Mechel Inks Deal With Jidong Cement To Supply Steam Coal - Analyst Blog

Russian steel and mining company Mechel OAO MTL has signed a memorandum to supply 1 million tons of steam coal produced at Neryungrinsky and Elga open pits to China’s Jidong Cement between Apr 2015 and Mar 2016. The companies are also considering the possibility of Mechel supplying metallurgical coals to Jidong Development facilities.

For Mechel, tapping the Chinese market is vital as it accounts for about 70% of its total sales to the entire Asia Pacific. With the demand for coal going down, it is important for the company to develop long-term ties that will enable it to retain its share in the market and make sure that coal exports are stable.

Mechel posted net loss (as reported) of $3,113 million for the fourth quarter of 2014, wider than net loss of $681 million recorded in the fourth quarter of 2013 and a loss of $575 million in the previous quarter. The company’s loss widened due to weakening of the ruble.

Adjusted net income was $134 million for the reported quarter versus adjusted net loss of $251 million reported in the year-ago quarter and income of $17 million in the previous quarter.

Revenues for the fourth quarter came in at $1,384 million, down about 26.6% from $1,885 million in the year-ago period. Sales were also down 12.7% sequentially.

Mechel is a leading domestic steel and coal producer with a strong position in key businesses, including production of specialty steel and alloys.

Other well-placed companies in the steel industry include Olympic Steel Inc. ZEUS, Evraz Highveld Steel & Vanadium Ltd. HGVLY and POSCO PKX. While Olympic Steel sports a Zacks Rank #1 (Strong Buy), Evraz Highveld and POSCO carry a Zacks Rank #2 (Buy).

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