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Russian miner Mechel OAO (MTL - Analyst Report) has released its operational results for the first quarter of 2014. Mechel's coal production was 5,565,000 tons in the quarter, a decline of 13% year over year and 21% sequentially. The sequential decline in production was due to seasonal factors and minimized production at Mechel Bluestone.

Pig iron production decreased 4% year over year but increased 12% sequentially to 935,000 tons. Steel production slipped 21% year over year but rose 3% quarter over quarter to 1,031,000 tons.

Coking coal sales decreased 3% sequentially to 2,611,000 tons in the reported quarter. The sales of PCI and anthracites were down 20% sequentially due to the seasonal fall in outflow through Far Eastern ports in wintertime. Mechel expects them to recover in the second quarter.
Iron ore concentrate sales declined 10% sequentially to973,000 tons as most of the supplies from Korshunov Mining Plant were shifted toward domestic markets.

Even though the Russian economy is slowing down, the company’s steel segment continues to operate and there was a sequential increase in steel sales in the reported quarter. Sales of pig iron rose from the previous quarter due to completion of repairs at the Chelyabinsk Metallurgical Plant's blast furnace #1, which also led to a 10% increase in coke sales sequentially.

Sales of flat products declined 39% year over year and 5% sequentially to 112,000 tons due to Mechel’s gradually decreasing marketing of third-party products and destocking of European warehouses, as Europe's demand for steel is expected to remain weak in the near future.

Stampings sales declined 11% from the previous quarter due to halting of Urals Stampings Plant's Izhevsk branch, whose product line will be transferred to the main production site in Chebarkul during 2014. Forgings sales were down by 28% sequentially to 12,000 tons due to weak demand from the company’s key consumers.

Ferrosilicon sales from Bratsk Ferroalloy Plant remained at par with the previous quarter. Sales from the power segment enterprises were also at par with the prior quarter. However, the minor decline in electricity production was due to the repair of boiler equipment at Southern Kuzbass Power Plant. Further, Mechel Energo’s heat energy sales increased by 17% sequentially due to a seasonal increase in demand.

Mechel currently retains a Zacks Rank #4 (Sell).

Other companies in the steel and related industries with favorable Zacks Rank include NN Inc. (NNBR - Snapshot Report), ThyssenKrupp AG (TYEKF) and Timken Co. (TKR - Snapshot Report). While NN retains a Zacks Rank #1 (Strong Buy), ThyssenKrupp and Timken carry a Zacks Rank # 2 (Buy).

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