate on one of our wash plant, which was 400,000 tonnes.

And it was more than our logistic infrastructure could deal with by that moment. So that’s why we limited our largest wash plant in February and in March.

So we produce raw coking coal as you see at high pace. We have big stockpile of raw coking coal and we have some considerable stockpile of concentrate, but we sell the same amount as fourth quarter, which was not enough for these production volumes.

and we are going to slightly increase this – sales volumes in second quarter to free up our kind of washing CapEx. So is that okay?

Yes. Thank you.

Okay.

Nikanor, with regards to the cash cost, if you don’t mind, we will answer you offline. We have to check some numbers and if you don’t mind.

Thanks a lot.

Thank you.

Yes. Hello.

I have several questions. You mentioned avoiding usage of vanadium.

Anecdotally, we hear reports of niobium substitution, reports of backdating rebar shipments to the pre-October period. What do you think?

I mean, are such reports possibly credible, or do you see evidence that the vanadium demand in China has actually moved up to the level consistent with the new rebar standards? Thank you.

Yes, Barry, it’s Alexander. We do see mostly the customers adhering to the standards.

of course, I believe that it will be even more sound following 2019 and 2020. However, there are some substitution of – there were some substitution of vanadium at the level of $120 per metric tonne for vanadium or above for the simple reason that rebar is not – the new rebar standard is not prohibiting of usage of niobium, let’s say, instead of vanadium.

It does prohibit though usage of the tempered rebar. So, in general, if you use the proper alloying element, it’s possible.

The situation is the following: Niobium is pretty hard to use for the rebar production. It can substitute portion of vanadium.

So what people do, they sometime – what people did in December and January, they sometime use smaller – small portion of niobium to substitute ferrovanadium. It’s also possible not at all rebar mills.

It depends on the speed of rebar production. However, at the current price level, it doesn’t make sense for the producers to try to avoid that because substitution of vanadium with niobium is costly and it’s also costly in terms of mining and costly in terms of capacity.

So they have to sacrifice with some capacities. Given the fact that now the prices for vanadium are close to niobium or even below.

If you look at the spot market, I don’t think there is any incentive for the Chinese producer to substitute one with another. As for the alloying, I think the alloying for rebar will even increase on the growing concern.

Thank you. Can I just have a quick follow-up.

So if the producer has substituted with niobium, does that mean they have reengineered their process to the extent that they wouldn’t then be able to or it might be a barrier to moving back to, let’s say, 100% vanadium, or they can flexibly move between these options?

They can move. The thing is that niobium requires much more accurate usage, I mean, much more accurate control of temperature during rolling.

So with vanadium, we don’t have that sensitivity to the temperature, with niobium you do. But it doesn’t require any reengineering of the process.

The thing is that if you can use niobium you just can, if you can’t you won’t be able, I mean, you need probably to building new rebar mill, moreover, that rebar mill will be old style rebar mill, because it will be slower production of rebar. For niobium, you need slow and controlled cooling of the ingot going through the mill, so – but again, it doesn’t require any reengineering.

It’s mostly about the pricing.

Thank you.

Hi. I just have three quick questions on my side.

Firstly, it’s around the recent announcement that the U.S. hasn’t granted the exemptions.

And, I guess, you mentioned you’re looking at other sources for the slab products. But the key thing is, what sort of – can you give an indication on the pricing for these products for slab volumes?

And if they’re – if you’re able to secure the same quality of slab volumes as you can produce at your mills? The second question is around your mix of EVRAZ’s quality, sort of, grades of coal from – with higher quality versus lower quality coal?

And then the last question is, just in terms of the ramp up at Raspadskaya, what’s the progress and what should we be sort of incorporating into our models in the near-term given your targets of ramping up the contribution from that mine, especially the higher grade volumes?

I suggest that was the first question. Yes, thank you.

Yes. I’ll take the first one.

So as far as slab supplying is concerned, there are a few sources that’s we are using right now. It is – the pricing, I would say varies from quarter-to-quarter.

And it is -- I’m not ready to give the numbers for that. But I can tell you that there are certain countries with available merchant slab that have no tariffs, it is quota-based supply into the U.S.

and we’re using those both sources and or trying to increase the supply from such countries today. It is an example, being, in Brazil.

And as far as quality is concerned, quality, we don’t have any issues with that, it is – the slab available is of the same pool.

Thank you.

So maybe I will just kind of give some numbers regarding our mix and probably we could answer this in more details not on this call. So basically, what we’re doing in Raspadskaya, especially in Raspadskaya in Mezhdurechensk.

we have now hard coking coal open pit, which produced last year slightly more than 1.5 million tonne and this is a new facility for us. We are going to keep this new facility on this level and the launch of this open pit actually have improved the mix, especially from Mezhdurechensk for the first time in 2018.

We see that the average price for our our Mezhdurechensk business more or less the same as for Kemerovskaya business. So it’s considerable step up in terms of producing more hard coking coals.

This year, we launched this long roll on the Raspadskaya-Koksovaya mine, and for the first time, we are going to produce 1 million to previous year, as Raspadskaya-Koksovaya mine worked on room-and-pillar method and produced 0.5 million. So it’s hopefully plus $0.5 million this year to hard coking coal, it’s a key grade.

Big Raspadskaya mine produces coal, which is kind of either semi-hard or high quality semi-soft. This year it will produce 6.5 million tonne.

Also hope it would be the plus $0.5 to the previous year. And our strategy for this mine is to keep the volume approximately at about 6 million tonnes, but to improve quality due to – since we are going deeper, we have more quality – high-quality coal.

