Azovstal increased steel output by 31,2% y-o-y in 9M10

Company, ths mt                           9M10    9M09   Chg,%
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ArcelorMittal Kryviy Rih (KSTL)       4,538   3,520   28,9%
Azovstal (AZST)                             4,218   3,226   31,2%
MMK Illicha Steel (MMKI)                4,049   3,111   30,2%
DMK Dzerzhinskogo Steel (DMKD)   2,003   2,594  -22,8%
Zaporizhstal (ZPST)                        2,519   2,427    3,8%
Alchevsk Iron & Steel (ALMK)          2,210   2,805  -21,2%
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Total                                            24,105  21,716   11,1%
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Source: Interfax

Ukrainian producers increased their crude steel output by approximately 11% in 9M09. The leader was Azovstal, with production increasing by 30.2% y-o-y. DMK Dzerzhynskogo steel and Alchevsk Iron & Steel were underperformers with declines of 22%, which we attribute to their respectively difficult financial situations and difficulties in purchasing inputs. We expect this gradual recovery to continue in October. However, despite the anticipated stability, the moderate growth in the steel sector does not present the same attractive investment opportunities as found in the more profitable iron ore sector (SGOK, CGOK) or Khartsyzk Pipe in the pipe sector.