The segment’s overall revenues increased sharply amid rising sales prices as global market trends remained favourable. This was driven by supply disruptions caused by the ongoing capacity optimisation programme in China and extreme weather conditions in Australia.
Sales volumes rose due to higher annual output at the Raspadskaya and the Raspadskaya-Koksovaya mines, as well as the launch of commercial production at Mezhegeyugol.
Revenues from internal sales of coal products grew, mainly because of a surge in prices of 78.4% and an uptick in volumes of 1.4%. This was in line with the upward trends seen among global benchmarks.
Revenues from external sales of coal products rose due to growth of 61.1% in prices and 6.4% in sales volumes, which was driven by stable, positive demand on the domestic and export markets and higher coal production volumes.
In 2017, the Coal segment’s sales to the Steel segment amounted to US$830 million (37.5% of total sales), compared with US$483 million (36.5%) a year earlier.
During the reporting period, roughly 50.0% of EVRAZ’ coking coal consumption in steelmaking came from the Group’s own operations, compared with 47.5% in 2016.
|US$ million||% of total segment revenues||US$ million||% of total segment revenues||Change, %|
Coal segment cost of revenues
The main drivers of the year-on-year increase in the Coal segment’s cost of revenues were as follows:
- The consumption of auxiliary materials rose by 55.0% amid an increase in mine openings and higher drilling meterage. This was accompanied by growth in prices for auxiliary materials and spare parts, as well as by the rouble’s appreciation impact on costs. The increase in auxiliary materials costs was partially offset by the effect of cost-cutting initiatives.
- Costs for services climbed due to the stronger rouble, the rescheduled longwall repositioning at Yuzhkuzbassugol’s mines, the growth of service costs to drill degassing holes and the increase in open-pit mining works at the Raspadskaya-Koksovaya mine.
- Transportation costs grew in the reporting period, primarily due to the higher share of exports in the sales mix, which had a negative impact on trading companies. This was accompanied by the appreciation of the rouble and an increase in tariffs for the supply of wagons.
- Staff costs were up because of rouble strengthening and wage inflation at Russian sites. This was partially offset by a reduction of US$7 million due to the disposal of Evraz Nakhodka Trade Sea Port.
- Depreciation and depletion costs rose, primarily due to the stronger Russian currency.
- The growth in energy costs was attributable to the impact of the stronger rouble on costs and higher electricity prices in local currencies.
- Other costs decreased in the reporting period, mainly due to changes in work in progress and finished goods. This was partially offset by higher taxes after the mineral tax rate was increased, as well as the effect of rouble strengthening.
|US$ million||% of segment revenues||US$ million||% of segment revenues||Change, %|
|Cost of revenues||973||43.9||701||53.0||38.8|
|Other Primarily includes goods for resale, certain taxes, changes in work in progress and finished goods, allowance for inventory, raw materials and inter-segment unrealised profit.||67||3.1||65||4.9||3.1|
Coal segment gross profit
The Coal segment’s gross profit for 2017 amounted to US$1,241 million, up from US$621 million a year earlier, primarily due to higher sales prices.