MOSCOW, June 30. /TASS/. Mechel expects the situation with coal prices to improve in the second half of the year due to falling production, Chief Executive Officer Oleg Korzhov said, adding that "prices cannot be lower."

"I believe that prices cannot be lower. The current situation in China in terms of steel production does not yet give reason to talk about an increase in coal demand. The capacity utilization for pig iron and steel has decreased to about 85% there. That said, production volumes are still on the rise in China, and China is introducing import duties, this concerns Russian coal as well," he told reporters, adding that he sees no prospects for the cancellation of duties so far, with about 20% of the world's coal companies being unprofitable against this background.

"Therefore, production volumes are falling in any case, which is also demonstrated by the domestic market, with volumes of both thermal coal and brown coal decreasing, and the volume of coking coal exports to the East also contracting. All this leads to a decrease in coal production volumes. Whereas a decrease in production volumes usually leads to an increase in prices," the chief executive explained.

The key rate and the dollar exchange rate, coupled with other factors, "theoretically should lead to the situation shifting in the opposite direction in the third and fourth quarters," Korzhov noted. "I don't think that prices will go down any further; today they are already at a fairly serious minimum in terms of costs," he concluded.

Mechel brings together producers of coal, iron ore concentrate, steel, rolled products, ferroalloys, high-value-added products, and thermal and electric energy.