Mechel navigates ‘extremely mixed’ 2020 with stable output, strong HVA sales

Russian coking coal miner and steelmaker Mechel maintained crude coal and steel output last year and boosted sales of high value-added products, including of pulverized coal injection (PCI), rails and sections, according to the company’s operational results released March 11.

“Amid the backdrop of the coronavirus pandemic, last year was extremely mixed and the most complicated for industries since the 2008 financial crisis,” CEO Oleg Korzhov said in a statement.

“Mechel coped in this context fairly well — we did not halt any of our facilities, we kept our staff and did not make any substantial cuts to our production plans,” said the CEO.

He noted that economic activity in most parts of the Asia Pacific region had started to pick up in Q3 2020, and that currently there is solid demand for the company’s coking coal products supported by incremental growth in steel output in the region.

The rise in the spot market in Q4 2020 had influenced Q1 quarterly contract prices, he said.

Mechel mined a total of 16 million metric tons of crude coal in 2020, up 10% year-on-year, with the growth supported by increased stripping and mining fleet upgrades.

A 1% year-on-year decline in coking coal concentrate sales to third parties (to 3.96 million mt) was due to a slump in business with Japan, as the country’s steelmakers adjusted their production plans. Some volumes meant for Japan instead went to South Korea.

Increased PCI output at Southern Kuzbass company drove Mechel’s overall sales of the product higher by 31% year on year to 1.85 million mt in 2020, all of which was sold outside the group with sales to Asia accounting for most of the growth.

Anthracite sales to third parties almost doubled (up 92%) to 1.1 million mt due to increased mining at Krasnogorsky open pit.

Last year, Mechel sold externally just 39,000 mt of iron ore concentrate, 80% lower year on year; the company noted poorer ore grades as one of the reasons behind a weaker production.

Coke sales to third parties remained broadly stable last year at 933,000 mt.

Sales of major products up

In H2 2020, with lockdown measures being lifting, construction companies and steel fabrication plants were among the first to restore steel uptake, Mechel noted.

Mechel said it focused on making products with high profit margins during the year.

It achieved a 3% year-on-year rise in rail sales to 290,000 mt and ramped up sales of beams, channels and other sections by 14% to 326,000 mt, which was a result of both positive market trends and the company’s prompter response to customer demand.

Compared to 2019, Mechel also maintained and improved sales of long and flat-rolled steel, which climbed 1% and 2% to 2.55 million mt and 456,000 mt, respectively.

“The 6% decrease in ferrosilicon sales was due to the blowing out for modernization of ore thermal furnace No.3 at Bratsk Ferroalloy Plant, as well as negative trends in the global ferrosilicon market,” it said.

Hardware sales remained largely unchanged year on year at 556,000 mt, despite a small dip in sales of wire used in reinforced concrete and ropes.

Mechel also produces and sell forgings and stampings.

— Ekaterina Bouckley