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Mechel Reports 1Q2023 Operational Results

Mechel PAO’s Chief Executive Officer Oleg Korzhov commented on the results:

“In the reporting period, Mechel's mining division operated constrained by the shortage of railway infrastructure capacity in the Far East and related restrictions (conventions) on freight transportation, and so the company was unable to take full advantage of the favorable pricing environment on the global coal market. Logistical difficulties were the main restraining factor that affected the sales structure in 1Q2023. With this in mind, we were forced to adjust production plans downward at both Southern Kuzbass Coal Company and Yakutugol Holding Company.

“In the reporting quarter, we significantly consolidated our position in the online sales segment. Steel product sales via Mechel-Service sales network's online store increased fivefold year-on-year and by 12% quarter-on-quarter. The Urals macro-region was the absolute leader in the growth of online sales (+43% quarter-on-quarter). Krasnoyarsk, which belongs to the Siberia macro-region, saw the highest growth rate in online sales (+107% quarter-on-quarter) among cities with a population of over one million people.

“Coking coal concentrate sales quarter-on-quarter went down by 34%, anthracite sales were down by 18%, thermal coal went down by 8%, while domestic thermal coal sales more than doubled due to reallocation of shipments from export destinations. As for PCI, the sales almost doubled due to the accumulation of large stockpiles of this coal grade in the Far Eastern ports by the end of 4Q2022.

“In the reporting period, due to unfailing operation and processing of higher quality ore, Korshunov Mining Plant’s facilities increased output of iron ore concentrate by 109% compared to the previous period. In the first quarter of this year, we completed preparations for the launch of commercial production at the Sivaglinsky iron ore deposit in Southern Yakutia, and the first batch of ore was shipped to Chelyabinsk Metallurgical Plant in April.

“The coke released due to restrictions on shipments to Western destinations was sold on the domestic market, where we saw a steady growth in demand for this product. Total sales were up by 19% quarter-on-quarter.

“Mechel's steelmaking enterprises worked as usual ahead of the traditional summer season of scheduled equipment repairs. Almost all key production indicators, as well as sales figures, demonstrated growth.

“Mechel's steelmaking enterprises worked as usual on the eve of the traditional summer season of scheduled equipment repairs. Almost all key production indicators, as well as sales figures, showed growth.

“Sales of rolled longs remained approximately at the level of the previous quarter. Given the good margins in the CIS markets during the reporting period, we partially redirected shipments of rebar and other products there. Sales of shapes and sections produced by Chelyabinsk Metallurgical Plant's universal rolling mill, including structural beams, went up by 16% quarter-on-quarter.

“The 6% quarter-on-quarter increase in sales of rolled flats was due to an increase in Chelyabinsk Metallurgical Plant’s output of these products.

“Ferrosilicon sales remained practically at the level of the previous quarter, demonstrating a slight decrease. We compensate for the decrease in export sales caused by the disruption of global supply chains by building up our customer base in the Russian market.

“Hardware sales went up by 5% quarter-on-quarter due to major contracts for supply of high-strength wire and expansion of the geography of our polymer-coated wire rope sales.

“Quarter-on-quarter forgings sales went down slightly in absolute terms. The 15% increase in stampings sales was due to additional shipments to machine-building companies in the reporting period.

“The 3% quarter-on-quarter increase in electricity generation was due to reduced timeframe for repairs to major power equipment. The 11% increase in heat generation is seasonal in nature.”

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Mechel is an international mining and steel company. Mechel unites producers of coal, iron ore concentrate, steel, rolled products, ferroalloys, heat and electric power. All of its enterprises work in a single production chain, from raw materials to high value-added products.