Mechel announced financial results for the 9M 2016. Operating profit went up by 31% if compared to the same period of the previous year, reaching 28.8 billion rubles.
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EBITDA went up by 16% to 41.6 billion rubles, and EBITDA margin reached 21%.
Mechel CEO Oleg Korzhov commented on the 9M 2016 results: "This reporting period is characterized by significant volatility in prices for our key products.
"At the beginning of this year, prices for most of our products hit historical lows both domestically and internationally. The market situation fluctuated throughout these three quarters, but mostly market changes were favorable for Mechel, which found its reflection in our financial results."
Mechel Mining Management OOO CEO Pavel Shtark noted: "In early 2016, prices on coking coal, our division’s main product, were at their longtime lows. Steam coal prices were also extremely low.
"Later during the first half of the year, the market situation gradually improved, as benchmark and global indexes demonstrated stable growth, with our contract prices growing accordingly.
However, in the second half of this year we witnessed an unprecedented hike in prices on high-quality coking coal. If benchmark contract prices for hard coking coal supplied by Australian producers to Japan were set at 92 US dollars per tonne in the third quarter, for the fourth quarter they were set at 200 US dollars per tonne.
"It is impossible to give an unequivocal explanation to this price hike, but experts mostly agree that it was caused by a deficit of premium coal grades on China’s domestic market due to mining limits imposed on Chinese coal producers.
"Force majeure events on several Australian facilities as well as damage to the transport infrastructure in China and Australia added to this. Coal stocks in Chinese ports were at their historical lows.
"At the same time, spot prices on high-quality coking coal continued to grow and are currently set at their historical highs, topping 300 US dollars per tonne, at a significant difference with contract prices set for the fourth quarter.
"Negotiations for the first quarter 2017 basic prices will start shortly, and considering the spot market indicators, we can expect the contract price level for the first quarter to be significantly higher quarter-on-quarter." ■