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Mechel () is one of Russia's mining and metals companies, comprising producers of coal, iron ore in concentrate, steel, rolled steel products. Headquartered in Moscow, it sells its products in Russia and overseas, and is formally known as Public Joint Stock Company Mechel.
Mechel acquired a controlling stake in Southern Kuzbass GRES OAO and Kuzbassenergosbyt power sales company in 2007. Also in 2007, Mechel added to its asset portfolio the Bratsk Ferroalloy Plant, the largest producer of high-silicon content ferrosilicon in Eastern Siberia, producing 84,000 metric tons of this material per annum, or approximately 14% of the total Russian ferrosilicon output.
Mechel acquired Oriel Resources Ltd in April 2008, which controls the Tikhvin Ferroalloy Plant (in Leningrad Region), the Shevchenko Nickel Deposit (in Kazakhstan) and the Voskhod Chromite Deposit (in Kazakhstan). The Tikhvin Plant has an annual projected capacity of 140,000 metric tons of ferroalloys. Mechel launched a new refinery, Mechel Chrome, at the Voskhod Deposit in September 2008, with annual capacity of approximately 900,000 metric tons of chromite concentrate per annum. Mechel signed a deal to sell the Tikhvin Ferroalloy Plant and the Voskhod Refinery to Turkey's Yildirim Group in 2013. Андрей Горбунов Туркам достались русские ферросплавы // Эксперт, № 33 (863), 19 августа 2013 The US$425-million deal was closed in December 2013. Мечел закрыл сделку по продаже ферросплавных заводов турецкой Yildirim за $425 млн // Ведомости 27 декабря 2013
Mechel negotiated the acquisition of 100% in US Bluestone Coal in 2008, for an estimated US$4 billion (approximately). However, the price was revised downward in early 2009 because of the Great Recession: Mechel was to pay for the asset US$425 million and issue 15% of the post-acquisition equity in preferred stock to the current shareholders of Bluestone Coal. Юлия Федоринова, Анастасия Денисова, Кирилл Хрипунов. Кризис помог Зюзину // Ведомости, № 34 (2304), 26 февраля 2009 After receiving $436 million in cash from Mechel and 83.3 million preferred shares of Mechel stock in 2009, Jim Justice purchased Bluestone Coal from Mechel OAO for only $5 million in cash in February 2015 with Mechel receiving future royalty payments of $3 per ton from Bluestone Coal mines and 12.5% from the sale of Bluestone Coal company if Justice sells the Bluestone Coal company during the next 5 years and 10% from the sale of the Bluestone Coal company during the next 5 to 10 years.
Mechel Trans, a Mechel logistics and transportation subsidiary, acquired a controlling stake (55%) in the Vanino Sea Commercial Port for RUB 15.5 billion from the government at an auction in early December 2012. Only one month later, Mechel re-sold most of its recently acquired stake to a consortium of Russian and international investors. Ольга Алексеева, Алексей Топалов. «Мечел» сплавил Ванино // Газета.ру, № 34 (2304), 18 января 2013 The company later acquired 21.64% of the Port's common stock from En+ for RUB4.57 billion. "En+ официально объявила о продаже «Мечелу» акций «Ванино» // Forbes, 31 января 2013 Mechel sold 21.64% of common stock in Vanino Port for RUB 5 billion on October 23, 2013, retaining only 1.4% in the Port "Сокращенная консолидированная финансовая отчетность (непроаудировано) за шесть месяцев по 30 июня 2013 и 2012 годов" In October 2019, Mechel agreed to buy Gazprombank’s 34% stake in the Elga coal deposit for around 30 billion roubles ($461 million). In 2021, the company's revenue amounted to 28 billion rubles.
On the following day, July 25, the company issued a contrite statement promising full cooperation with federal authorities, while share values rebounded by nearly 15 percent. However, Vladimir Putin once again criticized Mechel's management on July 28 during a government meeting on transfer pricing, narrowing down his complaint:
After this, the stock price (which had recovered a little over the previous days) collapsed by another 33.85% (producing a combined decline of 60%). «Мечел» потерял 60 % капитализации // Вести. Ru, 29 июля 2008 The company's market capitalization in August 2011 was still half its value in July 2008.
