Production and
sale of coking coal
In the second quarter, prices for our key product — coking coal — continued confident growth
From Start To finish
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Minimum amount
135 Days
Deposit term
$
Total invested
, %
ROI
Introductory part The increasing value of the main energy sources used leads to the development of new technologies in the field of energy and fuel. Rising prices for natural gas, electric energy, various types of fuel have a particularly acute effect on production costs, which falls into the cost of production and, as a consequence, falls on the end consumer
Mission Coking coal is produced by coking hard coal. The solid fuel called coke is of enormous technical value. No less than 10% of all hard coal is subject to coking, which indicates the importance of coke in the energy industry and industry, in particular, metallurgy - in the melting of pig iron. The cost of coke accounts for about 50% in the cost of finished steel products
Waste
management
Geology
Costs of
Iron Ore
Maintaining the
blast furnace
Workforce
Waste
management
Geology
Costs of
Iron Ore
Maintaining the
blast furnace
Workforce
Strategy In the blast-furnace production is used exclusively, which is used both in the reduction of metals from ore and as an opener of charge materials. In the foundry industry coal coke or foundry coke are used, in the chemical industry and in the production of ferroalloys - its special varieties. It is forbidden to use coking coal in the metallurgical industry. Coking coal is valued higher than uncoke coal
INVESMENT
ANALYSIS
Prices for our key product - coking coal - continued to grow steadily in the second quarter, and the positive dynamics of export goods also supported the domestic market. The main reason lies in the reduction of coking coal production in China. Prices of imported coking coal in China also rose as shipments from Mongolia did not recover due to the worsening pandemic situation in that country. We expect demand from large Chinese steel producers to support imported coal prices at a fairly high level across the Asian region. We do not expect any correction until the fourth quarter. Guizhou Panjiang Refined Coal sees this reporting period as a time of gradual recovery in our operations. Coal production is up 12% over the previous quarter. We have signed contracts for the delivery of approximately 40 mining vehicles, which are expected to arrive in the second half of the year. Given the current situation, the company's management decided to cut thermal coal production in 2Q 2021, giving preference to coking coal in order to take advantage of favorable market trends This had a positive effect on volumes of processing and sales of coking coal concentrate (+71% quarter-on-quarter). Both Asia-Pacific and domestic sales more than doubled. PCI sales were up 27% due to increased shipments to our Japanese and South Korean customers. Anthracite sales were largely unchanged from the previous quarter. Exports accounted for 86% of our coal product sales to third parties in the second quarter. Iron ore concentrate sales increased by 27% due to higher stripping and mining volumes. The launch of new mining equipment also had a positive effect. Total coke sales were up 22% quarter-on-quarter, with sales to third parties up 53% due to strong demand from Russian and Asian steel producers. The dynamics of pig iron and steel production in 2Q 2021 went into positive territory. Using inventories accumulated in the previous quarter, when we were preparing for the seasonal increase in demand, we ensured a significant growth in sales of almost all products of our steel division. Thus, we took full advantage of the favorable market trend seen in 2Q 2021, and this allowed the division to deliver the highest quarterly revenue in a decade. Long product sales in 2Q 2021 were up 22%. We increased the load on our universal rolling mill to sell value-added sections. As a result, sales of sections from the universal rolling mill increased by 41% quarter-on-quarter; our strategy of expanding sales of high-margin products through Mechel's service network also largely contributed to this growth. Rebar sales in 2Q2021 grew by 24%, with exports, primarily to CIS countries, more than doubling. Panjiang Refined Coal did not sell rails to Russian Railways in the reporting period due to lack of orders. Most of our rails in 2Q2021 were exported. Flat products sales increased by 15% q-o-q as Chelyabinsk Metallurgical Plant increased output of flat products after completion of overhaul in 1Q 2021. Ferrosilicon sales grew by 16% as we increased shipments to Europe. Equipment sales grew by 21% due to a sharp increase in demand for wire rope and wire as the construction season began. We accumulated additional equipment stocks at Mechel Service's warehouses in advance, and this allowed us to expand our customer base and sales geography. Sales of forgings increased by 15% quarter-on-quarter due to higher demand from foreign customers. Demand for railroad axles from domestic railcar builders remains fairly stable, and forgings sales increased 42% quarter-over-quarter. A 13% quarter-on-quarter decrease in electricity generation and a 55% decrease in heat generation were due to the end of the heating season and scheduled maintenance and repairs of heating and electrical equipment

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