Metinvest steel output steady qoq in 3Q19

Ukraine’s largest steelmaker Metinvest (METINV)
reported on Nov. 1 no qoq change in steel production, at 1.982 mmt, at its
subsidiaries in 3Q19. Azovstal’s output lost 5% qoq to 1,025 kt in 3Q19, while
Ilyich Steel’s output gained 6% qoq in 3Q19 to 957 kt, according to the
holding’s operational update. In 9M19, Metinvest’s crude steel output rose 6%
yoy to 5.905 mmt due to a 16% yoy jump at Ilyich Steel that was partially
offset by a 3% yoy drop at Azovstal.

 

The holding’s hot iron output in 3Q19, 2.033 mmt, slid
1% qoq. Its 9M19 hot iron production lost 3% yoy to 6.041 mmt, according to the
release.

 

The 3Q19 output of semi-finished products at Metinvest
slid 1% qoq to 809 kt as its merchant pig iron output dropped 13% qoq to 290 kt
and its slab output gained 7% qoq to 519 kt.

 

The holding’s finished product output lost 8% qoq in
3Q19 to 1.417 mmt due to a 28% qoq plunge in hot-rolled coil output to 157 kt,
a 5% qoq loss in hot-rolled plate output to 865 kt, a 7% qoq decrease in long
product output to 186 kt, and an 11% drop in galvanized coil output to 93 kt.

 

The qoq plunge in flat steel production was due to the
planned major overhaul of Mill 1700 at Ilyich Steel,
as well as due to scheduled major overhauls at its European rerolling plants,
Metinvest noted in its release.

 

In 9M19, its semi-finished product output dropped 3%
yoy to 2.247 mmt as merchant pig iron production plunged 29% to 847 kt due to a
redirection of hot iron to production of crude steel and further to downstream
products at Ilyich Steel following the
launch of continuous casting machine No. 4. Finished product
output inched up 1% yoy to 4.455 mmt in 9M19.

 

Total coke production dropped 6% qoq to 1.136 mmt in
3Q19, while merchant coke output jumped 44% qoq to 449 kt. Metinvest noted a
coal shortage due to a drop in direct supply from Russia, which started in
June, as a reason for the qoq drop in its coke production in 3Q19.

 

Total 3Q19 iron ore concentrate production inched up
1% qoq to 7.295 mmt, whereas output of merchant iron ore products lost 3% qoq
to 4.426 mmt due to an 8% qoq decrease in merchant iron ore concentrate
production to 2.471 mmt that was partially offset by a 4% qoq gain in merchant
pellet production to 1.955 mmt. In 9M19, iron ore concentrate output rose 6%
yoy, and merchant iron ore product production jumped 18% yoy.

 

Dmytro Khoroshun: We expect
Metinvest’s 2019 steel production to amount to 7.6-7.9 mmt (or 4-8% higher
yoy).

 

We also maintain our estimate for Metinvest’s 2019
attributable iron ore concentrate output (including its 45.6% share of Southern
Iron Ore production) at 33.3-34.2 mmt (91-94 kt per day), or 5-8% more yoy. The
management guidance for Metinvest’s subsidiaries (excluding Southern Iron Ore)
is for a 4-5% yoy increase, or by 1.2-1.3 mmt.

 

We maintain our bullish view on METINV bonds.