Daily analyst comments

Mechel has acknowledged signing contracts with Asian consumers for steam and coking coal deliveries in 2009. In addition to the South Korean and Japanese markets, the company will now cooperate with Chinese consumers. The company has so far supplied the Chinese market only with iron ore products from the Korshunovsky ore mining and processing plant.

The company has contracted to deliver 2 million tons of coking coal from Yakutugol and 2.3 million tons of steam coal from Yuzhny Kuzbass and Yakutugol. The Metal-Courier agency announced that in 1Q 2009, coking coal shipments from Yuzhny Kuzbass plunged by 55.5% to 922,500 tons and coal deliveries from Yakutugol plummeted 95.5% to 100,000 tons. In 2008, Yakutugol shipped roughly 8 million tons of coking coal and Yuzhny Kuzbass supplied 7.1 million tons. Coal sales by Yakutugol sharply dropped in December 2008 to around 82,000 tons, down 88.5% on the average monthly output in the preceding twelve months. By making new contracts, Mechel has primarily secured orders for Yakutugol products.

In our view, the signing of the contracts with the Chinese has been helped by pricing disputes between local companies and Australian raw materials producers. China, on its part, has attempted to reduce its expenses to a minimum and diversify its sources of raw materials.

We believe that the information released will add support to the fundamental value of the company. We currently have no official recommendation on Mechel shares.