Mechel (MTL) Inks Agreement with Russian Railways - Analyst Blog

Russian mining company, Mechel OAOMTL has inked a new deal with Russian Railways OAO's Center of Corporate Transportation Services, including organization of cargo train traffic by reserved routes with fixed arrival and departure times.

Mechel's shares rose as much as 7.1% in the trading session following the news release.

The deal is valid from Apr 1, 2015 till Dec 31, 2015. The routes in which Mechel Group's railway operator will be able to avail Russian Railways OAO's services are the one from Yakutugol Holding Company OAO (part of Mechel Group) to Trade Port Posiet OAO (part of Mechel Group, located on the coast of the Sea of Japan) and from Port Vanino OAO. The routes from Southern Kuzbass Coal Company OAO to Trade Port Posiet OAO and from Southern Kuzbass Coal Company OAO to Port Vanino OAO will also be included.

As per the earlier agreement, Mechel dispatched 1,800 cargo trains on fixed schedules. The transit time reduced 20% compared with the conventional cargo delivery time norms. The company could allocate a part of its wagon park to other production needs as the required amount of coal was sent by lesser number of wagons.

As per Mechel, working with Russian Railways' subsidiaries has been a pleasant experience. The company can deliver its export cargo to the sea ports on schedule, which helps it to plan its further logistics, such as vessel presentation, freight and preparation of port facilities, more accurately. In 2014, Mechel's cargo accounted for 12% of all cargo shipped by Russian Railways using fixed schedules.

Cargo train traffic control on fixed schedules is a primary indicator of the quality of railways operation. This technology enables Corporate Transportation Services to efficiently distribute the load on Russian Railways OAO's infrastructure, streamline the work of its locomotive teams, and optimize exploitation costs.

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

Other well-placed companies in the steel industry include ThyssenKrupp AG TYEKF , Commercial Metals Co. CMC and LB Foster Co. FSTR .

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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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