Avdiyivka again lost power supply due to shelling

The town of Avdiyivka, the site Metinvest’s (METINV) largest coke plant, was cut from its electricity supply on Feb. 18 after power line damage from shelling, the head of Donetsk administration Pavlo Zhebrivskiy said on the same day, as cited by Interfax-Ukraine. The town is located in the government-controlled part of Donetsk Oblast, but very close to the separation line with the occupied part. As of the evening of Feb. 19, power lines were repaired on the side controlled by Ukrainian government, while line damage still exists in the occupied territory, according to Zhebrivskiy. “The Russian side did not allow the repair team to [get to] the power lines, referring to shelling from Ukrainian militaries. This [report of shelling] is fake,” he wrote in his blog.

Avdiyivka Coke produced 200 kt of coke in January, according to preliminary data provided by Interfax-Ukraine. This is 16% less yoy and 5% more m/m. The plant is the most important source of metallurgical coke for Metinvest’s steel mills, as it accounted for more than 55% of the holding’s coke production last year. Plant operations were interrupted at times over the last three weeks after pro-Russian separatists began attacking Avdiyivka on Jan. 29 and damaging power lines.

According to available information from media, the blockade of railway connections between the occupied territories and the government-controlled part of Ukraine is still ongoing. This makes deliveries of anthracite coal from the occupied territories to power plants in Ukraine impossible, as well as deliveries of hard steam coal to Zuyivska Power Plant located on the occupied territory.

Alexander Paraschiy: The situation remains risky for Metinvest’s steel production segment due to the idling of Avdiyivka Coke. In particular, Mariupol-based Illich Steel (accounting for 1/3 of the holding’s steel output) depends heavily on supplies of coke from Adviyivka. Also, the blockade of railway connections adds risk for Metinvest’s Yenakiyeve Steel, which is located in occupied Donbas, but dependent on iron ore supplies from central Ukraine. With such a news flow, the selling pressure on Metinvest bonds can intensify.