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Azovstal to cut coke output, Avdiivka might win

Azovstal to cut coke output, Avdiivka might win

31 May 2012

Azovstal (AZST UK) will phase out three of six coke batteries in 2012-2014, the CEO of parent Metinvest (METINV) said yesterday (via Interfax). The first facility will be shuttered as soon as in July 2012.

Roman Topolyuk: Azovstal’s six coke batteries of a total capacity of 2.5 mmt p.a. cover about 70% of the steel mills’ demand for coke. Only two batteries capable of making 0.9 mmt of coke p.a. are relatively modern, installed in 2003 and 2006. The closure of the old facilities was expected, and we estimate that up to 1.2 mmt in capacity will be closed by 2014. Metinvest has not announced any fresh plans for new batteries, which means additional supplies of coke for Azovstal might potentially be provided from Avdiivka Coke (AVDK UK), which currently has an inactive 0.7 mmt coke battery. However, this seems like it would add little to the profitability of Avdiivka (which had a USD 32 mln net loss in 2011), as long as it purchases expensive coking coal from Metinvest’s US-based subsidiary.

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