OREANDA-NEWS. Mechel OAO (NYSE: MTL), one of the leading Russian mining and metals companies, announces 1H2014 operational results.

Mechel OAO's Chief Executive Officer Oleg Korzhov commented on the company's 2Q2014 results:

“In 2Q2014 spot prices for coking coal reached their seven-year minimum. We think that the next few months may be expected to see their gradual recovery. Despite the current price dynamics, Mechel Group maintained the volumes of run-of-mine coal production on the previous quarter's level. The sales volumes of coking coal concentrate from our major mining enterprises (Southern Kuzbass Coal Company and Yakutugol) went up by 5% quarter-on-quarter due to two factors - stable exports, primarily those we contracted with steelmaking holdings in Asia Pacific, and a significant increase in supplies (27% quarter-on-quarter) to Mechel Coke OOO for restocking. The general decrease of coking coal concentrate sales compared to 1H2013 was due to a temporary interruption of mining at US-based Mechel Bluestone due to unfavorable market conditions.

“PCI sales were up by 75% in 2Q2014 quarter-on-quarter due to an increase in exports, particularly to China. The eight-percent increase in anthracite sales as compared to the previous quarter was due to a seasonal increase in supplies to Chelyabinsk Metallurgical Plant's sintering facilities.

“Steam coal sales went down by 14% quarter-on-quarter due to a seasonal slump in demand from both external customers and the Group's enterprises. We are currently actively working at expanding steam coal sales in burgeoning Asian markets.

”The Group's steel segment in 2Q2014 increased production volumes quarter-on-quarter, with steel production up by 6%, pig iron production up by 3% due to stable demand for Chelyabinsk Metallurgical Plant's products, which also helped maintain coke sales at the previous quarter's level.

“In 2Q2014, we increased sales of flat rolls by 2% and long rolls by 3% quarter-on-quarter due to a seasonal increase in demand. At the same time, the decrease in sales of third-party products was compensated by the increase in our own production. The decrease in sales in 1H2014 as compared to 1H2013 was due to a slump in the sales of third-party products as well as disposal and reorganization of the Group's several service and sales centers in Europe.

“During the report period we dispatched a batch of high-quality rails produced at the universal rolling mill for certification by Russian Railways OAO. Getting those rails certified will enable us to begin supplying Russian Railways with up to 400,000 tonnes of rails a year. During the report period we also continued to expand the range of the universal rolling mill's products, mastering manufacture of 18 types of shaped rolls.

“The five-percent decrease of stampings' sales in the second quarter as compared to the first quarter was due to a weaker demand for these products and high competition from foreign producers.

“Ferrosilicon sales from Bratsk Ferroalloy Plant to the Group's enterprises and to third parties remained flat quarter-on-quarter. Global ferrosilicon prices currently demonstrate positive dynamics.

“In 1H2014, our power segment has slightly decreased production of electricity and heat as compared to the same period last year, which is due to ZMZ-Energo OOO and boiler stations at GMZ OOO leaving the Group's power division. The 16-percent decrease in electricity production and 53-percent decrease in heat production in the 2Q2014 quarter-on-quarter is due to seasonal changes.”