Metinvest steel output drops 8.5% in February

Steel production at Ukraine’s largest producer
Metinvest (METINV) was 18.8 kt per day (or 525 kt per month) in February, an 8.5%
m/m decrease in average daily terms, 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. (Production at Metinvest’s Yenakiyeve Steel was halted
in February 2017). Unlike our previous reports, no attributable portion of
Zaporizhstal’s (ZPST UK) result is included.

Ilyich Steel reported a 3.8% m/m fall in steel
production to 8.8 kt per day, while Azovstal showed a 12.2% m/m drop to 10.0 kt
per day.

The holding’s hot iron output declined 6.0% m/m to
23.3 kt per day in February.

During 2M18, Metinvest’s steel output was 1.16 mmt, or
22.3% less yoy. Excluding Yenakiyeve Steel, which Metinvest does not control
anymore, the holding’s output rose 1.0% yoy to the same 1.16 mmt in 2M18.

Dmytro Khoroshun: The actual
steel production drop at Azovstal, 12.2% m/m or by 1.4 kt per day, was less
than we expected (around 18% m/m or by 2 kt per day) due to
maintenance work on blast furnace No. 6 and oxygen converter No. 2.

We expect Metinvest’s 2018 steel output at about 7.3
mmt, or 4-5% less yoy.

We maintain our Speculative Buy recommendation on
the Metinvest Eurobond on expectations of a deal (restructuring or refinancing)
in the near future. For more details behind our recommendation, please refer to
our March 1 report on Metinvest.