Mechel complex
Mecheltrans LLC (transportation subsidiary of Mechel OJSC) has won the open tender held by Russian Railways OJSC for the sale of the Port Temryuk production complex located at Taman coast of the Sea of Azov. Following complete commissioning of the real estate assets of the Port Temryuk production complex, the company’s management plans to achieve its transshipment capacity of approximately 1.5 million tonnes of cargo in 2008 and approximately 1.8 million tonnes beginning from 2009.
One more acquisition
The tender held by Russian Railways in late December 2007. The tender involved the sale of the real estate assets of the Port Temryuk production complex, two land plots of about 150,000 sq. m total area. According to Vladimir Polin, Chief Executive Officer of Mechel Management LLC, said “The acquisition of this property complex will enable us to strengthen our presence in the export shipping markets and provide us with more opportunities to efficiently manage the port’s operations and regulate logistics of our deliveries”.
The acquired property complex is located in immediate proximity to Temryuk-Sotra, which is already owned by Mechel. In September 2007, Mechel acquired 100% of Temryuk-Sotra seaport for $6.1 million. The operations of the both assets are supported by the same railway branch owned by Temryuk-Sotra and this affords the company an opportunity to subsequently join these two infrastructure facilities into a high capacity port transshipment complex.
Up to the present Temryuk-Sotra specialized in transshipment of scrap metal, while now it will specialize mainly in coal transshipment. As the company’s management commented earlier, “the port will focus on coal delivery to Turkey, where construction boom drives the demand for products of metallurgical industry, which in its turn requires coal”. The port’s berth wall is 248 meters long. Besides, a 172-meter long berth wall is under construction. The berths are linked to a railway enabling wagon-vessel transshipment operations. Currently, with the existing depths, the port enables the use of river-sea vessels up to 5,000 tonnage, whose parameters correspond to the capabilities of the Black Sea, Mediterranean, and the mainland waterways in West Europe.
Development prospects
Analysts of information company Financial Bridge estimate the share of unfinished production of the complex at 30-10% as of the moment of the deal. The port’s location is favorable to develop transshipment of coal and metal to a fast-growing market of Turkey being short of raw materials, sub-products and rolled products. However experts forecast that the port designed for small vessels may require additional investments into infrastructure development.
Mechel OJSC does not reveal the value of the transaction, though the analysts of information company Prospect say the opening price of the lot is $45 million. Besides, one of the port’s two berths requires investment into construction completion, which may be valued at $10 million under current prices. Despite successful acquisition experts note poor infrastructure of the port and the necessity of investments into expansion and deepening of the berths.
Mechel is one of the leading Russian mining and metals companies. Mechel unites producers of coal, iron ore, nickel, steel, rolled products, and hardware. Mechel products are marketed domestically and internationally. Machel has three ports – Posiet (Primorski Krai), Kambarka (Udmurtia) and Temryuk-Sotra (Tamn shore of the Sea of Azov) – as well as a transport and an energy company.