In mid-August 2008, the Federal Antimonopoly Service found Mechel guilty of violating Article 10 of the Competition Law by causing the domestic price of coking to rise, imposing a relatively small fine for this violation, equivalent to 5% of the group's annual sales, or RUB 790 million. In addition, FAS recommended that Mechel should reduce the domestic price of coking coal by 15%. «Мечел» отделается штрафом в 790 млн рублей и снижением цен на 15 % // NEWSru.com, 20 августа 2008 This caused an additional weakness in the stock price.
In the wake of these events, Mechel announced on August 8 that a preferred share issue, previously planned for placement on August 11, was to be postponed indefinitely. This essentially closed the door to equity finance for Mechel, restricting its financing options to debt.
Vladimir Putin expressed regret over his own comments at a steel industry meeting in Chelyabinsk on July 26, 2010:
In 2012, at the time when the Russian environmental watchdog Rosprirodnadzor filed claims against Mechel subsidiaries, a minority shareholder in Tomusinsky Open Pit Mine OAO (which is part of Southern Kuzbass) the Swiss Bank Julius Baer and Co. Ltd. accused Tomusinsky of issuing stock at a lower price in violation of the law and shareholders' rights. Снова нужен доктор? In 2013, Saven, which held a 22.95% equity stake in Tomusinsky Open Pit Mine OAO, filed nine suits with an arbitration court claiming more than RUB 6 billion from Tomusinsky and several other subsidiaries of Mechel: Yakutugol, Mechel Mining, Mechel Service, Mechel Trans, and Mechel Energo. Saven accused the defendants of diverting profits under the guise of low-interest loans to companies affiliated with Mechel on conditions clearly detrimental to themselves: at interest rates ‘‘below’’ the Russian Central Bank's refinancing rate, i.e. well below the market interest rate, and without any collateral. Argasera also filed a suit in 2013 against Mechel subsidiary Urals Stampings Plant OAO. Courts have invariably ruled for the plaintiffs in these suits.Gazeta.ru, 20.11.2013Коммерсант. Новосибирск., 10.07.2013Znak.com, 25.10.2013
Industry experts are unanimous that the company's trouble arise from inefficient acquisitions and highly risky financing policy, which has practically brought Mechel to the brink of bankruptcy. The company has been forced to engage in tough negotiations with both Russian and international creditor banks.«Мечел» согласовывает с банкирами новые ковенанты. Ведомости, 19.11.2013Компания недели: «Мечел». Ведомости, 21.11.2013Форбс, 29.11.2013Ведомости, 2.12.1013Форбс, 1.01.2014Компания, 23.2013
Mechel announced in late November 2013 that it had negotiated an arrangement with creditor banks to restructure debt, extend repayment terms, and be released from debt covenants for a “covenant holiday.” «Мечел» объявил о договоренности с кредиторами o ковенантных каникулах
Some experts believe that the company is no longer capable of servicing its debt, including coupon payments on its corporate bonds. However, market analysts see Mechel's bankruptcy as unlikely, as it would be against the creditors' best interests. Sberbank, VTB, and Gazprombank are Mechel's main creditors, accounting for as much as 60-65% of the group's debt; bonds account for an additional 20-25%. Проблемы есть, но банкротить «Мечел» невыгодно. Эксперты о падении акций The situation is complicated by the fact that Mechel is in need of dramatic upgrades to its production facilities.
Some observers have noted difficult relationships between Mechel and several local governments of the home regions of Mechel's plants and facilities, pointing out specifically Governor of the Chelyabinsk Region Mikhail Yurevich. Кризис «Мечела» связали с Михаилом Юревичем
Mechel intends to dispose some of its non-core assets in 2014, as well as a minority stake in Elga coal mine, one of Russia's largest. Гендиректором «Мечела» назначен вице-президент компании Олег Коржов
By August 2017, 75% of the company's debts had been restructured.
On the 6th of September 2021, Gazprombank left Mechel capital with 9,35% of equity shares.
Mechel's 2013 operating results reflected a substantial decline in output of the group's core products. More specifically, raw iron output declined by 10%, and steel production dropped 29% year-over-year. Mechel CEO Oleg Korzhov explained this decline by the divestiture of several loss-making steel assets in 2013. Coal output declined by 1% compared to 2012.
