Mechel releases 1H 2018 operating results

Mechel, one of the leading Russian mining and metallurgical companies, announces its operating results for the first half of 2018, which were commented on by Oleg Korzhov, Chief Executive Officer of Mechel PAO, step by step:

“The renewal of mining equipment at Mechel's coal facilities has allowed us to achieve stable production levels, and we plan to maintain this pace of work until the end of this year. The decrease in production volumes is due to the reorientation of our units towards the concentration of coking coal. Thermal coal production increased only in Elgaugol due to the overall increase in production, so we expanded the geography of our sales of washed thermal coal from the Elga field, making our first deliveries to India, Myanmar and Vietnam.

“Sales of coking coal concentrate in the second quarter were up 19% qoq due to increased shipments as we entered into new contracts with the largest steel companies in the Asia Pacific region for the 2018 fiscal year, which began in April. Exports to the Asia-Pacific region increased 60% and China became the top importer of our coking coal concentrate during this reporting period. The deliveries to our Japanese customers have increased. Our deliveries to China showed a positive trend, which was further supported by an increase in coking coal concentrate production at Elga Coal Complex.

“Sales of anthracites showed positive dynamics (+ 3%). Our main clients for this product are based in Europe. However, we are trying to redistribute our export flows and increase the sales of our clients in Asia and the CIS, as today these markets show the best profitability for anthracites.

“During this reporting period, Mechel's steel production reduced pig iron and steel production by 4% and 6%, respectively, due to scheduled repairs in agglomeration units, blast furnace and oxygen converters of the Chelyabinsk Metallurgical Plant. This factor also influenced the production and sale of flat metal products. At the same time, total sales increased by 6% due to sales of reinforcing and construction beams and stainless steel products.

“We continue to pay special attention to mastering the production of new products on a universal rolling machine. During this reporting period, we launched the production of two new types of broadband cylinders, taking into account the construction market of the European Union. The Universal Rolling Mill has also produced a test batch of 100m high-speed rail rails with a speed limit of 250 km /h, and their certification is almost complete. We plan to start mastering in the near future.