Mechel PAO, one of the leading Russian mining and metals companies, announced Q2 2016 operational results.
Mechel CEO Oleg Korzhov commented on the operational results: “In this accounting period, the coal industry demonstrated stable demand on both global and domestic markets, with a growth registered in both quarter benchmarks and spot prices. In Q2 China remained the market’s chief driver, and showed an increased demand for coal due to the decrease of local production. This year, Chinese authorities announced plans to close down unprofitable facilities, which produce a total of up to 250 million tons a year. According to analysts, about a third of this volume has already left the market. Accordingly, imports took the place of these unprofitable producers, especially as far as coking coal was concerned.
“Mechel put this market situation to good use. We increased overall mining by 4% and redirected some of our chief product – coking coal concentrate – to China, increasing our sales to this country nearly by half QoQ. We also made several coking coal shipments to India and Vietnam, which were new markets for us.
“PCI sales went down by 21% largely due to our running out of stock, which was entirely sold to Asia in the previous quarter due to the price dynamics we found comfortable for us. Today we consider PCI sales to South Korea as per our long-term contracts as a priority.
“The 16-percent increase in anthracite sales was due to a favorable price situation in Europe (Germany, the Netherlands and Belgium). Besides that, the seasonal increase of agglomerate production at Chelyabinsk Metallurgical Plant had its impact on the increase of demand for anthracite in the facility’s agglomeration process.
“Steam coal sales went up by 9% due to an increase in shipments from Elga Coal Complex and Southern Kuzbass Coal Company’s facilities. Over 50% of steam coal in this accounting period was exported to China.
“Coke sales went up by 5% in Q2 due to an increase in domestic demand. It is important to note that we have resumed shipping coke to the United States in this accounting period.
“The steel division increased production quarter-on-quarter – steel production went up by 2%, pig iron by 3%. I would like to note that we have moved forward in implementing our strategy aimed at boosting our share in the high-margin product market, which resulted in billet sales decrease by 41%. This year Mechel supplied Russian Railways with over 120,000 tons of rails, and we plan to bring this volume up to 220,000-250,000 tons by the year’s end.
“In Q2 domestic sales of flat rolls saw an insignificant decrease of 2%. At the same time, in the regions where our European steel trade network Mechel Service Global is present, we see a growth in demand for this type of product and we plan to expand our client base in the future.
“The five-percent increase QoQ in long rolls sales in Q2 was due to a seasonal hike in demand for rebar and other products from construction companies. Opening new Mechel Service offices in Northern Caucasus and Volga Federal Districts had a positive impact on our sales dynamics.
“Sales of Bratsk Ferroalloy Plant’s ferrosilicon to the Group’s enterprises and third parties went down by 14% due to some shipments being put off until the third quarter, while ferrosilicon production maintained the same level.
“The nine-percent increase in hardware sales in Q2 was due to Beloretsk Metallurgical Plant’s efficient work with its clients and an increase in sales of wire ropes for energy, mining and oil industries, partly replacing import goods, as well as an expansion of our market through shipments to other CIS states.
“Our power division in the second quarter decreased electricity generation by 22% QoQ. This decrease is due to planned repairs and equipment reconstruction at Southern Kuzbass Power Plant. The 55-percent decrease in heat generation is due to seasonal factors as the heating period drew to a close”. (Mechel/Ukrainian metal)
