London — Russian miner Mechel said Wednesday coking coal sales to Asia grew in the second quarter on the back of newly signed long-term supply contracts.
While overall coking coal sales recovered from a softer Q1, Mechel's overall coking coal sales in Q2 fell 8.1% year on year to 1.9 million mt.
PCI sales to Northeast Asia rose slightly, while coal mining volumes slipped, hit by equipment constraints.
Mechel had been recovering after a shortage of rail wagons and infrastructure constraints in far east Russia, along with high stocks at ports, hit met coal sales in Q1.
Mechel mined 4.73 million mt run-of-mine coal in Q2, down 5% from Q1, and compared to 5.257 million mt in Q2 2017.
Mechel said the decline in mining volume followed a re-orientation to focus more on coking coals, and reducing thermal coal output.
Mechel, which operates coke and steel plants, said overall coking coal sales increased 19% in Q2 from the 1.6 million mt shipped in Q1.
External coking coal sales in Q2 rose 32% to 1.174 million from Q1, while external sales hit 1.256 million mt.
Mechel said coking coal exports to Asia Pacific went up by 60% in Q2 from Q1, with China becoming its chief importer.
"Supplies to our Japanese customers increased as well. Our supplies to China demonstrated positive dynamics that were further supported by the boost to coking coal concentrate production at Elga Coal Complex," CEO Oleg Korzhov said in a statement.
Japanese steel group JFE Holdings extended a contract with Mechel to buy hard coking coal and PCI, while China's Baosteel Resources, a unit of major steelmaker China Baowu Group, signed new terms extending HCC sales from the Yakutugol mine, Mechel announced in the past two months.
While coal mining rates have slowed, hit by equipment constraints as maintenance was undertaken and geology hit yields, the company said mining operations were now on a better footing.
"Renewal of mining equipment at Mechel's coal facilities enabled us to attain stable mining levels and we plan to maintain this work pace until this year's end," Korzhov said.
The Southern Kuzbass Coal Company and Elgaugol mines performed better in Q2, while mining at Yakutugol was hit by higher stripping rates, Mechel said.
PCI coal sales in Q2 rose to 367,000 mt, from 341,000 mt in Q2 2017, and up from 313,000 mt in Q1. All PCI was sold externally in each period.
"The 17% increase in PCI sales in the Q2 is due to additional sales of stockpiles accumulated in Q1 due to infrastructure limitations at Far Eastern ports," Korzhov said.
"We ship practically the entire PCI volume to our Asian partners in South Korea, Japan and China."
External coke sales fell to 138,000 mt in Q2, from 178,000 mt in Q2 2017 and 168,000 mt in Q1 2018.
Mechel said it was "actively expanding into new markets in Eastern Europe" for coke, and the domestic Russian coke market was volatile, leading to decline in sales.
External anthracite coal sales dropped to 274,000 mt in Q2, from 309,000 mt in Q2 2017 and 267,000 mt in Q1 2018.
Mechel has been seeking to increase anthracite sales to customers in Asia and the Commonwealth of Independent States area as better margins were on offer in these markets.
Mechel said its main anthracite customers were in Europe.
