Moscow, Russia – October 11, 2006 – Mechel OAO (NYSE: MTL), a leading Russian integrated mining and steel group, today announced results for the first half ended June 30, 2006.

US$ thousand	2Q 2006	1Q 2006	2Q06 vs. 1Q06	2Q 2005	2Q06 vs. 2Q05
Revenue	1,072,998	853,518	25.7%	1,039,763	3.2%
Net operating income	150,480	58,996	155.1%	135,623	11.0%
Net operating margin	14.0%	6.9%	-	13.0%	-
Net income	118,784	62,881	88.9%	74,111	60.3%
EBITDA	210,331	134,411	56.5%	143,086	47.0%
EBITDA margin	19.6%	15,8%	-	13.8%	-

US$ thousand	1H 2006	1H 2005	1H06 vs. 1H05
Revenue	1,926,516	2,079,219	-7.3%
Net operating income	209,475	362,396	-42.2%
Net operating margin	10.9%	17.4%	-
Net income	181,664	243,624	-25.4%
EBITDA	344,741	422,741	-18.5%
EBITDA margin	17.89%	20.33%

⁽¹⁾ EBITDA margin is calculated out of consolidated revenues of the segment, including intersegment sales.

US$ thousand	1H 2006	1H 2005	1H 06 vs. 1H 05
Revenues from externalcustomers	613,477	594,089	3.3%
Intersegment sales	151,627	174,192	-13.0%
Operating income	96,416	310,851	-69.0%
Net income	77,981	234,125	-66.7%
EBITDA	146,977	319,966	-54.1%
EBITDA margin (1)	19.2%	41.6%

Mining Segment Output

Product	2Q 2006, thousand tonnes	1Q 2006, thousand tonnes	2Q 2006 vs. 1Q 2006
Coal	4,083	4,011	1.8%
Coking coal	2,272	2,225	2.1%
Steam coal	1,811	1,786	1.4%
Iron ore concentrate	1,264	1,127	12.2%
Nickel	3.57	3.4	5.0%

Product	2Q 2006, thousand tonnes	1Q 2006, thousand tonnes	2Q 2006 vs. 1Q 2006
Coal	4,083	4,011	1.8%
Coking coal	2,272	2,225	2.1%
Steam coal	1,811	1,786	1.4%
Iron ore concentrate	1,264	1,127	12.2%
Nickel	3.57	3.4	5.0%

Mining segment revenue from external customers for the first half of 2006 totaled $613 million, or 31.8% of consolidated net revenue, an increase of 3.2% over segment revenue from external customers of $594 million, or 28.6%, of consolidated net revenue, in the first half of 2005.

Operating income in the mining segment in the first half of 2006 totaled $96 million, or 12.6% of segment revenues, compared to total operating income of $311 million, or 41.6% of segment revenues a year ago. EBITDA in the mining segment in the first half of 2006 was $147 million. The EBITDA margin of the mining segment was 19.2%. The key driver of such a significant drop in the EBITDA margin of the segment was a decrease in selling prices of major products of the segment: the decrease in prices of coking coal by 31% was the reason for decrease in EBITDA by $95 million, or 12.3 basis points; the decrease in prices of iron ore by 30% was the reason for decrease in EBITDA by $36 million, or 4.7 basis points; decrease in prices of steam coal by 22% was the reason for decrease in EBITDA by $24 million, or 3.1 basis points. Also, in the first half of 2006 the segment was negatively impacted by a one-time extraction tax accrual at our Korshunov Mining Plant, which amounted to approximately $20 million and was caused by different interpretation of tax code by us and tax authorities. This is the reason for the EBITDA decline by 2.6% basis points.

Average realized prices in the second quarter of 2006 rose 10% for iron ore concentrate, 41% for nickel, while prices for coking and steam coal decreased by 18% and 4%, respectively, from levels of the first quarter 2006 (all prices are quoted on an FCA basis).

Mr. Ivanushkin commented on the results of the mining segment: “In the second quarter, we saw a rise in prices and sales volumes for our mining products, as compared to the first quarter of this year, though the price increase cannot be compared to those we witnessed in the first half of 2005. The segment also demonstrated considerable output growth in the first half of 2006 compared to the first half of 2005, while we kept the segment’s cost base stable. Mining continues to be a growth driver for our business, and in line with this strategy, we recently commissioned the Olzherasskaya coal mine, which will allow us to increase coal output by 1.8 million tonnes in 2007 and by 3 million tonnes annually starting in 2010. The recent acquisition of Moscow Coke and Gas Plant will further allow us to expand our sales markets, as the plant will use between 1.5 – 2 million tonnes of our coking coal. We believe our iron ore production is on track to reach record production levels this year. In addition, nickel prices were unexpectedly high, and we were able to increase production in response to growing demand. Going into the second half of 2006, we continue to witness a positive market environment for our main products. We intend to further capitalize on this positive trend as we are planning to increase sales volumes, control costs, and improve logistics to enhance the segment’s performance in the future.”

Steel Segment Results

US$ thousand	2Q 2006	1Q 2006	2Q 2006 vs. 1Q 2006
Revenues from external customers	748,978	564,059	32.8%
Intersegment sales	4,543	5,173	-12.2%
Operating income	83,351	29,707	180.6%
Net income	68,265	35,414	92.8%
EBITDA	121,348	76,411	58.8%
EBITDA margin	16.1%	13.4%

(1) EBITDA margin is calculated out of consolidated revenues of the segment, including intersegment sales.

