Metinvest boosts April steel production

Ukraine’s largest steelmaker Metinvest (METINV) boosted its monthly steel production by 30% m/m in April to 713 kt, according to the production reports of its subsidiaries published by Interfax-Ukraine on May 6. The result was driven by Yenakiyeve Steel, which manufactured 192 kt of steel, up from 48 kt in March. Its operations were relaunched at the end of March after a halt in February.

Mariupol-based Ilyich Steel produced 245 kt (+11% m/m), its highest monthly output since August 2014. Mariupol-based Azovstal performed relatively flat in April, having produced 276 kt steel (-1% m/m). The 4M15 operating performance of these three plants still remained depressed YTD due to logistic constraints at the beginning of the year. Their aggregate steel output fell 37% yoy to 2.4 mmt compared to 4M14.

A fourth steelmaker, Zaporizhstal, in which Metinvest owns a 49.9% stake and whose products are resold to third parties, decreased its steel output 2% m/m in April to 294 kt, while 4M15 production slid 4% yoy to 1.2 mmt.

Roman Topolyuk: The pace at which Yenakiyeve Steel restored output in April is encouraging. Steel capacity load at the enterprise reached 77% last month, contrary to the conservative guidance of Metinvest’s management of around 50% load at the steel mill going forward. Such high production is in line with our projection of steel output by Metinvest’s three subsidiaries of 7.6 mmt in 2015 (-17% yoy).

Ilyich Steel may bring surprises to the upside in terms of production, if it maintains steel output at current levels (58% capacity load) by the year end. The positive dynamics of the Mariupol-based steel mills indicate that logistics bottlenecks – caused by warfare near the city since August – have widened recently. The maximum load of steelmaking capacities is crucial for Metinvest in generating the largest possible earnings in the current market, as profitability has shifted from mining the raw materials to producing finished steel products.