In USD million

Steel segment revenues increased by 29.3% to USD 7,492 million in the first six months of 2011 compared with USD 5,796 million in the first six months of 2010, a reflection of positive price dynamics for steel products and higher sales volumes.

The proportion of revenues attributable to sales of construction products increased as a result of the growth in the sales volumes and prices of construction products in Russia. The proportion of revenues attributable to sales of railway products slightly increased as a result of the higher than average growth in sales volumes of railway products in Russia and North America compared to other steel products as compared to H1 2010.

The proportion of revenues attributable to sales of flat-rolled products increased in response to a higher than average hike in prices and sales volumes compared to other steel product groups, with main contribution coming from sales in Europe and Russia.

The proportion of revenues attributable to sales of tubular products decreased primarily due to a significant decline in sales volumes of large diameter pipes and casing and tubing goods and also due to lower prices for large diameter and seamless pipes in North America.

The proportion of revenues attributable to sales of semi-finished products decreased due to a significant reduction in export sales volumes of billets used in production of construction products sold in Russia. Steel segment sales to the mining segment amounted to US$89 million in the first half of 2011 compared with USD 57 million a year earlier. The increase is attributable to higher sales prices and volumes.

Revenues from sales in Russia amounted to approximately 41% of steel segment revenues in the first six months of 2011, compared with 33% in the first six months of 2010. The increased share of revenues from sales in Russia resulted from the reallocation of steel volumes from Asian export markets to the Russian market.

Steel segment cost of revenues increased to 83.2% of steel segment revenues in the first six months of 2011 or USD 6,237 million compared with 81.2% of steel segment revenues, or USD 4,704 million, in the first six months of 2010. The increase in cost of revenue in monetary terms is attributable to a growth of 41.8% in raw material costs due to significant increase in the prices of all key raw materials, the increase in costs of semi-finished products of 54.2% due to increased production volumes of flat products at EVRAZ North American operations, higher share of external purchases of semi-finished products and higher average cost of slabs, growing staff costs increase in energy costs by 25.7% due to the growth in prices of 8/21 energy resources, higher production volumes at most EVRAZ operations and the appreciation of local currencies against the US dollar and an increase in other costs by 25.7% primarily due to a significant increase in purchases of goods from the market for subsequent resale after the acquisition of Inprom Group in December 2010.

The other factors that contributed to the increase were higher costs of auxiliary materials for repairs and maintenance, higher volume and costs of industrial services due to increased production volumes and the appreciation of local currencies against the US dollar. At the same time transportation costs decreased by 10.7% due to lower export sales volumes from the Russian operations to Asia.

In H1 2011, the steel segment recorded an operating profit of USD 376 million compared with USD 502 million in the same period of 2010.