Rolled steel output up 5.7% yoy in 1H08

Rolled steel production in 1H08, mln mt

                                       1H07     1H08  Chg, yoy  Share 
ArcelorMittal (KSTL: SELL)                      3,576    3,469      -3.0%    19.6%
MMK Illicha Steel (MMKI: BUY)                2,742    2,701      -1.5%    15.2%
Azovstal (AZST: BUY)                             2,728    2,884       5.7%     16.3%
Zaporizhstal (ZPST: HOLD)                     1,865    1,839      -1.4%     10.4%
Alchevsk Iron&Steel Plant (ALMK: BUY)   1,686    2,406       42.7%    13.6%
DMK Dzerzhinskogo Steel (DMKD: BUY)   1,596    1,733       8.6%      9.8%
Enakievo Steel (ENMZ: BUY)                   1,326    1,470       10.9%     8.3%
DMK Petrovskogo Steel (DMZP: BUY)       641       614         -4.2%      3.5%
Donetsk Metal Rolling (DMPZ: HOLD)       74         49           -33.8%     0.3%
Dniprospetsstal (DNSS: HOLD)                162       172           6.2%      1.0%
Donetsk Steel Plant (DOMZ: SELL)           383       394           2.9%      2.2%
Total                                                      16 779   17 731      5.7% 

Andriy Gerus: After recent steep drop on the local market, Ukrainian steel names are trading at 35-65% discounts to developed peers on market multiples, and at 45-75% to Russian and Emerging markets rivals. At the same time, steel prices continue their strong rally, making new historical high: square billet (FOB) rose 142% yoy to USD 1,185/mt in June 2008. Our top-picks are Enakievo Steel, Azovstal and Alchevsk Iron & Steel Plant, which boosted their output by 10.9%, 5.7% and 42.7% yoy respectively in 1H08. Donetsk Metal Rolling decreased its production by 33.8% due to the upgrading of its rolling shop in 1Q08.