Prices of Metinvest steel products plunge in March

Ukraine FOB prices for the types of steel products
exported by Metinvest (METINV), Ukraine’s largest producer, dropped in March
after rebounding in the end of 2019 and early 2020, according to data provided
by Metal Expert, an industry consultancy.

 

Slab prices plunged 19% to USD 340/t on Mar. 27 from
their recent high of USD 420/t on Jan. 17. Slab prices remain only 1% above
their recent low of USD 335/t on Nov. 1.

 

Billet prices plunged 17% to USD 340/t on Mar. 27 from
their recent high of USD 410/t on Jan. 17. Billet prices dropped 3% below their
recent low of USD 350/t on Oct. 4.

 

HRC prices dropped 12% to USD 420/t on Mar. 27 from
their recent high of USD 478/t on Feb. 21. HRC prices remain 15% above their
recent low of USD 365/t on Oct. 25.

 

Prices provided by Metal Expert are sophisticated
estimates but they are not necessarily the same as the prices realized by
Metinvest for its specific products.

 

Dmytro Khoroshun: If the
recent steel price plunge is further extended toward and below the October-November
lows, Metinvest’s operating cash flows before working capital changes might
turn negative, as they did in November
and December.

 

And if Metinvest makes little or no money on its
operations, it might face problems servicing its debt already this year.
Metinvest’s debt service payments in 2020 amount to about USD 205 mln in
interest and USD 155 mln in principal repayments (excluding about USD 400 mln
in trade finance loans, which Metinvest plans to roll over, but which might
need to be scaled back and partially repaid under adverse market conditions).

 

The recent declaration of debt restructuring by DTEK
Energy, a Ukrainian energy company which has the same controlling shareholder
(the SCM group) as Metinvest, shows that Metinvest cannot assume its
shareholders will provide financing as the steel market situation deteriorates.

 

We maintain our negative view on METINV bonds.