Mechel report 3Q20 operational results

Mechel PAO’s CEO, Oleg Korzhov, commented: “In 3Q20, the coal market began gradual recovery after the first wave of the coronavirus epidemic, which had key importer states introduce various limitations while our customers among steelmaking corporations temporarily halted their facilities and corrected their annual plans for steel output. Mechel’s subsidiaries have mined a total of 4.3 million t of coal in this accounting period, with the 7% slump due to a planned decrease in mining caused by a face transfer at V.I. Lenina Underground Mine and major overhauls at our washing plants. At the same time, over 9M20 our company demonstrated positive dynamics in sales of all our coal products.

“The overall decrease of coking coal concentrate by 12% was due to a slump in shipments to the domestic market and redirecting our volumes to the more profitable Asian markets. In 3Q20 sales of coking coal concentrate to Asia Pacific went up by 11% q/q.

“We have nearly doubled PCI supplies to South Korean customers, which upheld the overall sales volumes for this product at the previous quarter’s level as demand in China and Japan has slumped. As for the 9M20 result, the 58% hike is due to the increase in Southern Kuzbass Coal Co.s PCI output and our PCI sales to Asia.

“The increase in Southern Kuzbass Coal Co.’s anthracite output also had a positive impact on our sales dynamics both in Europe and in Asia. Most of our anthracite has been sold to Japan and South Korea, which are the premium markets for this product. Anthracite sales went up by 9% q/q and by 72% in 9M20 y/y.

“In 3Q20, in order to meet our contractual obligations, we redirected some of our thermal coal from Asia to the domestic market. In addition, we have signed a long-term contract for supplies of thermal coal to Turkey ahead of the heating season. Thermal coal sales went up 2% q/q, and by 16% in 9M20 y/y.

“Iron ore concentrate sales went up by 29% in 3Q20 due to increased output at Korshunov Mining Plant in summer. The plant’s iron ore concentrate is chiefly intended for our own Chelyabinsk Metallurgical Plant.

“Increased coke exports had a positive impact on the overall coke sales, which demonstrated a 6% growth q/q. Moreover, several coke shipments intended for clients in Central and Eastern Europe are still waiting in Ust-Luga port, which will improve the 4Q20 sales dynamics.

“Mechel Group’s steel division in 3Q20 decreased output of pig iron by 5% and steel by 8% due to equipment overhauls at Chelyabinsk Metallurgical Plant. At the same time, the decrease in steel output mostly affected the least profitable, regular long rolls, while output of the universal rolling mill’s most profit-making product, beams, went up in volume.

“The coronavirus pandemic made its own adjustments to operations of Russian companies which noted following the spring crisis that new opportunities for import substitution have sprung up as several industry sectors increased demand for specialised high-quality products. Infrastructure construction also registered such growth. All such projects uphold the domestic demand for steel products and ensure good perspectives for our facilities which are oriented more toward domestic markets. I should note that export markets have also revived in the 3Q20 (including Europe and the CIS). Nevertheless, due to the coronavirus the current situation remains uncertain, and new factors may yet appear that will require us to amend our forecasts and appraisals.

“In this accounting period we have shipped off a jubilee three-millionth tonne of rolls from the universal rolling mill — it consisted of 100-m rails for Russian Railways. The mill’s product range continues to actively expand with production of 80 new profile sizes mastered, including many profile types never before produced in Russia.

“3Q20 saw a revival of business activities both in Russia and abroad, which had its positive impact on demand and steel sales. Overall, sales of long rolls remained on the previous quarter’s level as sales of construction products made at the universal rolling mill went up by 28% and stainless long rolls by 13%. Sales of rolled flats demonstrated similar figures. The overall level of sales did not change quarter on quarter, but sales of high-margin stainless products went up by 4%. It is important to note that as a result of 9M20 we managed to gain profit from sales of rolled longs and flats despite tough limitations caused by COVID-19, that were imposed in the end of 1Q20 and throughout 2Q20.

“The decrease in ferrosilicon output and sales by 13% q/q due to ongoing equipment repairs at Bratsk Ferroalloy Plant.

“The 10% increase of hardware sales compared to the previous quarter was primarily due to increased orders for Beloretsk Metallurgical Plant’s wire from construction and furniture companies once the quarantine limitations were lifted.

“The gradual revival of demand from engineering producers and steel trading service centres helped increase forging sales by 2% in 3Q20 q/q. As a result of shrinking shipment volumes in our country, demand for new wagons sank, with demand for railroad axles diminishing accordingly, which in its turn had its impact on sales of Urals Stampings Plant’s stampings – they slumped by 17% q/q.

“The 5% decrease in electricity generation in 3Q20 q/q was due to planned equipment repairs. A decrease in heat generation is seasonal in character.”

Read the article online at: https://www.worldcoal.com/coal/19112020/mechel-report-3q20-operational-results/