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Mechel reports 1Q21 operational results

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World Coal,

Mechel PAO, one of the leading Russian mining and metals companies, has announced its 1Q21 operational results.

Mechel PAO’s CEO, Oleg Korzhov, commented on operational results:

“Our operational dynamics in 1Q21 were largely what they were due to conditions our company worked in last year, caused by both external and internal factors. Even as the decrease in debt leverage due to restructuring and partial repayment of our loans had its positive impact; starting in April – May, Mechel felt the lack of cash flow sufficient for financing our operations as needed. This was due to a major slump in coal and steel prices because of the pandemic. Underfunding of our operations in 2H20 led to a major reduction in stripping and negative dynamics in coal mining and sales in 1Q21 accordingly. The steel division had a similar situation.

“I would like to note that this year, due to a significant improvement in market trends, we managed to provide ample funding for our repair programmes, which had a positive effect. In April alone, sales of most of our products demonstrated results nearly equal to half of those of the entire first quarter. For example, last month we sold approximately 500 000 t of coking coal concentrate – which is 53% of the amount sold in the entire reporting period.

“The 23% decrease in sales of coking coal concentrate was due to reduced mining of this type of coals caused by insufficient stripping volumes in 4Q20 at our facilities in Yakutia and Kuzbass. The same cause became the determining factor for the negative dynamics of PCI (-33%) and anthracite (-4%) sales. At the same time, we have tried as much as possible to meet our contractual obligations. I would like to use this opportunity to offer my deepest gratitude to our partners for their understanding and constructive approach.

“Thermal coal sales were conducted in accordance with our contractual obligations to the Far Eastern Generating Company and the Republic of Sakha (Yakutia)’s housing and utilities infrastructure. The remaining thermal coal was exported, primarily to China.

“Iron ore concentrate sales went down by 36% due to the technical health of Korshunov Mining Plant’s mining and transport equipment. At the same time, we managed to remedy the situation in 1Q21, and in April iron ore shipments amounted to 42% of the entire volume sold in the reporting period.

“In 4Q20, our sales company Mechel Carbon shipped two shiploads of coke totalling 100 000 t from our accumulated stock to one of our key clients. This fact reflected on the coke sales dynamics in the following quarter (-19%).

“As intra-Group supplies of raw materials for steelmaking declined, pig iron output went down by 13% q/q, and steel output slumped by 15%. The reporting period was characterised by a confident growth of average prices on steel products, which offset the negative sales dynamics.

“Sales of long rolls went down by 7% q/q. As for the universal rolling mill’s output, the 31% decrease in rail sales was due to our shipping the remaining rails intended for construction of Moscow’s new metro stations in 4Q20, ahead of schedule. Sales of the universal rolling mill’s sections went down by 16% due to the seasonal slump in demand for beams. The mill has formed an additional stockpile of construction products, which will enable us to increase sales in the next reporting period. We pay extra attention to sales of stainless long rolls, which have picked up and demonstrated a 22% growth q/q.

“Flat roll sales went down by 8% due to ongoing repairs at Chelyabinsk Metallurgical Plant.

“Hardware sales went down by 17% due to a traditional slump in demand for wire and other hardware in 1Q21. We have begun preparations for the new construction season well in advance, ensuring a wide range of hardware in our Mechel Service sales network’s storage facilities.

“Forgings sales went up by 3% as some of the volumes sold in 4Q20 were actually shipped in this reporting period. Stampings sales grew by 87% due to improved demand from wagon-building companies.

“In 1Q21, our power division’s facilities produced 3% less electricity y/y due to a larger volume of repairs. Heat generation went up by 12% y/yr and by 17% q/q due to temperature factors and increased steam consumption by the Group’s enterprises.”

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