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Mechel Announces Quarterly Results
08/07/2013 - As it reported its quarterly earnings results, Mechel said sales of metallurgical coal were up while iron ore sales declined. It noted the launch of the Chelyabinsk Metallurgical Plant in July will give a new impulse to the steel segment's development and have a positive impact on its results this year.
Mechel OAO's chief executive officer Evgeny Mikhel commented on the company's operational results for the first half of 2013 (1H2013):
"Coking coal sales in the 2Q2013 went up by 2% quarter-on-quarter. The mining segment's key enterprises — Southern Kuzbass Coal Company and Yakutugol Holding Company — maintained the volumes of coking coal production and sales at last year's level. The 8-percent decrease in overall coking coal sales in the first half of this year compared to the same period last year was due to our revision of production plans for Mechel North America (Mechel Bluestone) as prices on our key markets decreased.
"Sales of other metallurgical coals, such as anthracites and PCI, grew by over 6% in the 1H2013. In line with our approved long-term strategy, the company continues to expand its client base and enter new markets for these coals, which remain in demand by international steelmakers due to global expense cuts.
"Iron ore product sales decreased by 4% as compared to the first half of last year as Chinese customers became less active in their business. The decrease in exports was partly compensated by the growth of sales on the domestic market, where demand was more stable during this period.
"Coke sales in this period fell by 16%, which was due to the stoppage of supplies to Southern Urals Nickel Plant.
"As demand on our key construction rolls market remained stable in the second quarter, we managed to increase sales of long rolls by 15%. The 25% decrease in steel production and on several other counts in the steel segment's output in 1H2013 as compared to the same period last year was due to the Group's disposal of its Romanian assets and the halting of Donetsk Electrometallurgical Plant.
"The 1.1 million tonne universal rolling mill's launch at Chelyabinsk Metallurgical Plant in July will give a new impulse to the steel segment's development and have a positive impact on its results this year already as the first bar supplies began in the end of the second quarter. The mill's operations will enable us to increase the share of high value-added products due to processing low-margin square billets into high-quality structural shapes and rails for high-speed railways.
"The ferroalloys segment in the first half of this year worked against the backdrop of Southern Urals Nickel Plant's full stoppage. Due to highly unfavorable market situation, nickel production remains economically unsound. In April the Uvatsk quartzite deposit began supplying Bratsk Ferroalloy Plant with ore for ferrosilicon production. After the ore smelting furnace #4 was launched at Bratsk Ferroalloy Plant following its modernization, ferrosilicon production and sales volumes in this period went up by 35% as compared to 1H2012.
"In the power division, sales of electricity and heat decreased quarter-on-quarter due to a seasonal slump. The decrease in heat and electricity sales in 1H2013 as compared to the same period last year is largely due to disposal of Toplofikatsia Rousse EAD in late 2012."
Mechel is an international mining and steel company which employs over 80,000 people. Its products are marketed in Europe, Asia, North and South America, Africa. Mechel unites producers of coal, iron ore concentrate, steel, rolled products, ferroalloys, heat and electric power. All of its enterprises work in a single production chain, from raw materials to high value-added products.
