-- Revenues increased 55% to $2.99 billion --
-- Operating income more than tripled to $738.9 million --
-- Net income increased 169% to $489.5 million, $3.53 per ADR or $1.18 per diluted share --

Moscow, Russia – October 3, 2007– Mechel OAO (NYSE: MTL), a leading Russian integrated mining and steel group, today announced results for the first half ended June 30, 2007.   

US$ thousand	1H 2007	1H 2006	Change Y-on-Y
Revenue	2,986,862	1,926,516	55.0%
Net operating income	738,986	209,475	252.8%
Net operating margin	24.7%	10.9%	-
Net income	489,456	181,664	169.4%
EBITDA(1)	813,681	344,741	136.0%
EBITDA margin	27.2%	17.9%	-

 ⁽¹⁾See Attachment A.

Igor Zyuzin, Mechel’s Chief Executive Officer, commented: “During the first half of 2007, Mechel continued to move forward with its plans for scaling up production volumes and increasing profitability.  In addition, the Company expanded its existing production capacity and acquired new assets that complement Mechel’s current operations. The Company’s operational progress, coupled with the ongoing favorable market conditions, enabled Mechel to achieve record financial results for the first half of 2007, tripling its operating income when compared to the same period last year.”

Consolidated Results

Net revenue in the first half of 2007 rose 55.0% to $2.99 billion, from $1.93 billion in the first half of 2006, reflecting increased production volumes and strong selling prices across the Company’s primary product categories. Operating income rose by 252.8% to $738.9 million, or 24.7% of net revenue, versus operating income of $209.5 million, or 10.9% of net revenue, in the first half of 2006.

For the first half of 2007, Mechel reported consolidated net income of $489.5 million, or $3.53 per ADR ($1.18 per diluted share).

Consolidated EBITDA rose by 136.0% to $813.7 million in the first half of 2007 from $344.7 million a year ago. Please see the attached tables for a reconciliation of consolidated EBITDA to net income.

Mining Segment Results

US $ thousand	1H 2007	1H 2006	Change Y-on-Y
Revenues from external customers	897,766	613,478	46.3%
Operating income	419,312	96,417	334.9%
Net income	263,078	77,981	237.4%
EBITDA	449,699	146,977	206.0%
EBITDA margin(1)	36.3%	19.2%	-

⁽¹⁾EBITDA margin calculation is based on the total revenues of the segment including intersegment sales.

Mining Segment Output

Product	1H 2007, thousand tonnes	1H 2007 vs. 1H 2006
Coal	8,870	10%
Coking coal	4,223	(6)%
Steam coal	4,647	29%
Iron ore concentrate	2,376	(1)%
Nickel	8.4	20%

Mining segment revenue from external customers for the first half of 2007 totaled $897.8 million, or 30.1%, of consolidated net revenue, an increase of 46.3% compared with segment revenue from external customers of $613.5 million, or 31.8%, of consolidated net revenue, in the first half of 2006. The increase in revenues reflects increased total output, strong market positions, and a favorable pricing environment.

Operating income for the first half of 2007 in the mining segment rose 334.9% to $419.3 million, or 33.9% of total segment revenue, compared to operating income of $96.4 million, or 12.6% of total segment revenues a year ago. This increase in profitability reflects Mechel’s enhanced cost control efforts, as well as the overall efficiency of the Company’s mining operations as revenue levels increased. EBITDA in the mining segment for the first half of 2007 was $449.7 million, 206.0% higher than segment EBITDA of $146.9 million in the first half of 2006. The EBITDA margin for the mining segment increased to 36.3% compared to 19.2% in the same period of last year.

Mr. Zyuzin commented on the results of the mining segment: “Mechel’s efforts to effectively manage costs and increase mining segment output yielded positive operating performance for the first half of 2007.  Coal output during the period increased by 10% year-on-year, driven by new production from the Olzherasskaya-New Mine, which was commissioned at the end of last year, and ongoing upgrades of mining equipment as part of the Company’s technical equipment modernization program.  In addition, we continued to optimize new technology processes in the segment, which enabled us to increase nickel production by 20%. Net income in the mining segment increased by 237.4% compared with first half results a year ago, due to the positive trends that we continue to see in key customer markets.  Supported by the current favorable pricing environment and the outlook for the coal and iron ore markets, we intend to maintain our pace of production output in line with our annual plan, and anticipate continued strong operating performance from the mining segment through the remainder of this year".

Steel Segment Results

US $ thousand	1H 2007	1H 2006	Change Y-on-Y
Revenues from external customers	2,089,096	1,313,038	59.1%
Operating income(2)	348,393	113,567	206.8%
Net income(2)	255,097	104,188	144.8%
EBITDA(2)	392,702	198,267	98.1%
EBITDA margin(1)	18.6%	15.0%	-

⁽¹⁾EBITDA margin calculation is based on the total revenues of the segment including intersegment sales.
⁽²⁾Data for the first half of 2006 has been recalculated in accordance with a new segment calculation method. According to the previous methodology, the results of the steel segment were calculated after the elimination of the unrealized profit of the mining segment in the stock of the trading and producing entities of the steel segment - the approach did not provide the full picture of the steel segment performance on a stand-alone basis. According to the new methodology, the steel segment results are given before this elimination, which will be shown in the segment accounting separately.

