OREANDA-NEWS. May 15, 2014. Mechel (NYSE: MTL), one of the leading Russian mining and metals companies, announces 1Q2014 operational results.

Mechel Chief Executive Officer Oleg Korzhov commented on the company’s 1Q2014 results:

“In 1Q2014 spot prices for coking coal reached their minimum since 2007, as demand from our major consumers remains weak. During the 1Q we minimized the production at Mechel Bluestone due to unprofitability. Jointly with seasonal factors these measures had a negative impact on out raw coal production, which is down by 21% comparing with 4Q2013. At the same time we managed to increase sales of our Russia-based coal assets (Yakutugol and Southern Kuzbass) by 6% q-o-q due to growing export sales.

“PCI and antracites sales were down by 20% due to the seasonal slump in outflow through Far Eastern ports in wintertime, we expect them to recover in 2Q. Steam coal sales are stable due to existing contracts with several large Russian power companies.

”Iron ore sales in 1Q2014 declined by 10% versus the previous quarter as the major part of supplies from Korshunov Mining Plant was shifted toward domestic markets, in particular to the Group’s enterprises, which are more attractive in terms of prices.

”The Group’s steel segment continues to operate as Russian economy is slowing down, which has a negative impact on the demand for our major products. Despite that we managed to keep our steel output stable, with a 3% increase versus the previous quarter. Pig iron output growth by 12% versus the previous quarter is due to completion of repairs at the Chelyabinsk Metallurgical Plant’s blast furnace #1, which also led to coke sales increase by 10% versus the previous quarter.

”Mechel successfully continues to implement its steel segment development strategy which focuses on increasing the share of value added products in its portfolio.

”Sales of our long products which are key for our portfolio remain flat as Mechel’s own output growth almost completely made up for the 38% slump of third-parties’ products sales.

”The Group gradually decreases marketing of third-parties’ products and actively destocks European warehouses, as the Europe’s demand for steel is expected to remain weak in the foreseeable future. These measures led to the decline of flat products sales by 39% q-o-q.

”After the launch of the universal rolling mill at Chelyabinsk Metallurgical Plant we are actively expanding into new markets. In spring 2014 we produced a trial lot of high-quality rails for Russian Railways certification tests. After the tests are completed we will be able to start supplies for Russian Railways.

”The 11% decrease of stampings sales versus the previous quarter is caused by the halting of Urals Stampings Plant’s Izhevsk branch, whose product line will be transferred to the main production site in Chebarkul during 2014. The forgings sales were down by 28% due to the weak demand from our key consumers.

”Ferrosilicon sales from Bratsk Ferroalloy Plant to the Group’s enterprises and to third parties in 1Q2014 remain flat comparing with the previous quarter. The stabilization trend seen on international ferrosilicon markets proved a positive factor of the segment’s results.

”Operational results of our power segment enterprises in 1Q2014 were largely comparable with the previous quarter. The minor decrease in electricity production was due to the repair of boiler equipment at Southern Kuzbass Power Plant. At the same time, Mechel Energo increased heat energy sales by 17% versus the previous quarter due to a seasonal hike in demand.”