Quarterly Production Reshuffle

Mechel, one of Russia’s largest mining and metallurgical companies, has announced a 17% decline in coal production for the first quarter of 2025, reaching 2.13 million metric tons. This strategic cutback reflects the company's response to falling global demand and sustained downward pressure on coking coal prices. The announcement was made via a corporate statement released this week.

The output reduction aligns with Mechel's broader effort to recalibrate its production strategy. The company cited an increasingly challenging international market shaped by lower steelmaking activity and extended sanctions on Russian exports.

Steel & Pig Iron Production on the Rise

While coal output fell, Mechel reported significant growth in key downstream sectors. Steel production rose by 14% year-on-year, reaching 863,000 metric tons. Pig iron output also saw a 10% increase, totaling 769,000 metric tons for the quarter.

These figures suggest a pivot in Mechel’s operations from raw material extraction to higher-value manufacturing activities. The company appears to be leveraging stable domestic demand to balance reduced international opportunities, a trend seen across other Russian heavy industries navigating sanctions-induced market fragmentation.

Evolving Coal Sales Dynamics

Sales of coking coal concentrate dropped by 7% to 1.06 million metric tons compared to Q1 2024. In contrast, thermal coal sales rose by 4% to 903,000 metric tons, indicating a shift in product focus as energy utilities remain steady consumers of thermal-grade coal.

Anthracite sales saw a modest rise of 1%, reaching 260,000 metric tons, while coke sales increased by 7% to 482,000 metric tons. These figures underline the mixed dynamics within Mechel’s coal portfolio, where certain segments benefit from localized industrial resilience even as export opportunities diminish.

Flat-Rolled & Long-Rolled Products Decline

Sales of flat-rolled steel products experienced a sharp contraction, falling 57% year-over-year to just 38,000 metric tons. Long-rolled product sales also dipped by 8%, settling at 538,000 metric tons. These declines reflect weaker construction and manufacturing activity, both domestically and abroad.

The fall in flat-rolled products, which are typically used in automotive, appliance, and infrastructure sectors, suggests ongoing challenges in high-tech and export-driven industries. Long-rolled products, commonly used in rebar and structural steel applications, are slightly more insulated due to state-backed infrastructure projects within Russia.

Strategic Pivot to Domestic Clients

Mechel’s CEO, Oleg Korzhov, noted that the company has “optimized its production plans in response to a cooling global demand for coking coal, which has exerted significant pressure on domestic market prices, driving them toward multi-year lows.” The firm is increasingly focused on strengthening its presence in the Russian market through partnerships with both existing and new clients.

This strategic shift comes amid continuing sanctions from Western countries, which have limited access to traditional export markets for Russian commodities. Mechel’s emphasis on domestic cooperation signals a broader pivot across Russian industrial sectors toward self-reliance and regional integration.

Pressures from Global Oversupply

Global coking coal prices have been trending downward since mid-2024 due to slowing steel production in China, surplus inventories in India, and increased output from major exporters such as Australia and Indonesia. This oversupply has driven benchmark prices toward multi-year lows, eroding profit margins for producers like Mechel.

The pricing pressure has also impacted investment flows into coal-dependent industries, with energy transition policies and green finance movements accelerating the push away from fossil-fuel-based production models.

Key Takeaways

• Mechel cut Q1 2025 coal production by 17% to 2.13 million metric tons due to weak global demand.

• Steel and pig iron outputs increased by 14% and 10%, respectively, reflecting a strategic pivot.

• Sales of flat-rolled products dropped 57%, while thermal coal and coke sales saw moderate growth.