Though all major Russian steel producers have borrowed heavily in last year’s booming market to the tune of more than $30 billion, Mechel’s debt is the largest: $5.4 billion as of 31 December 2008.

In the ‘risk factors’ section of the 2008 20-F filing, the company has stated that it expects to refinance $3.5 billion in short-term debt. Last month, Mechel re-negotiated terms of a $1.5 billion bridge loan it had taken to acquire Kazakh chrome maker Oriel Resources. It will restructure $1 billion and repay the rest with a Gazprombank loan.

The company, which is controlled by billionaire Igor Zyuzin, may also refinance a $2 billion loan taken to acquire the Yakutugol coal mine in 2007.

Among its lenders, only Germany’s WestLB has forced Mechel to stick to repayment terms. WestLB forced Mechel to make an early repayment of $84.8 million because of covenant violations by the latter.

Mechel has also restarted issue of 45 billion roubles ($1.43 billion) in bonds that it had suspended in July.

Estar’s Zlatoust plant has begun production after being idle for many months. The plant owners’ decision to suspend production is now being examined by the prosecutor’s office to see if it was lawful. State Duma authorities had to intervene to get workers’ their wage arrears.

But restarting operations does not in any way mean the troubles of Zlatoust Metallurgical Works (ZMZ) are over. It is currently operating at just 20 per cent of its capacity of over 50,000 tons and it has to urgently focus on getting new orders.

Mechel’s Chelyabinsk plant has partnered with ZMZ, the regional government said. Financial details of the alliance were not made clear but industry analysts say that Mechel would expect government support for its own long-term projects in return for this strategic partnersip.

Russia is the world’s fourth largest producer of steel, yet its steel makers are now struggling to survive because of a sharp fall in demand from key sectors such as construction and automobile production.