Russian mining company Mechel OAO (MTL) announced the launch of the new converter # 2 in Chelyabinsk Metallurgical Plant's oxygen-converter shop.
Replacement of the converter #2 is the first stage in the complex reconstruction program for Chelyabinsk Metallurgical Plant's oxygen converter shop and is expected to be completed by 2013. The program includes full replacement of the shop's three converters, dedusting tracts and their infrastructure equipment.
The converter was produced by Austria-based Siemens VAI, with the cooler, the dedusting system and the stack module manufactured by the Ukrainian based technological and scientific center Energostal.
After the completion of the program, the shop's steel annual output would go up by 950,000 tons to a total of 4,550,000 tons at a total cost of $173.8 million.
The new converter #2's launch would enable the company to increase cast weight from 140 tons to 152 tons and reduced the time required for cast treatment.
Reconstruction of the converter # 2 cost a total of RUB 1.289 billion ($44.1 million).
The oxygen-converter shop comprises of three converters and two high capacity concasters. The plant's complex technical re-equipment program also includes construction of a ladle furnace, a vacuum degasser and the concaster #5, which will produce billets for Chelyabinsk Metallurgical Plant's major investment project.
Mechel is a leading domestic steel and coal producer with a strong position in key businesses, including production of specialty steel and alloys. The company has the largest coal reserve base in Russia. It is focusing on growth and cost-cutting measures.
Mechel has also entered into various agreements to supply its rail products to large Russian metal mining companies. We are positive on the company’s favorable business profile with a high degree of backward integration and low-cost structure. Mechel’s key assets are located close to the major steel consuming markets.
In addition, the company owns and controls essential infrastructure, including ports, rolling stock and power plants, which provide access to export markets. However, Mechel’s large capital-spending program, high debt and substantial interest burden are matters of concern.
Currently, Mechel has short-term (1 to 3 months) Zacks #3 Rank (Hold) and a long-term (6 months) Neutral recommendation.
Mechel faces stiff competition from Arcelor Mittal (MT) and Norilsk Nickel Mining and Metallurgical Co.
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