Mechel Restarts Bluestone Facility - Analyst Blog

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Referenced Stocks:AMSIY;MTL;PKX;ROCK

Russian miner Mechel OAO ( MTL ) announced the resumption of operations at some of its Bluestone mining facilities in West Virginia, U.S. The decision to resume operations at the mine was based on the decline in coal inventories in the mine. The company resumed open pit mining at the Justice and Dynamic Energy complexes. The complexes are expected to produce about 135,000 tons a month.

Bluestone is the mining division of Mechel and production at the mine was temporarily suspended in Oct 2012 due to an accumulation of coal inventories. Mechel stated that it will resume mining at other facilities when market conditions improve.

Last month, Mechel announced that it will discontinue production at its Southern Urals Nickel Plant OAO owing to persistent slowdown in demand for nickel and bleak outlook for its recovery in the near future.

The decision of halting production was taken to minimize losses. The company will comply with all the regulations that are set forth by the Russian Federation's law for the shutdown.

Mechel released its third-quarter 2012 results in Dec 12. The company posted consolidated net income of $54.9 million for the quarter compared with $25.7 million in the year-ago quarter, representing a roughly 114% surge. Revenues for the quarter came in at roughly $2.71 billion, down 15.4% from $3.21 billion in the year-ago period.

The company registered an operating income of $126.7 million in the quarter compared with $529.5 million a year ago, leading to a contraction in operating margin. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) declined 44.7% year over year to $374.8 million in the quarter.

Mechel remains focused on improving its core divisions, such as mining and full-cycle steelmaking, and has adopted several measures to cut costs and increase sales. Its cost containment initiatives led to marked improvement in its bottom line in the third quarter.

Mechel currently retains a short-term Zacks Rank #4 (Sell).

Other companies in the steel industry with favorable Zacks Ranks are Gibraltar Industries Inc. ( ROCK ), POSCO ( PKX ) and ArcelorMittal South Africa ( AMSIY ). While both Gibraltar and POSCO hold a Zacks Rank #1 (Strong Buy), ArcelorMittal South Africa holds a Zacks Rank #2 (Buy).

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