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Mechel sums up production and sales results for 2020

Press Releases
March 11, 2021

Mechel sums up production and sales results for 2020

Moscow, Russia - March 11, 2021 - Mechel PAO (MOEX: MTLR, NYSE: MTL ), a leading Russian mining and metals company, announces operating results for 2020.

CEO Oleg Korzhov comments on the results of work in 2020:

Against the backdrop of the coronavirus pandemic infections The past year can be called extremely heterogeneous and, perhaps, the most difficult for industrialists since the 2008 global financial crisis. Mechel Group survived the current situation rather well: we did not stop a single enterprise, retained our teams, did not significantly revise production plans.

Economic activity in most countries of the Asia-Pacific region was observed starting from the 3rd quarter. Today, customers show a strong interest in our coal products, which is due to stable demand and the progressive growth of steel production in the region. By the end of 2020, spot quotation for coking coal concentrate reached $ 202 per tonne on a China CFR basis. Within two months, from October to early December last year, the price increased by 62% and continued to rise. The upward dynamics of the spot market also affects the formation of quarterly contract prices.

Coal production by Mechel enterprises in 2020 amounted to about 16 million tons, which is 10% higher than a year earlier. This is due to an increase in stripping work and the implementation of a program to modernize mining transport equipment.

A slight decrease in sales of coking coal concentrate (CCP) by 2% was caused by a decrease in shipments to Japan due to adjustments to annual plans for steel production by the country's largest metallurgists. We promptly redistributed the freed up volumes mainly to South Korea.

The growth in pulverized coal fuel (PCI coal) production at Yuzhny Kuzbass had a positive impact on sales: in 2020 this figure grew by 31%, primarily due to sales of products in the most marginal Asian markets.

As for anthracites, the third-party sales (+ 92%) were affected by an increase in production at the Krasnogorsky open-pit mine. In the reporting period, we increased deliveries to European customers by 54% and almost tripled shipments to Asia, primarily to the premium markets of South Korea and Japan. This type of product is in high demand today, in connection with which we plan to increase production at the Kuzbass industrial site this year.

In 2020, steam coal sales increased by 26% due to production growth in Yakutugol and involvement warehouse stocks. A significant amount was sold to Vietnam (+ 76% by 2019), as well as under a contract with the Far Eastern Generating Company.

Sales of iron ore concentrate (iron ore concentrate) decreased by 16% on an annualized basis due to processing and beneficiation of a large volume of ore with a lower iron content.

Sales of coke products to third parties in the reporting period generally remained at the level of the previous year. In the 4th quarter, we increased our sales to Asia and the CIS countries two and a half times.

In the second half of 2020, after most of the quarantine restrictions were lifted, the demand for metal products from the construction industry and factories of metal structures. Demand revived in the machine-building sector as well. Against this background, there was a steady rise in prices for the construction assortment both in the domestic market and in export directions. Throughout the year, we have focused on delivering products with higher margins. The overall increase in sales of rail products by 3% in 2020 was achieved due to the increase in export deliveries, while the decrease by 52% in the 4th quarter compared to the 3rd quarter was due to a decrease in purchases by Russian Railways. Sales of beams, channels and other types of shaped sections produced at the ChMK rail and structural mill grew by 14% in the reporting period. This became possible not only due to the positive market conditions, but also due to the formation of additional sub-sorting warehouses in the structure of the Mechel-Service distribution network, which contributed to a more efficient response to consumer requests. Largely due to the proactive work of Mechel-Service, we have maintained and improved sales figures in comparison with the pre-coronavirus year: long products - by 1%, flat products - by 2%.

Decrease in sales of ferrosilicon by 6 % in annual terms was a consequence of the halt for the modernization of the ore-thermal furnace No. 3 of the Bratsk Ferroalloy Plant, as well as the generally negative dynamics of world prices for this product.

The indicator of metalware sales practically did not change year-on-year (-1%) ... A slight decrease was recorded for reinforced concrete wires and ropes, due to

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