August 27, 2021

Mechel sums up production and sales results for the 2nd quarter of 2021

Moscow, Russia - August 27, 2021 - Mechel PAO (MOEX: MTLR, NYSE : MTL), a leading Russian mining and metals company, announces 2Q and 1H2021 operating results.

CEO Oleg Korzhov comments on Q2 results:

“In the second quarter, prices for our main product - coking coal - on CFR basis China and FOB Australia continued to grow steadily, positive dynamics of export quotations supported the domestic market as well. The main reason is the reduction in the production of coking coal in the PRC during this period. The growth of import quotations of coking coal in China was also influenced by the fact that the supply from Mongolia did not recover due to the worsening epidemiological situation in the country. We believe that demand from large metallurgical companies in China will continue to maintain prices for imported coal at a fairly high level throughout the Asian region. The correction is expected no earlier than the fourth quarter.

We view the reporting period as a time of smooth recovery of production indicators. Coal production increased by 12% compared to the previous quarter. We have signed contracts for the supply of about 40 more units of mining transport equipment, which will be delivered to our enterprises in the second half of the year. In the current environment, the company's management decided to reduce steam coal production in the second quarter, giving priority to coking coal amid favorable market conditions. This had a positive impact on the volumes of processing and sales of coking coal concentrate (+ 71% qoq). Sales of products in both the Asia-Pacific region and the Russian market more than doubled.

The sales of pulverized coal (PCI) increased by 27% due to increased shipments to consumers in Japan and South Korea. Sales of anthracite, in general, remained at the level of the previous quarter.

The share of exports in the structure of sales of coal products to third-party consumers in the second quarter was 86%.

Sales of iron ore concentrate (iron ore concentrate) increased by 27% due to an increase in stripping and iron ore mining. This indicator was positively influenced by the commissioning of new mining and transport equipment.

Total sales of coke products increased by 22% quarter-on-quarter, while sales to third parties grew by 53% due to strong demand from Russian and Asian metallurgical companies.

The dynamics of indicators of iron production and steel smelting in the second quarter came to positive values. Taking into account the warehouse stocks prepared a quarter earlier, in anticipation of a seasonal recovery in demand, we ensured a significant increase in sales of almost all types of products of the metallurgical division. Thus, we took full advantage of the favorable market conditions in the second quarter of this year, which allowed the division to achieve record quarterly revenue in more than 10 years.

Total long product sales in the second quarter increased by 22 %. We have increased the capacity utilization of the universal rail and structural mill (URBS) for the sale of high-value-added structural shapes. As a result, sales of URBS shaped rolled products grew by 41% quarter-on-quarter, which was largely due to the implementation of the strategy to expand sales of high-margin products through the Mechel-Service sales network. Valve sales in the second quarter increased by 24%, while sales of these products in export markets, primarily in the CIS countries, more than doubled. The sale of rails to Russian Railways in the reporting period was not carried out due to the absence of an application from the customer. The main volume of rail products in the second quarter was shipped to export destinations.

Sales of flat products increased by 15% qoq due to the expansion of production of these products at Chelyabinsk Metallurgical Plant after the completion of major repairs in the first quarter of 2021.

Sales of ferrosilicon rose by 16% due to increased supplies to Europe.

Sales of metal products increased by 21% due to a surge in demand for ropes and wires caused by the start of the construction season. We have pre-formed additional stocks of hardware products at the warehouse sites of the Mechel-Service network, which allowed us to expand our customer base and geography of supplies.

The sales of forged products by 15% qoq is due to an increase in demand from foreign consumers ... The demand for railway axles on the part of domestic car-building enterprises is also at a fairly high level: an increase in sales of stampings compared to the previous quarter was 42%.

A 13% decrease in electricity generation and 55% in heat energy generation in the second quarter on par

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