Mechel OAO ( MTL ) announced that it has signed a coking coal supply deal with China's Shasteel Group. Per the agreement, Mechel Carbon (Singapore), a trading subsidiary of Mechel's mining unit, will supply 40,000 to 80,000 tons of coking coal a month from Russian Far East ports to Shasteel group.
Mechel Carbon has already supplied more than 500,000 tons of coking coal to Shasteel's main coke plant in Zhangjiagang, Jiangsu Province, before May 2013. The long-term agreement between Mechel and steel major Shasteel bears testimony to Mechel's ability to successfully establish long-standing relationship with the world's largest steel producers while positioning itself in diversified markets. China's Shasteel Group is the largest private steel mill in China with an annual production capacity of about 35 million tons of steel.
Last month, Mechel Carbon also signed a three-year coking coal supply agreement with South Korean steel maker POSCO Corporation ( PKX ). Under the contract, Mechel Carbon will be supplying 500,000 tons of coking coal per year to POSCO for three years.
Mechel Carbon signed another one-year contract with POSCO, wherein, it will supply 200,000 tons of PCI coal in 2013. However, the terms of these contracts are not determined as yet. They shall be adjusted mutually on a quarterly basis.
A long-term, stable partnership with POSCO and other major companies will enhance Mechel's position in the global metallurgical coal market by providing its coal mining enterprises with stable orders.
Mechel currently retains a short-term Zacks Rank #3 (Hold).
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