Metinvest steel output rises 2% qoq in 2Q19

Ukraine’s largest steelmaker Metinvest (METINV)
reported on July 30 a 2% qoq increase in steel production to 1.982 mmt at its
subsidiaries in 2Q19. Azovstal’s output rose 11% qoq to 1,079 kt in 2Q19, while
Ilyich Steel’s output lost 7% qoq in 2Q19 to 903 kt due to the shutdown of oxygen converter No. 3,
according to the holding’s operational update. In 1H19, Metinvest’s crude steel
output rose 3% yoy to 3.923 mmt due to a 16% yoy jump at Ilyich Steel that was
partially offset by a 6% yoy drop at Azovstal.

 

The holding’s hot iron output in 2Q19, 2.051 mmt, rose
5% qoq due to the shortage of raw materials experienced in 1Q19, Metinvest
said. Its 1H19 hot iron production lost 7% yoy to 4.008 mmt due to an unstable
supply of raw materials, as well as shutdowns of two blast furnaces at
Azovstal, according to the release.

 

The 2Q19 output of semi-finished products at Metinvest
jumped 31% qoq to 815 kt as its merchant pig iron output rose 48% qoq to 332 kt
and its slab output gained 21% qoq to 483 kt. Metinvest noted that the 85 kt
qoq increase in slab output was due to a 118 kt rise at Azovstal that offset
the 33 kt in losses at Ilyich Steel.

 

The holding’s finished product output inched up 2% qoq
in 2Q19 to 1.537 mmt due to a 3% qoq rise in hot-rolled plate output to 913 kt,
a 9% qoq gain in galvanized coil output to 105 kt, and a 5% qoq increase in
long product output to 200 kt.

 

In 1H19, its semi-finished product output dropped 12%
yoy to 1.439 mmt as merchant pig iron production plunged 36% to 558 kt due to a
redirection of hot iron to steel production and further downstream products at
Ilyich Steel following the launch of continuous casting machine
No. 4. Finished product output rose 3% yoy to 3.038 mmt in
1H19.

 

Total coke production dropped 5% qoq to 1.211 mmt in
2Q19, while merchant coke output lost 20% qoq to 312 kt.

 

Total 2Q19 iron ore concentrate production inched up
1% qoq to 7.250 mmt, whereas output of merchant iron ore products rose 3% qoq to
4.571 mmt due to a 10% qoq increase in merchant iron ore concentrate production
to 2.685 mmt that offset a 5% qoq retreat in merchant pellet production to
1.886 mmt. In 1H19, iron ore concentrate output rose 3% yoy, and merchant iron
ore product production jumped 20% yoy.

 

Dmytro Khoroshun: We
tentatively expect Metinvest’s steel output to plunge 15-25% qoq to 1.5-1.7 mmt
in 3Q19 due to both planned overhauls and, importantly, the hot iron mixer accident at Azovstal.
We hope Metinvest provides more details soon about its plans for fixing the
situation at Azovstal after the accident.

 

We maintain our bullish view on METINV bonds.