Metinvest attributable steel output flat m/m in June

Attributable steel production at Ukraine’s largest producer
Metinvest (METINV) was 25.7 kt per day in June, a 0.2% decline m/m (and 2.0%
decline yoy), according to Concorde Capital’s analysis of separate news reports
by Interfax-Ukraine. It includes Azovstal (AZST UK), Ilyich Steel (MMKI UK) and
a 49.9% portion of Zaporizhstal’s (ZPST UK) result. Production at Yenakiyeve
Steel was halted on Feb. 20.

The two Mariupol-based mills increased production by
0.4% m/m in June to 20.6 kt per day. This includes Ilyich Steel, (1.8% m/m rise
to 8.6 kt per day), and Azovstal (-0.5% m/m to 12.0 kt per day). Zaporizhstal
produced 10.2 kt of steel per day, which is 2.7% lower m/m.

In 1H17, Metinvest’s attributable steel production was
4.9 mmt, or 4.5% less yoy. Excluding Yenakiyeve Steel, which Metinvest does not
control any more, the holding’s output increased 8.8% yoy to 4.6 mmt in 1H17.

Andriy Perederey: The output trend of Mariupol-based mills disappointed us. We expected
some higher increase in June due to the resolved issue with the coke bottleneck
(coke production at Avdiyivka stabilized in mid-May). We still expect a more
visible increase in Mariupol production in the coming months, and we see a
boost in steel output at Zaporizhstal in July-August as soon as the plant
recommissions its blast furnace #3 after a seven-month overhaul. All in all, we
are keeping a positive view on Metinvest bonds.