Metinvest steel output jumps 26% m/m in August

Steel production at
Ukraine’s largest producer Metinvest (METINV) was 23.8 kt per day (or 737 kt
per month) in August, a 26.4% m/m gain, according to Concorde Capital’s
analysis of separate news reports by Interfax-Ukraine. That result includes
Azovstal (AZST UK) and Ilyich Steel (MMKI UK) figures.

Ilyich Steel
reported a 27.0% m/m increase in steel production to 11.5 kt per day, while
Azovstal’s output jumped 25.9% m/m to 12.2 kt per day in August. The holding’s
hot iron output rose 22.5% m/m to 23.2 kt per day.

In 8M19, Metinvest’s
steel output was 5.24 mmt, or 5.3% more yoy.

Dmytro Khoroshun: The strong August steel production
volumes are a huge positive surprise that prove wrong our concerns regarding Azovstal’s
performance.

We can only
attribute Azovstal’s 12.2 kt per day August steel output to the plant restarting its oxygen
converter No. 1 in early August, which is earlier than we expected. Azovstal also apparently
overcame the issue of hot iron supply from blast furnaces to oxygen converters
after the July 12 accident with a hot iron
mixer.

We upgrade our estimate for Metinvest’s 2019 steel production to 7.9-8.1
mmt (or 8-11% higher yoy) and maintain our bullish view on METINV bonds.