Ukraine might boost monthly steel output 16% m/m in June

Ukrainian steelmaking enterprises plan to boost steel output 16% m/m to 2.2 mmt in June, the head of the sector’s association announced on May 13, according to Interfax-Ukraine. Steel output in May, yet to be reported, as part of industrial statistics, has been projected by the association flat m/m at 1.9 mmt. By our estimates, if such plans for May-June materialize, Ukraine’s 1H15 steel production will come in at 11.2 mmt (-28% yoy).

Roman Topolyuk: A recovery could be in the making for Ukraine’s steel industry, which suffered a lot from the ongoing military conflict in Donbas. Destruction of its infrastructure led to operating constraints, while most production capacities are in working condition now. Steel output has stood at 1.8-1.9 mmt per month since active warfare broke out in eastern Ukraine, and June may become the first month of significant improvement. Metinvest’s subsidiaries (METINV) Yenakiyeve Steel (ENMZ UK) and Ilyich Steel (MMKI UK), as well as IUD’s Alchevsk Steel (ALMK UK), could be the key contributors to recovery.

The news implies positive macroeconomic consequences for Ukraine, as metals and mining is still the most important source of hard currency for the country, or 23.2% of total in 4M15, according to the State Fiscal Service of Ukraine. The sector generated USD 2.9 bln in export revenue in 4M15 (-37% yoy), which was negatively impacted by falling prices and volumes. With higher volumes and stabilized prices, the negative trend may be reversed in coming months.