Mechel Launches Coke Oven Battery - Analyst Blog

Russian mining and steelmaking company Mechel OAO ( MTL ) announced the launch of the reconstructed coke-oven battery #5 at Mechel Mining OAO's subsidiary Mechel-Coke OOO.

The launch of the new coke oven battery with an annual capacity of 470,000 mt of coke allows the company to increase production of coke and chemicals, ensuring the self sufficiency of Mechel Group's Chelyabinsk Metallurgical Plant and Southern Urals Nickel Plant.

The reconstruction of the plant has enhanced the capacity threefold; and when the battery No. 5 reaches its full capacity, Mechel-Coke will be able to produce about 3.1 million mt per year. Reconstruction of coke-oven battery #5's facilities cost a total of 1.8 billion rubles ($56.2 million).

The battery's reconstruction process also involves the introduction of a computerized central control system of the technological process for all of coke shop #2's coke-oven batteries.

In October 2011, Mechel released its third quarter 2011 results. The company recorded a net income of $191.9 million in the second quarter of 2011, down 37.9% from the previous quarter's consolidated net income of $309.1 million.

Revenues in the second quarter soared 18.3% sequentially to $3.5 billion based on the company's relentless efforts in restoring production volumes in its mining segment while preserving high capacity utilization rates in steel and other segments.

Operating income in the reported quarter climbed by 6.2% to $476.3 million versus the first quarter of 2011. Operating margin was 13.72% in the second quarter of 2011 versus 15.28% in the first quarter of 2011.

Mechel is a leading domestic steel and coal producer occupying a strong position in key businesses, including production of specialty steel and alloys. The company has the largest coal reserve base in Russia. It is focusing on growth and cost-cutting measures.

The company owns and controls essential infrastructure, including ports, rolling stock and power plants, which provide access to the export markets. However, Mechel's large capital-spending program, high debt and substantial interest burden are matters of concern.

Currently, Mechel has a short-term (1 to 3 months) Zacks #4 Sell rating and a long-term (6 months) Neutral recommendation.

Mechel faces stiff competition from Arcelor Mittal ( MT ) and Norilsk Nickel Mining and Metallurgical Co.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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