Mechel Volatility Sinks as Commodities Rebound: Russia Overnight

OAO Mechel (MTL), Russia’s biggest producer of steelmaking coal, is posting the smallest price swings in 15 months on prospects higher prices for the metal will boost earnings.

American depositary receipts of Mechel (MTLR) gained 2.3 percent to $6.76 in New York yesterday, as its 100-day volatility retreated to 49.45, the lowest since September 2011, data compiled by Bloomberg show. Moscow-based Mechel was the biggest gainer on the Bloomberg Russia-US Equity Index (RUS14BN) of the most- traded Russian shares in New York, sending the gauge to its first advance in three days. RTS stock-index futures slipped 0.2 percent to 152,550.

The Standard & Poor’s GSCI gauge of 24 commodities rallied the most in a month and oil climbed to the highest level since October yesterday as President Barack Obama returns to Washington to resume talks aimed at averting spending cuts and tax gains that threaten the world’s largest economy. Mechel is poised for the first decline in revenue growth since 2009 this year as a drop in commodity prices sent shares 20 percent lower, making it the third-worst performer on the Russia-US gauge.

“Mechel was beaten more than others and therefore has a bigger potential for growth,” Vladimir Tikhomirov, the chief economist at Otkritie Financial Corp., said by phone from Moscow yesterday. “The stock is very sensitive to commodity prices as well as global economic environment news, and benefits from both of the factors.”

The Bloomberg Russia-US gauge added 0.2 percent to 97.18 in New York yesterday. The Market Vectors Russia ETF (RSX), the largest dedicated Russian exchange-traded fund, increased 0.6 percent to $28.92, gaining by the most since Dec. 20. The RTS Volatility Index, which measures expected swings in the stock futures, rose 2.4 percent to 23.33 points.

Premium to Moscow

Mechel settled at a 1.4 percent premium to the company’s Moscow-listed shares yesterday, the widest gap since Dec. 14. Shares gained 0.7 percent to 203.6 rubles, or $6.66, in Moscow yesterday.

The company will probably report that 2012 sales fell 6.5 percent to $11.7 billion this year, according to the mean estimate of 22 analysts surveyed by Bloomberg. The company is expected to return to profit in 2013 after an estimated $237 million loss in 2012, according to the survey.

Mechel shares have been sinking as the company restructures some of the $8.8 billion of debt it owed at the end of the first half that made it the most indebted Russian mining company after aluminum producer United Co. Rusal.

Oil Increases

Oil, which together with natural gas accounted for half of the nation’s federal budget revenue in 2011, advanced to a two- month high in New York yesterday, climbing 2.7 percent to $90.98 a barrel on the New York Mercantile Exchange. Prices are down 7.9 percent this year. Brent for January settlement on the London-based ICE Futures Europe exchange rose 2.1 percent to $111.07 a barrel. Urals crude, Russia’s chief export oil blend, increased 2.1 percent to $110.98.

OAO Surgutneftegas (SGTPY), Russia’s fourth-largest oil producer, climbed the most in two weeks, advancing 1.7 percent to $6.56. The Moscow preferred shares added 0.7 percent to 20.34 rubles, or 66.6 U.S. cents. One ADR equals to 10 shares.

VimpelCom Ltd. (VIP), the world’s sixth-biggest mobile phone company by subscribers, rallied 1.7 percent to $10.73 yesterday after four days of declines and was the second-biggest gainer on the Russia-US Equity index. The stock is up 13 percent this year.

MTS’s Investments

OAO Mobile TeleSystems (MBT), the nation’s chief mobile operator, declined 0.4 percent to $18.14 in U.S. trading, the lowest level since Dec. 7. The ADR is up 24 percent this year. The company’s Moscow-listed stock added 0.5 percent to 246.35 rubles, or $8.06.

The company’s investments for 2013 will exceed $3 billion as it expands its network, billionaire Vladimir Evtushenkov, whose AFK Sistema owns 50.8 percent stake in MTS, said in an interview with Kommersant newspaper published yesterday. MTS’s capital expenditure is expected at $2.6 billion in 2012, compared with $2.2 billion in 2011, according to OAO Nomos Bank.

Ruble futures showed the currency little changed at 30.925 per dollar yesterday after gaining 0.7 percent to 30.5190.

To contact the reporter on this story: Halia Pavliva in New York at hpavliva@bloomberg.net

To contact the editor responsible for this story: Emma O’Brien at eobrien6@bloomberg.net

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