Metinvest reports on 4% qoq decrease in steel output in 4Q16

Ukraine’s largest steelmaker and iron ore miner Metinvest (METINV) reported on Feb. 7 it decreased crude steel production by 4% qoq to 2.06 mmt in 4Q16. This includes production at its three steel mills: Azovstal, Ilyich Steel, and Yenakiyeve Steel. The decrease was mainly a result of an overhaul of oxygen furnaces at Ilyich Steel (where steel output fell 10% qoq).

Metinvest’s output of sellable semi-finished products decreased 17% qoq to 553 kt in 4Q16, which the holding explains by higher intra-group use. Its output of finished products decreased 3% qoq to 1,612 kt. Long products output stepped down by 12% qoq to 474 kt, while flat products output increased 3% qoq to 1,103 kt due to the end of annual major overhauls. Its output of sellable iron ore products decreased 8% qoq to 3.66 mmt in 4Q16, while the product mix of iron ore shifted towards pellets (up 22% qoq to 1.70 mmt).

In full year 2016, Metinvest’s steel production increased 9% yoy to 8.39 mmt. Its output of sellable semi-finished products decreased 14% yoy to 2.23 mmt due to the company shifting to higher-margin finished products. The output of finished goods increased 15% yoy to 6.49 mmt. It sold to third parties 17.09 mmt of iron ore products in 2016, down 16% yoy.

Andriy Perederey: The operating performance of Metinvest`s subsidiaries is in line with the preliminary observations coming in separate news reports from Interfax. The metallurgical divison of the holding benefitted from high steel and iron ore prices and we see the stable operational performance in 2017 at a minimum on the same level of 2016. We are keeping our positive view on Metinvest Eurobonds.