Mechel looks to China lifeboat

DEBT-laden Russian steel and coal producer Mechel is looking to increase its coal exports to China as it struggles to stay in business.
Mechel looks to China lifeboat Mechel looks to China lifeboat Mechel looks to China lifeboat Mechel looks to China lifeboat Mechel looks to China lifeboat

Courtesy of Mechel.

Blair Price

Having entered into the Chinese market for the first time, Mechel said it had made deals amounting to 2 million tons of coking coal and 2.3Mt of thermal coal at various grades with Chinese, Japanese and South Korean companies so far this year.

While contract prices were not revealed, Mechel’s shares dived considerably in July last year after Russian Prime Minister Vladimir Putin publicly attacked the producer for avoiding taxes and selling coking coal to affiliated Swiss companies at a quarter of the world price at the time.

In Friday’s announcement, Mechel senior vice-president Vladimir Polin said the Chinese market was very promising.

“I would like to emphasise that entering into new large contracts with Chinese companies allows us to increase the load of our coal mining facilities [and] that is of particular importance in the current challenging business environment,” he said.

In a US Securities and Exchange Commission filing last week, Mechel signalled there was substantial doubt about its ability to continue as a going concern.

The company is currently working with its lenders to restructure considerable debt.

Mechel ended 2008 with debt of $US5.37 billion and, due to breaching loan conditions, had $1.56 billion of long-term debt classified as short-term liabilities.

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