So we reduce production on this mine on SIM No. 10, which is lower quality.

And the next year, we hope to see considerable improvement on quality on the same – basically on the same volume and open pit stays the same. So these are some details of what we are doing to improve the mix.

And these trends, I think, we have reserves for the next maybe 10 years to keep up on these trends. So this is the direction we’re going to develop our core business.

Ramp up on the Raspadskaya, as I said, Raspadskaya mine, the Raspadskaya big mine will produce at least 0.5 million more than the last year. But in general, our policy is not to ramp up Raspadskaya mine itself, but to improve quality, because we can ramp up on the open pit as well more or less for the same coal.

So this is kind of the answers on the on – these two questions, as I got you, but maybe you meant something else, so please specify if I can give some other information.

Okay. Thank you.

That’s what I was looking for.

Thank you.

Hi. Just on the mix coming from the coal assets.

You talked a bit about the dynamics in terms of mine by mine. But could you give us an idea for at spot prices in the market today?

What those changes are expected to do in terms of your average realization? You quoted $117 tonnes a day, I mean, in the first quarter.

would that be once this evolution of a mix has taken place? I mean, how much does that add?

Thank you.

What we see that – we have basically two coals to which our contracts are linked, it’s hard coking coal and semi-soft coal. So hard coking coal is the same as the previous quarter.

Semi-soft declined basically almost 20% during the quarter from approximately 120 million tonnes to 96 million tonnes. So for the first quarter, it would be good.

For the second quarter, we should see decline in the price. But – so we can try to calculate based on this spot price.

So it should be approximately maybe $7 lower. But we need to see kind of exact change on each contracts, because some for hard coking coal, we have hard coking coal formula for mix.

We have as well some mix formulas, which implies both. So I would estimate like minus $7, but it’s difficult to say for the second quarter, because many things could happen like Australian hurricanes or something.

Okay. So I was trying to get an idea for the change – what’s the change in the mix those to your average pricing rather than the dynamics in the markets.

So if we talk about spot prices today on the 2018 mix, for example, what would the 2019 or 2020 mix be in terms of the average price realization relative to 2018, if we just kept prices flat. I was just trying to get an idea for what the average realization would be due to the higher proportion of hard coking coal as a mix?

Yes. This is a very good question.

So we didn’t calculate it this way, but you’re right that we are truing to increase our had cocking coal portion and maybe let us calculate it separately, because I can tell something like I don’t know $4, but we better – we’ll calculate them and come back to you, because it’s a valid question for our strategy.

Yes. Now last one, if you could answer that offline that would be helpful.

Thank you.

Thank you.

Hi. Thanks so much for your tonne softening.

I must have a quarterly call from you. Just a quick question on the U.S.

division. I saw the tubular products volumes are down quite significantly.

And you mentioned the company shutdown due to fire. Does that mean that there’ll be similar production next quarter as this, still have the month of April with that out of action?

And then secondly, at your Capital Markets Day, you were talking about trying to sell more products you produced in Canada into the Canadian market. Can you give us any updates on how that’s getting on?

Have you been able to win new contracts in Canada and therefore, avoid the high tariff charges? Thanks.

Yes, sure. Thank you for the questions.

So as far as the decline of production in Canada in Q1, as I said, it is – it was mainly or I should say actually a shipment. It was mainly the result of the fire that we had in the coating facility, which is the last stage of production in pipe making process of large-diameter pipe.

We kept the operations running and you, for instance, you can see that our steel production did not decline actually. But as a result, our inventory has increased quite substantially and part of it is on the ground.

And the part of it is in transit, because we had to move pipe, for instance, to the south, to Texas, to cover it there and ship it to the final destination to the customer. So as we are working through the – this inventory, our shipments should start to increase.

So you should see our volumes up in the next couple of quarters. And as I said, our coating facility should restart shortly and after that we will be catching up the volumes in that facility as well.

So that’s as far as the first question is concerned. As far as your second question, I believe, if I heard it correct, there are two questions in that.

One is, it’s related to operational improvements in Canada and then the other one is the order book for our Canadian operations. So as far as operational improvements, it is – you can actually see it based on the numbers in the presentation.

Again, if you look at Slide 16, the production volume at our Regina facility has increased from what you see in Q2, Q2, Q3 of 2018 to 270,000 tonnes roughly per quarter in Q4 and Q1 of this year. So that’s we’ve seen already quite a significant improvement there.

And as far as pipe making facilities are concerned, we mainly had issues with our spiral operations as we were ramping up the new equipment and it is – we’ve seen some significant improvements as well in Q4 last year and Q1 this year. It is not fully where we want it to be, but all the productivity and quality metrics have increased quite substantially.

So we’re happy with the progress on that front. As far as the order book is concerned, we – right now, our shipments are approximately 40% for Canadian divisions, that is the volume that goes to the United States.

In Q1, we still have some volume that didn’t fully account for the duties and tariffs, but it was a much better situation already. And in Q2 and going forward, all the volume as far as shipping into the United States takes into account the new trade origin between the U.S.

and in Canada. And on top of that, it is this percentage will continue to decrease as we build through 2018, as we’re switching our order book to domestic Canadian sales as we indicated to you in the past.

And so we plan it to be at roughly 20%, maybe 20% to 25% in the second-half of this year subject to some spot sales mainly in OCTG. So I think that’s – I hope that answers the questions that you have.

Yes. Thank you very much.

Very helpful.

Thank you.

We also do see that there are no further questions. So would like to just thank you for the call for your questions.

We will get back to you with the answers that we took – with the questions that we took offline and talk to you soon. Thank you very much.

Have a great evening.