Conflicts with minority shareholders
Mechel has had numerous conflicts with minority shareholders practically from the time of its incorporation; minority shareholders have accused Mechel of disregarding their rights.
Vostok Nafta, Prosperity Capital, Metage Capital and H&Q Fonder accused Mechel in 2002—2004 of unfairly reducing the buyout stock price during consolidation of Mechel's subsidiary Southern Kuzbass assets. «Мечел» атакуют с тыла Против «Мечела» восстала «семья» The Federal Service for Financial Markets confirmed that Mechel had in fact violated minority shareholders' rights by withholding essential information from them. Eventually, Mechel was forced to buy out the minority shareholders at the market price.Российская газета, 23.07.2013
Late 2013 problems
Mechel stock unexpectedly dropped sharply towards the end of 2013. The stock dropped 41.35% on November 13, 2013, losing another 18% of their value the following day. Mechel's market capitalization decreased from US$ 24 billion in May 2008 to US$ 830 million in late 2013, while the group's debt had mounted to US$ 9.5 billion. Доктор не пришел: почему обвалился «Мечел» The company started delaying wage payments and contractual payments to suppliers.Ведомости, 20.12.2013 «Мечел» задерживает зарплату сотрудникам «Мечел» оптимизирует часть управленцев в Челябинск
Shareholders and management
Mechel Chairman Igor Zyuzin holds 67.42% of common stock in Mechel OAO (via Calridge Ltd, Bellasis Ltd, Cyberwood Ltd, Actiondeal Ltd, Armolink Ltd, and MetHol LLC). Форма 13D // Комиссия по ценным бумагам и биржам США, 22 июля 2013 Approximately 30% of common stock and 20% of preferred stock in Mechel is traded as ADS on the New York Stock Exchange (with the ticker MTL). The company's shares are also traded on the Moscow Exchange (ticker MTLR). Юлия Федоринова, Максим Товкайло, Филипп Стеркин. Добрый доктор для Зюзина // Ведомости, № 165 (2435), 3 сентября 2009 As of 30 May 2008 the company had a market capitalization of $24 billion. Ксения Рыбак, Филипп Стеркин. «Мечел» платит // Ведомости, № 124 (1898), 09 июля 2007 Ксения Рыбак, Евгения Николаева. «Дочки» на выданье // Ведомости, № 35 (2057), 27 февраля 2008
Management
Operations
Mechel is a steel, metals and mining company. The Mechel Group comprises producers of coking coal, steam coal, iron ore in concentrate, steel, rolled steel, ferroalloys, high value added products, heat and electric power. Mechel sells its output in the Russian and international markets.
Constituent companies of Mechel
Key investment projects
Operating results
In 2012, Mechel produced 11.5 million metric tons of coking coal in concentrate (compared to 12.5 million tons in 2011 and 11.5 million tons in 2010), 5.9 million tons of steam coal (versus 6.4 million tons in 2011 and 8.1 million tons in 2010), 3.5 million tons of coke (compared to 3.4 million tons in 2011 and 3.9 million tons in 2010). «Мечел в 2012 году увеличил выплавку стали на 7% до 6,5 млн тонн" // Металлоснабжение и сбыт, 1 февраля 2013 The group's steel division produced 4.1 million tons of raw iron in 2012 (compared to 3.7 million tons in 2011 and 4.2 million tons in 2010), 6.5 million tons of steel (compared to 6.1 million tons in 2011 and 6.1 million tons in 2010), 4.8 million tons of rolled steel (versus 4.5 million tons in both 2011 and 2010). Mechel increased its 2012 electric power output by 9% year-over-year to 4,272.6 million GWh.
Sports sponsorship
Mechel has sponsored through the years ice hockey clubs HC Izhstal based in Izhevsk (Udmurtia) and HC Mechel based in Chelyabinsk, which are playing in the Russian Major League.
External links
Categories: Companies Listed On The New York Stock Exchange, Steel Companies Of Russia, Mining Companies Of Russia, Coal Companies Of Russia, Companies Based In Moscow, Non-renewable Resource Companies Established In 2003, Companies Listed On The Moscow Exchange, Companies In The Moex, Russian Companies Established In 2003, Mining Companies Established In The 21st Century
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