Volatile Stock to watch: Mechel PAO (ADR) (NYSE: MTL)

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Mechel PAO (ADR) (NYSE: MTL), one of the leading Russian mining and metals companies, stock crashed by 20.89% (source: google finance) on April 10th, 2018. But the stock recovered over 3% in the pre-market session on April 10th, 2018. The company has recently released weak fourth quarter 2018 results, as the profit attributable to equity shareholders of Mechel PAO fell 93% compared to the third quarter 2017. In FY 17, the High coal prices had greatly supported the mining division’s results. The metallurgical coal prices in 2017 were influenced due a large number of different factors, which includes weather cataclysms in Australia, China’s policy of regulating mining and steelmaking volumes, production and shipping problems in Australia’s mines and ports. Therefore, the coking coal prices were fluctuating very widely, with the annual average greatly exceeding expectations

The steel division last year had to work in a more difficult environment, but by the end of the year the situation stabilized and the division attained good results. The steel product market was less volatile, though the first and the second halves of the year were markedly different insofar as prices for finished products and production costs were concerned. The beginning of the year was characterized by high costs as coal and iron ore prices spiked, even as many products in our range met with weak demand and low price levels. The situation improved only in the second half of the year.

Moreover, MTL’s one of the mining division’s key challenges was restoration of its mining volumes which have declined due to the lack of a sufficient amount of coal prepared for extraction. However, starting in the second half of 2017 and throughout this year’s first quarter, the company took steps to increase stripping operations by acquiring new equipment, actively funding repairs and bringing in contractors with equipment of their own.

Additionally, in FY 17, MTL had acquired and launched dozens of machines for the mines, open pits and washing plants, as well as modernized the environment-protection equipment. That includes 55 new equipment units for the Yakutia assets alone, including 5 excavators and 23 BelAZ trucks.

Meanwhile, MTL has recently launched Longwall 0-17-16 at V.I. Lenina Underground Mine which is part of Southern Kuzbass Coal Company. The new longwall’s industrial coal reserves are estimated at 650,000 tonnes of valuable coking coal grades. The longwall is 200 meters long, the extraction panel is approximately 800 meters.

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