US$ thousand	1H 2006	1H 2005	1H 06 vs. 1H 05
Revenues from external customers	1,313,038	1,485,130	-11.6%
Intersegment sales	9,717	31,221	-68.9%
Operating income	113,058	51,545	119.3%
Net income	103,679	9,499	991.5%
EBITDA	197,758	102,775	92.4%
EBITDA margin	15.1%	6.9%

Steel Segment Output

Product	2Q 2006, thousand tonnes	1Q 2006, thousand tonnes	2Q 2006 vs. 1Q 2006
Coke	552	526	4.9%
Pig iron	908	820	10.7%
Steel	1,498	1,367	9.6%
Rolled products	1,209	1,067	13.3%
Hardware	154	134	14.9%

Product	1H 2006, thousand tonnes	1H 2005, thousand tonnes	1H 2006 vs. 1H 2005
Coke	1,078	1,360	-21.0%
Pig iron	1,728	1,844	-6.0%
Steel	2,865	3,088	-7.0%
Rolled products	2,276	2,423	-6.0%
Hardware	288	296	-3.0%

Revenue from external customers in Mechel’s steel segment in the first half of 2006 decreased by 11.6% as compared to the 2005 first half, from $1.5 billion to $1.3 billion, and represented 68.2% of consolidated net revenue.

In the 2006 first half, the steel segment’s operating income totaled $113 million, or 8.6% of total segment revenues, compared to operating income of $52 million, or 3.5% of total segment revenues a year ago. EBITDA in the steel segment in the first half of 2006 was $198 million. The EBITDA margin of the steel segment was 15.1%.

Average realized prices for rebar grew by 4%, for semi-finished products – by 9% in the 2006 second quarter as opposed to the first quarter of this year.

The new sinter plant in Chelyabinsk was fully commissioned in the third quarter. The savings from previously commissioned lines of the sinter plant were $10.3 million in first half of 2006, expected savings for the full-year 2006 are $38.5 million

Mr. Ivanushkin commented: “We improved our cost controls and usage ratios to capitalize on the market recovery we saw in the second quarter and expect to see further into 2006, while also increasing sales volumes on a number of steel products. Prices in the steel segment improved when compared to the first quarter, contributing to the increase in revenue over first quarter levels. Moreover, we see the continuation of this pricing trend into the second half of 2006, though the price dynamics cannot be compared to the levels we saw in 2005. We expect additional cost-savings from our new concasting machine and coke battery in Chelyabinsk, which will both be put into operation in the fourth quarter. We believe that we are well positioned to sell into the strong Russian steel market, and we anticipate that the efforts we have made to increase profitability and lower costs will further help raise the segment’s margins.”

Recent Highlights

• In September, Mechel announced the commissioning of the Olzherasskaya Mine, a part of the Southern Kuzbass coal company. Commissioning of the Olzherasskaya Mine will allow Southern Kuzbass OAO to increase its coal output by 1.8 million tonnes in 2007. Production in 2006 is expected to be 0.6 million tonnes. The new mine’s annual capacity is 3.0 million tonnes and production is expected to reach this level in 2010. Mechel invested $100 million in the mine’s construction.
• In October, Mechel announced the acquisition of a controlling stake in Moscow Coke and Gas Plant OAO (Moskoks). The acquisition is in line with Mechel’s strategy of further developing its mining segment, expanding the company’s presence in coal and coke-chemical markets and strengthening synergistic effects. Moscow Coke and Gas Plant OAO, located in the Moscow region, has economically advantageous geographical position and stable sales markets. The plant’s annual production capacity is about 1.5 million tonnes of coke. Products are sold domestically and shipped abroad, in particular to Ukraine and European Union countries.

Mr. Ivanushkin commented: “The first half of 2006 demonstrated Mechel’s ability to carry on with the cost saving programs to improve performance of both segments as compared to the beginning of the year. Despite the difficult market conditions we faced in the first quarter of the year, we continued to strengthen the mining segment, while improving the performance of the steel segment.  We also managed to maintain cost levels, resulting in a significant increase in income and fulfilling our plans and expectations. Our presence as a self-sufficient, integrated producer combined with our geographic diversity, enables us to adapt to changing market conditions.  We believe this will result in significant value for our business and shareholders in the future.”

FinancialPosition

In the first half of 2006, CAPEX totaled $253.6 million, out of which $156.2 million was invested in the mining segment and $97.4 million in the steel segment.

Mechel spent $3.8 million on acquisitions in the first half of 2006, including $2.1 million for the 100% stake in Metals Recycling OOO, and $1.7 million on the purchase of minority stakes in other subsidiaries of Mechel.

As of June 30, 2006, total debt ^[1] was $453.6 million. Cash and cash equivalents amounted to $331.3 million at the end of the period, and net debt amounted to $122.3 million (net debt is defined as total debt outstanding less cash and cash equivalents).

* One American Depositary Share is equivalent to three diluted shares.

The management of Mechel will host a conference call today at 10 a.m. New York time (3 p.m. London time, 6 p.m. Moscow time) to review Mechel’s financial results and comment on current operations.  The call may be accessed via the Internet at https://www.mechel.com/investors/fresults/index.wbp.

^[1] Total debt is comprised of short-term borrowings and long-term debt