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Mechel to Form Long-Term Partnership with Russian Railways
02/27/2008 - Mechel OAO signs agreement to form a long-term, mutually beneficial partnership with Russian Railways in which Mechel will provide rails up to 100 meters long from a rail and structural steel mill to be built at the company’s Chelyabinsk Metallurgical Plant.
Mechel OAO has signed an agreement on a long-term, mutually beneficial partnership with Russian Railways (RZhD OAO) in which Mechel will provide RZhD OAO with rolled products manufactured at Mechel’s subsidiaries.
Under the agreement, Mechel will construct a modern rail and structural steel mill at Chelyabinsk Metallurgical Plant (CMP OAO) over the next two years. The new facility, which will have an annual capacity of over 1.0 million tonnes of high value added products, will enable Mechel to manufacture railroad rails up to 100 meters in length. The facility will employ state-of-the-art technologies for melting, rolling, tempering, straightening, finishing, and rail quality control, with technical solutions that will enable the production of products that surpass their world analogues in a number of key parameters, according to Mechel.
Russian Railways’ annual rail manufacturing volume will be up to 400,000 tonnes. The company will require product specifically designed for high-speed operation, enhanced durability, and contact wear resistance, as well as product that is suited for operation in a low-temperature environment.
Mechel OAO will obtain the necessary certificates for safe use of the rails in the railway system and will carry out work under the programs, which will be aimed at enhancing rail production technology. Russian Railways will construct a complex rail welding train (RWT) and an approach track following the legal completion of its land relationship with CMP OAO in 2008. The complex is scheduled to be commissioned in 2010.
To ensure a smooth production process at Mechel's Chelyabinsk Metallurgical Plant, Russian Railways plans to deliver rolling stock on a continuous basis using its own rail carrying cars, which will also be used for shipping finished products.
"One of the important components of Russia's economic development is its modern, well-developed railway system,” commented Mechel OAO Chief Executive Officer Igor Zyuzin. “Pursuant to the ‘Strategy of the Russian Federation Railway Transport Development Until 2030,’ which was developed by Russian Railways and approved by the Russian Federation Government, over 20,000 kilometers of new railroads will be constructed in Russia before 2030.
“Implementation of this program may be hindered in part by a sharp deficit of quality rails, which is currently felt in Russia,” continued Igor Zyuzin. “Mechel OAO came forward with an initiative of mastering and implementing, at its Chelyabinsk Metallurgical Plant subsidiary, a unique technology, unparalleled in Russia, to produce high quality rails up to 100 meters in length conforming to the most stringent requirements set by RZhD OAO. The company plans to invest more than US$500 million in the new production development.
“Mechel highly appreciates the opportunity to participate in this strategic state project and the role it plays in developing Russia's economy," concluded CEO Igor Zyuzin.
Mechel, one of the leading Russian mining and metals companies, unites producers of coal, iron ore, nickel, steel, rolled products, and hardware. Mechel products are marketed domestically and internationally.
