Mechel in Media

Benoit de Meulemeester: Mechel sold out of 2015 metallurgical coal, to resume mid-vol PCI

18.02.2015

PLATTS

Russian miner Mechel said Tuesday it sees strong demand for its metallurgical coal products in Europe and Asia, prompting it to resume offering a PCI product later this year, and is sold out for 2015.

"Mechel has huge sales potential in Europe, Middle East and Asia, said Mechel Carbon CEO Benoit de Meulemeester in response to questions emailed to the company.

"For 2015, we are already sold out -- all our volumes are booked by our usual customers." Mechel is planning to restart production of its Kuzbassky mid-vol 19-21% VM PCI in the second quarter of this year, he said. The PCI has around 9.5% ash, and 0.3% sulfur, with HGI of 55, based on the company's previous specifications list.

Some PCI buyers in Europe were awaiting the resumption of the brand as the tight PCI market experienced strong demand. KRU/Carbo One's Bachatsky and Mir Trade's PCIs are dominant mid-vol grades.

Shipments of Kuzzbassky stopped during 2014, according to market sources.

The company's production plans had been hit by high debts and limited cash flow for operations as it worked on restructuring.

Mechel is selling its key Sibirginsky low-vol PCI on a quarterly basis to European customers, de Meulemeester said.

In Europe some PCIs have been priced on an annual basis this year, with quarterly and spot transactions also featuring.

Mechel has focused on PCI sales adopting the quarterly benchmark framework, with the price in Europe related to prices of low-vol PCI from Australia agreed into Asia each quarter, he said.

In China, Mechel sells using monthly pricing, and the company prefers to secure both monthly and quarterly contracts for its met coals.

Mechel Carbon is the group's coal marketing arm, headquartered in Singapore. Mechel's mining operation has strategically decided to focus on exports since 2008, and is exporting about 70% of its salable coal product.

It developed strong direct ties with integrated steel mills in Europe and Asia, with a Japanese landmark customer taking product from the new Elga coking coal among Russian buyers.

Elga in 2015 is due to produce 600,000-1 million mt of washed coking coal in 2015, depending on market conditions, he said.

While the met coal market faces low prices, and growing production in Australia seeking out market share, cost control and a diversified portfolio along with favorable port and rail logistics may work to Mechel's favor.

"For the future, whatever the exchange rate and the inflation, we have a strong sales network with several very good customers in many countries," de Meulemeester said.

"In Russia we have a very competitive production of metallurgical coals and a very competitive logistics base. If Mechel is unable to make money with all that, neither will BHP."

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