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. Last Updated: 07/27/2016

Mechel Makes Play for Coke Market

MTDeineko, center, addressing workers from a truck on Thursday. The sign reads, "Glory to the working people!"��
VIDNOYE, Moscow Region -- Mechel reopened three coke oven batteries at a plant outside Moscow on Thursday in hopes of gaining a larger share of the Russian market for coke, a core component of steel.

The company, one of Russia's largest coal and steel producers, opened the batteries at its Moscow Coke and Gas Plant to grab an advantage over its dozen rivals in the coke market, most of whom had also frozen production because of dropping demand for steel.

"While 12 coke plants around Russia are standing idle, we decided to relaunch the batteries in Vidnoye to conquer a bigger share of the domestic market," Andrei Deineko, chief executive of Mechel's managing company, said at the opening. The unit manages Mechel's metals assets.

He addressed factory workers and reporters from the back of a truck, which was turned into an improvised stage in the plant's yard. The three batteries, or half the plant, had been stopped since November as demand for coke, which is derived from coking coal, plummeted.

Mechel turned the event into a small party for about 30 of the plant's 1,300 workers, bringing huge speakers to the production site and playing songs by Christina Aguilera and Russian pop group Ruki Vverkh.

But the party for Mechel will not last long, said Viktor Kovshevny, head of metals market analytical center Rusmet.

"When the coke market revives, which we expect by September, Mechel's share on it will shrink," Kovshevny said.

Russia's coke production for the first four months of the year dropped by 35 percent year on year, he said.

Deineko refused to give Mechel's current market share, but he said the Vidnoye plant makes one-third of the company's total coke output. The company produces the rest of its coke at a plant in Chelyabinsk.

According to the Rusmet data, Mechel is currently Russia's fifth-largest coke producer, with a market share of around 10.5 percent.

Deineko said the Vidnoye plant would produce 100,000 to 110,000 tons of coke per month, up from the 50,000 tons it had been producing. The total production for the year was expected to total 1 million tons.

"We are negotiating to export part of it, as we see a revival on the foreign markets," Deineko said, declining to elaborate. The contracts will be signed in the next two weeks, he said.

The Vidnoye plant currently sells 70 percent of its production domestically, with the rest going to Turkey and countries in the Commonwealth of Independent States, said Alexander Tolkach, Mechel's head of investor and international relations.

The company said Tuesday that its steel-producing facilities were now working at 94 percent capacity.