Steel Segment Output

Product	1H 2007, thousand tonnes	1H 2007 vs. 1H 2006
Coke	1,935	80%
Pig iron	1,865	8%
Steel	2,987	4%
Rolled products	2,527	11%
Hardware	336	17%

Revenue from external customers in Mechel’s steel segment increased 59.1% in the first half of 2007 to $2.1 billion, or 69.9% of consolidated net revenue, compared to revenue from external customers of $1.3 billion, or 68.2% of consolidated net revenue reported for the first half of 2006. 

In the first half of 2007, the steel segment generated operating income of $348.4 million, or 16.5% of total segment revenue, an increase of 206.8% over operating income of $113.6 million, or 8.6% of total segment revenue in the first half of 2006.  EBITDA in the steel segment for the first half of 2007 increased 98.1% to $392.7 million, compared with $198.3 reported in the first half of 2006.  EBITDA margin for the steel segment rose to 18.6% in the first half of 2007, compared with 15.0% reported in the same period of last year.

Mr. Zyuzin commented, “The steel segment continued to benefit from our program to reduce production costs and increase operating efficiencies, as well as a strong pricing environment for our products.  These factors enabled us to more than double the segment’s net income in the first half of 2007, compared with the same period last year.  In line with our objective to improve our product sales mix, we increased output of high value added products, which also added to the segment’s profitability during the period. Commodity coke output increased by 80%, which was supported by Mechel’s acquisition of Moscow Coke and Gas Plant and the commissioning of a new coking battery at Chelyabinsk Metallurgical Plant at the end of last year.  While we expect year-over-year growth rates to remain robust, by the end of the year we expect some decline in demand for steel products, explained largely by typical seasonality patterns.  However, based on Mechel’s diversified product portfolio and our expectation that any pricing softness would be limited, we anticipate good results for the segment overall for the year.”

Recent Highlights

• In March, Mechel OAO announced the acquisition of a controlling stake of 93.4% of Southern Kuzbass Power Plant OAO.  The transaction amount totaled approximately US$270 million. The acquisition of Southern Kuzbass Power Plant was in line with Mechel's strategy to further develop its mining segment.
• In August, Mechel OAO acquired all the charter capital of Bratsk Ferroalloy Plant OOO, the largest enterprise in Eastern Siberia producing high grade ferrosilicon.
• In September, Mechel OAO acquired all outstanding shares of the Temryuk-Sotra seaport, located at the Taman shore of the Sea of Azov. The seaport is primarily utilized for small tonnage river-sea type vessels in the Southern Russia.
• In August, Mechel OAO announced that its trading company, Mechel-Service OOO, opened new warehouses in July and plans to further expand its distribution network. In total, the new warehouses have capacity of approximately 15,000 to 20,000 tonnes of metal products every month.
• In July, Beloretsk Metallurgical Plant (BMP) commissioned new equipment and laid the foundation for a new steel wire-rope complex. The capacity of the lines can reach 27 thousand tonnes per year depending on the product range.

Mr. Zyuzin concluded, “Mechel continued to make significant progress during the first half of 2007. The market environment for our products remained favorable, and we continued our strong performance from last year, achieving record operational and financial results for the first half through a combination of organic growth and selective acquisitions. In addition, we have made additional progress on our capital expenditure program to support future production and efficiency enhancements, and also reduced our future dependence on electricity by considerably expanding our power business and acquiring power generation through our controlling stake in the Southern Kuzbass Power Plant OAO and power distribution via the Kuzbass Power Sales Company OAO assets. Through the planned development of a branch network of our trading subsidiary, Mechel Service, which substantially expanded its regional presence this year, we are laying the groundwork for a future increase of metal product sales directly to end users. This strategic initiative allows the Company to further strengthen its relationships directly with the end users of its products and capture additional incremental revenues. Overall, based on the demand for Mechel’s products that we are seeing across the steel and mining segments and the current pricing environment, we are optimistic about the growth prospects for the Company throughout the remainder of the year.”

Financial Position

First half cash expenditure on property, plant and equipment amounted to $146.4 million, of which $58.4 million was invested in the mining segment and $88.0 million in the steel segment.

In the first half of 2007, Mechel has spent $321.1 million on acquisitions, including $270 million (net of cash acquired) for 93.4% of the shares of Southern Kuzbass Power Plant OAO, and $37  million (net of cash acquired) for 49% of the shares of Kuzbass Power Sales Company OAO. 

As of June 30, 2007, total debt¹  was at $383.3 million. Cash and cash equivalents amounted to $315.2 million at the end of the first half of 2007 and net debt ² amounted to $68.1 million.

The management of Mechel will host a conference call today at 6:00 p.m. Moscow time (10:00 a.m. New York time, 3:00 p.m. London 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, under the Investor Relations section.