Metinvest attributable steel output rises 4.3% in January

Attributable steel production at Ukraine’s largest
producer Metinvest (METINV) was 26.3 kt per day (or 816 kt per month) in
January, a 4.3% m/m increase, according to Concorde Capital’s analysis of
separate news reports by Interfax-Ukraine. That result includes Azovstal (AZST
UK), Ilyich Steel (MMKI UK) and a 49.9% portion of Zaporizhstal’s (ZPST UK)
result. (Production at Metinvest’s Yenakiyeve Steel was halted in February
2017.)

The two Mariupol-based mills boosted output 5.1% m/m
to 20.5 kt per day, including Ilyich Steel (a 0.4% m/m decrease to 9.1 kt per
day) and Azovstal (a 10.0% m/m rise to 11.4 kt per day). Zaporizhstal’s output
increased 1.5% m/m to 11.7 kt per day.

Also, the holding’s hot iron output rose 4.2% m/m to
31.1 kt per day in January.

In 2017, Metinvest’s attributable steel output was
9.65 mmt, or 6.7% less yoy. Excluding Yenakiyeve Steel, which Metinvest does
not control anymore, the holding’s output rose 10.9% yoy to 9.30 mmt in 2017.

Dmytro Khoroshun: We expect
Metinvest’s 2018 attributable steel output at about 9.3 mmt, or 3-4% less yoy.
However, if Ukrzaliznytsia, Ukraine’s state railway company, increases the
throughput of the Kamysh-Zaria-Volnovakha raw material supply route, which
currently limits the utilization rate
of Metinvest’s two Mariupol plants to 70-80%, then attributable steel production
might remain roughly flat yoy around 9.65 mmt, or even slightly exceed that
level in 2018.

In February, Azovstal is likely to reduce its hot iron
output by about 2 kt per day, or 20% m/m, due to blast furnace No. 6 being
under maintenance. A decrease in Azovstal’s steel production of a similar
magnitude might also follow.

We are keeping our neutral view on METINV
Eurobonds.