Bloomberg News

Mechel Says 2005 Steel Output Declined as Prices Fell

February 10, 2006

OAO Mechel (MTLR), Russia's fifth-biggest steelmaker, said it cut production by 5 percent last year as prices weakened.

Crude steel production fell to 5.9 million metric tons, Mechel (MTLR) said in a statement today. Rolled steel output dropped 2 percent to 4.6 million tons. Pig iron production declined 14 percent to 3.3 million tons. Coal output was unchanged at 15.6 million tons.

``They are showing discipline in line with other Russian steel producers faced with falling prices,'' Alexei Morozov, a metals analyst at UBS Brunswick in Moscow, said in a telephone interview.

Evraz Group SA, OAO Magnitogorsky Metallurgichesky Kombinat and OAO Severstal, Russia's three-biggest steelmakers, have said their 2005 profit will decline on weaker prices. Export prices for benchmark hot-rolled coil from the former Soviet Union dropped 31 percent last year, according to data from London-based publisher Metal Bulletin Plc.

Mechel said Dec. 16 that net income for the first nine months of 2005 fell to $314.7 million, from $420.8 million a year earlier. Sales rose 18 percent to $2.9 billion.

Chief Executive Vladimir Iorich said in the statement he expects 2006 to be a ``good'' year for Mechel's coal unit.

The company plans to raise annual coal output 60 percent from production in 2004, to 25 million metric tons by 2010. The company this week said it wants a controlling stake in the Yakutugol coal mine in Russia's Far East.

Mechel's American Depositary Receipts closed 2.7 percent higher at $30.33 in New York yesterday.

To contact the reporter on this story: Samantha Shields in Moscow sshields2@bloomberg.net.

To contact the editor responsible for this story: Justin Carrigan at jcarrigan@bloomberg.net


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