Mechel, Russias No.6 steel maker said Wednesday it has signed a $300 million contract with Chinese group Minmetals to build a rail and structural steel mill at its Chelyabinsk plant.

The deal is the first under a memorandum of intent signed on Tuesday between the companies during Chinese Premier Wen Jiabaos visit to Moscow.

New York-listed Mechel said in a statement that Minmetals engineering arm would build the workshop, and install the mills equipment and commission plant, which will be supplied by Italys Danieli.

The mill, due for completion in 2010, will produce rails up to 100 metres in length for supply to Russian Railways, the state rail monopoly, as well as structural steel shapes in a wide range of sizes.

Mechel, controlled by billionaire Igor Zyuzin, is also Russias largest producer of coal for the steel industry.