Russian steelmaker Mechel PAO’s steel production dropped by 3pc in H1 from the prior year period. In Q2, steel output rose by 6pc as major overhauls of the company’s Chelyabinsk blast furnace and converter were completed.
Mechel’s steel division sales in Q2 was impacted by the COVID-19 pandemic, in both the export as well as the domestic market, according to the company’s H1 results release. Sales of long rolls products in Q2 equalled that of Q1, but in H1 increased by 3pc, due primarily to rebar sales. Construction season was delayed in Russia amid the pandemic. Sales of Universal rolling mill’s shapes and sections fell in Q2 compared to Q1 due to a significant reduction in demand for rails and high-margin products. In H1, the company focused on flats rolled output as it is a high-profit margin product.
| Mechel’s steel production and sales in H1 | ||||||
|---|---|---|---|---|---|---|
| Production (mt) | H1 2020 | H1 2019 | Change (%) | Q2 2020 | Q1 2020 | Change (%) |
| Steel | 1.80mn | 1.86mn | -3 | 9,26,000 | 8,76,000 | 6 |
| Pig Iron | 1.78mn | 1.73mn | 3 | 9,12,000 | 8,72,000 | 5 |
| Sales (mt) | ||||||
| Long rolls | 1.29mn | 1.26mn | 3 | 6,47,000 | 6,48,000 | 0 |
| Flat rolls | 2,33,000 | 2,29,000 | 2 | 1,09,000 | 1,24,000 | -12 |
| Hardware | 2,68,000 | 2,90,000 | -8 | 1,34,000 | 1,33,000 | 1 |
| Forgings | 22,000 | 21,000 | 2 | 9,000 | 12,000 | -24 |
| Stampings | 27,000 | 60,000 | -55 | 4,000 | 23,000 | -82 |
Mechel’s coal mining volumes improved by 7pc in Q2 from Q1 due to the restoration and upgrading of mining equipment at Yakut and Kuzbass plant. This helped improve sales to Asia Pacific region where demand recovered post the pandemic. However, coal prices fell to a 4-year low. Coal prices are subdued due to China’s strict policies towards imported coal and allocation of quotas for coal import. Australian coal producers have announced to revise their operational plans which is expected to boost global coal prices.
The company’s iron ore concentrate sales fell by 18pc from the prior quarter due to a drop in mining and lower Fe content. Weak demand for ore in Europe was partially offset by an increase in sales to Asian countries.
For H1, Mechel PAO’s consolidated revenue dropped by 11pc to RUB131bn ($1.77bn) from the prior year period with a net profit of RUB10.2bn, down by 20pc. In Q2, consolidated revenue fell by 4pc to $64.5bn and net profit was RUB47.1bn.
($1=RUB73.87)