October 10, 2019

Cherepovets Steel Mill (CherMK), one of the largest integrated steel plants
in the world (part of Severstal’s Russian Steel division), has announced plans
to increase the amount of electricity it generates using by-product industrial
gases.

CherMK consumes 5.9 billion kWh of electricity per year, 78% of which the
mill generates itself. As part of its strategic priority to achieve Cost
Leadership, the Company aims to grow the share of electricity generated
in-house up to 95% of the mill’s total consumption by 2025. The Company will
use secondary energy resources – coke, blast furnace and converter gases, which
are produced as part of the production process.

At CherMK, the Company is already using energy generated from blast furnace
and coke oven gases. Severstal is now working to develop a technical solution
for using energy from converter gases to generate electricity.

Alexander Shevelev, CEO of Severstal, commented:

“78% of CherMK’s total energy demands are met with its own electricity,
27.9% of which is generated using secondary fuels. Through our [energy
replacement] program, we plan to increase the proportion of secondary gases
used for electricity generation to 33.9%. One of the most important outcomes
will be environmental, as it will reduce the amount of polluting atmospheric
emissions by up to 12,000 tons per year, and reduce our CO2 emissions by more
than 200,000 tons. Using converter gases will reduce the amount of natural gas
purchased for CherMK by 200 million m3 per year, which is also in line with our
principle of environmental responsibility and energy conservation. In this way,
our project to increase the amount of electricity we generate using secondary
resources is aligned to three of the 17 UN sustainable development goals, which
we pledged to adhere to when we joined the organization’s Global Compact
initiative in 2018 – “Affordable and clean energy,” “Responsible consumption
and production” and “Climate action.”

Also in accordance with the UN SDGs, the Company maintains an optimal
balance between the ratio of scrap metal and cast iron in the steel it
produces. Scrap is the primary steelmaking component used in our electric steel
furnaces. The share of secondary raw materials in the composition of one
125-ton smelting at CherMK amounts to 70%, significantly exceeding the share of
cast iron. In 2018 alone, approximately 900 thousand tons of scrap metal were
used in the production of electric steel at CherMK.

Projects using by-product gases are also currently being implemented at
Severstal’s Resources division. Vorkutaugol uses mine methane – a greenhouse
gas – in the operation of its boiler houses. Methane from coal seams is
transferred to the surface using vacuum pumping stations, where it is used as
fuel for the Vorkutinskaya, Komsomolskaya, Zapolyarnaya and Vorgashorskaya
boiler mines.

“The Vorkutaugol mine methane degassing and utilisation project is unique to
Russia. In 2018, the Company’s boiler mines between them used 73% of all the
degassing methane, which is 77.5 million cubic meters of gas,” added Alexander
Shevelev.

A further example of using secondary energy sources is Olcon, which has
begun to use waste oils for heating large industrial premises, instead of
electricity.