Mechel Says 3Q External Demand for Steel Fell Vs 2Q — Commodity Comment


By Mary de Wet

Mechel PAO’s steel segment saw lower demand from external customers in the third quarter compared with the second, although sales rose 62% from a year earlier.

Its mining segment is working to restore production volumes, including preparing to start development of its Sivaglinskoye iron-ore deposit.

On its steel segment:

Third-quarter revenue from external customers fell 8% from the second quarter to 67.18 billion rubles ($930 million), the mining-and-steel company said.

“The main reasons were reduced demand due to market price volatility, impact from export duties and negative price expectations from our customers. In these conditions, we decreased the share of exports, redirecting our sales partly to the domestic market and partly to replenishing our sales network’s inventories which went down during the high demand period in the second quarter,” Mechel said.

Revenue was up from RUB41.35 billion in the third quarter of 2020, according to the company’s website.

“Despite a weaker steel market, average FCA-based prices that the company used to sell long products went up by 11% quarter-on-quarter, while the price on flat steel went up by 10% quarter-on-quarter and hardware prices went up 19%.

“In October the downward price trend continued, but in November the market rebounded, as traders faced the necessity of replenishing depleted inventories.

“The end of the third and the beginning of the fourth quarter also demonstrated a hike in ferrosilicon prices as China tightened energy restrictions. Due to electricity shortages, a significant decrease in ferrosilicon production and increase of its production costs, market prices more than doubled. Taking into consideration that the hike came nearly at the end of this reporting period, the average sale price for the Group’s ferrosilicon went up nearly by 30% quarter-on-quarter. After China’s authorities intervened in the power crisis, and introduced additional ecological limitations in November-December ahead of the heating season and preparation for the Olympics, ferrosilicon production will continue to go down, which will support the prices.

“Despite limited sales opportunities, in 3Q 2021 the division’s facilities increased steel output by 2% and maintained stable production levels for finished goods as compared to the previous quarter, replenishing our sales network’s inventories for planned sales volumes in the future.”

On its mining segment:

Revenue from sales to third parties rose 2% quarter-on-quarter due to higher prices for all types of the division’s output except iron-ore concentrate. Sales volumes decreased, the company said.

Third-quarter sales totaled RUB29.77 billion, up from RUB17.19 billion a year earlier.

“In 3Q 2021, mining volumes at the division’s facilities remained largely at the previous quarter’s level. At the same time, sales of metallurgical coals demonstrated a decline, mostly due to the fact that significant volumes of coal inventories accumulated earlier were sold in the second quarter.

“In the third quarter, our ability to market stockpiled coal were limited. Anthracite and PCI sales remained stable quarter on quarter. With favorable market trends, this yielded a 2% quarter-on-quarter increase in revenue from sales to third parties, while the division’s Ebitda improved by 20%. The division’s Ebitda margin in 3Q 2021 reached 52%.

“The division’s facilities continue to implement programs aimed at restoring production volumes. As a result, mining at Southern Kuzbass Coal Company went up 23% quarter on quarter. As giant tires arrived at Yakutugol Holding Company, the facility restored its heavy-duty truck fleet. In 3Q 2021, Korshunov Mining Plant received six new trucks as well as pumps and hydrocyclone separators for its washing plant. In 4Q 2021, the plant will receive an excavator, a boring rig and a heavy-duty bulldozer.

“Also, in order to improve the group’s iron-ore supply, the division is preparing to launch development of the Sivaglinskoye iron-ore deposit.”

Write to Mary de Wet at


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