Mechel Announces Operational Results for 2008
01/26/2009 - Mechel OAO reports a 24% increase in coal production and a 3% reduction in steel production for 2008.
Mechel OAO reported a strong 24% increase in coal production for 2008, thanks in part to its acquisition of Yakutugol in October 2007, which helped to boost its production of both coking and steam coal. As a result of falling demand late in the year, however, the company’s steel production fell by some 3% in 2008 vs. 2007.
“In the first nine months of 2008 our company performed at a very high level and some results were outstanding,” said Vladimir Polin, Senior Vice President of Mechel OAO, commenting on operational results. “Mechel subsidiaries showed overall stable operational results in 2008 despite negative trends in economy at the end of the year.”
Polin said the company’s acquisition of Ductil Steel in Romania allowed it to enhance its presence in the Eastern Europe steel market. The Mechel Targoviste and Mechel Campia Turzii integrated mills became profitable through their incorporation into Mechel Group, reflecting the company’s strategy to perform modernization and technical upgrades in its facilities. The Eastern European steel division, which incorporates all four Mechel subsidiaries in Romania, is responsible for raising the efficiency and profitability of these facilities.
Declining volumes in the machinery, automotive, and construction industries have caused a decrease in demand for Mechel’s products. This also led to temporarily reduced market demand for ferroalloys, resulting in a small reduction of ferroalloys output and impacting flat products and stampings output. Polin said that Mechel has reduced its production of billets, offsetting the increase in long products output thus implementing the strategy to increase the output of high-margin downstream products.
Polin said the Oriel Resources acquisition provided Mechel’s ferroalloy division with a new impetus for development. “One of the main characteristics of our ferroalloy facilities is their own source of raw materials required for their operations and development. To ensure efficient management of our ferroalloy business, we established the dedicated ferroalloys division that includes both ore mining and ferronickel, ferrosilicon, and ferrochrome production facilities.”
Polin noted that 2008 coke output had been affected by scheduled major repairs at Chelyabinsk Metallurgical Plant (CMP) coking battery No. 6 as well as suspension of Moscow Coke and Gas Plant coking battery (not cooled). Similarly, 2008 pig iron output was reduced by the shutdown of Chelyabinsk Metallurgical Plant Blast Furnace No. 4 for scheduled repairs.
Regarding Mechel’s power production, Polin noted that, “Power production has increased as a result of the incorporation of the Southern Kuzbass State Regional Power Station and improving efficiency of power generating capacities at the subsidiaries. In particular, we have revised our repairs and investments plan, broadened the clientele, and increased power sales in wholesale markets, which was favorable in the pricing environment.”
“In 2008, we implemented several projects included in the investment plan, such as major repairs with upgrades, installation of new equipment and processes, and development of corporate sales and distribution chains,” added Polin. “I am sure the results we achieved in 2008 will act as a basis for successful development of Mechel in the future.
“We are constantly monitoring the markets, revising our operations program and performing all necessary activities for equipment maintenance to be able to increase output most efficiently as soon as the markets recover.”