Severstal to Invest Over $180 Million in Blast Furnace Upgrades; Begins Its 4-Year Modernization Program

DEARBORN, Mich., July 14 -- Severstal North America, Inc. announced today that it has filed a permit to install application with the Michigan Department of Environmental Quality to expand and enhance the larger of its two iron-producing blast furnaces. The Company will invest more than $180 million to add capabilities that will improve furnace productivity, efficiency and reliability and significantly reduce particulate emissions associated with the iron making process in its Dearborn-based steel making operations.

In January 2004, OAO Severstal, the second largest steel producer in Russia, acquired the assets of the former Rouge Steel Company and embarked on the development of a plan to make the new company, Severstal North America, among the lowest cost and most efficient integrated steel mills in North America. "The reline of 'C' Blast Furnace is the cornerstone of our plan," said Ronald J. Nock, president and chief executive officer of the Company. "We have worked very closely with the Michigan Economic Development Corporation, the Michigan Economic Growth Authority and the City of Dearborn to lay the foundation for investments in excess of $500 million in our Dearborn facilities over the next four years. We intend to provide our customers with the steel products of the future that they are demanding, preserve good paying jobs and be a good corporate citizen and neighbor in Dearborn and Southeastern Michigan for years to come."

Severstal's investment program includes process improvements and facility enhancements throughout its operations. In addition to the Blast Furnace upgrade, the Company plans to make modifications to other parts of its Primary Operations to improve the quality and yield of its automotive sheet steel products, upgrades to its Hot Strip Mill reheat furnaces to improve efficiency and reduce energy consumption and significant modifications to its Cold Mill facilities. The Cold Mill modernization plan includes a new pickle line and major improvements to the Company's Tandem Mill and No. 2 Temper Mill to improve productivity, yield, quality and equipment capabilities.

According to Donald Windeler, manager of Environmental Engineering for the Company, "Our blast furnace improvement plan provides us with the opportunity to upgrade the systems that impact environmental performance and will place 'C' Blast Furnace among the most environmentally friendly iron producing assets in North America." Severstal will introduce pulverized coal injection technology to reduce the use of metallurgical coke and natural gas, add a second tap hole to increase furnace productivity, install a new furnace cooling system to improve furnace reliability and stability and construct a new secondary emissions capture system. The combined impact of these improvements will be to significantly reduce airborne particulate emissions from the Company's iron making operations.

As a part of the permit application, Severstal reported that it is evaluating the future of operating its smaller "B" Blast Furnace following the reline of its larger blast furnace. "With the added production capability of the enhanced 'C' Blast Furnace, the question is simply whether or not the market will support the incremental tonnage produced by our smaller furnace in 2007 and beyond," said Mr. Nock.

The reline of "C" Blast Furnace is expected to commence in March 2007 and last approximately 110 days. The reline will provide significant benefits to the local economy including the preservation of good paying manufacturing jobs, hundreds of construction jobs and a stable and growing tax base for the City of Dearborn.

Severstal North America, Inc. is an integrated flat rolled sheet steel producer that primarily serves the automotive, converter and service center markets in North America. Severstal North America employs approximately 2,000 employees in its manufacturing facilities and corporate offices located in Dearborn, Michigan. Severstal North America is a wholly owned subsidiary of OAO Severstal, Russia's second largest steelmaker, and an affiliate of the Severstal Group, a Russian-based conglomerate including metallurgy, mining, automobile manufacturing, machinery, transportation and other businesses. The Severstal Group employs approximately 150,000 people and operates more than 30 plants in 14 regions across Russia and the United States. In April 2005, the Severstal Group acquired a 62% interest in Lucchini S.p.A., an Italian based specialty steel manufacturer with 20 industrial plants and 9,000 employees located in Italy, France, Poland, Great Britain and Sweden.