Metinvest steel output declines 3% qoq in 3Q17

Ukraine’s largest steel maker Metinvest (METINV) reported on Nov. 2 a 3% qoq decline in steel production to 1.80 mmt at its subsidiaries in 3Q17. Azovstal’s output dropped 8% qoq to 1.00 mmt in 3Q17, while Ilyich Steel’s output increased 4% qoq to 0.80 mmt, according to its operating update.

During 9M17, crude steel output fell 10% yoy to 5.73 mmt at Metinvest’s subsidiaries due to an 82% yoy plunge in output at Yenakiyeve Steel to 269 kt, which was partly offset by a 15% increase at Azovstal and an 8% rise at Ilyich Steel. The holding reduced its output of steel products by 4% to 6.30 mmt during 9M17.

Production of semi-finished products increased 15% yoy to 1.96 mmt during 9M17, owing to slab output rising by 63% yoy to 960 kt and pig iron output climbing by 12% yoy to 989 kt. On the other hand, Metinvest’s 9M17 production of square billets, which used to be produced by Yenakiyeve Steel, plummeted 94% yoy to 15 kt. The holding’s finished products output decreased 11% yoy, including a 6% increase in flat products (to 3.49 mmt) and a 52% fall in long products (to 691 kt) due to a lack of square billets.
Total iron ore concentrate production declined 11% yoy to 20.44 mmt at Metinvest’s subsidiaries during 9M17.

Dmytro Khoroshun: Comparing Metinvest’s data on 9M17 production and 8M17 sales, we observed the holding had the possibility of substantially boosting its sales of slabs in September, of which 960 kt was produced during 9M17 but only 649 kt was sold during 8M17. The prices for this product had reached their recent three-year highs in September after rising in July and August.

This increase might have been as high as 200-250 kt in September (compared to the January-August monthly average of 81 kt). If Metinvest’s figures at the end of this month confirm this large increase, then Metinvest’s September EBITDA might have been higher than the August value of USD 157 mln. We are keeping our neutral view on METINV Eurobonds.