Metinvest attributable steel output rises 1.5% in November

Attributable steel production at Ukraine’s largest
producer Metinvest (METINV) was 26.4 kt per day (or 792 kt per month) in
November, a 1.5% m/m improvement, according to Concorde Capital’s analysis of
separate news reports by Interfax-Ukraine. That result includes Azovstal,
Ilyich Steel and a 49.9% portion of Zaporizhstal’s result. (Production at
Metinvest’s Yenakiyeve Steel was halted on Feb. 20.)

The two Mariupol-based mills boosted output by 0.5%
m/m to 21.4 kt per day, including Ilyich Steel (6.1% m/m increase to 8.8 kt per
day) and Azovstal (3.1% m/m decrease to 12.6 kt per day). Zaporizhstal output
increased 6.2% m/m to 10.0 kt per day.

Also, the holding’s hot iron output jumped 9.9% m/m to
30.3 kt per day in November.

In 11M17, Metinvest’s attributable steel output was
8.86 mmt, or 6.8% less yoy. Excluding Yenakiyeve Steel, which Metinvest does
not control anymore, the holding’s output rose 10.5% yoy to 8.52 mmt in 11M17.

Dmytro Khoroshun: Metinvest’s
monthly attributable steel output was higher than our expectations. Especially
interesting is the fact that Zaporizhstal’s daily output increased m/m, while we expected flat output. Apparently,
while Zaporizhstal’s rolling mill 1680 was idle during the first nine days of
November, the plant continued producing steel ingots, a semi-finished product,
without further processing them into rolled products. The semi-finished product
stocks accumulated during November, enabling Zaporizhstal to increase shipments
in December. They will rise 59% m/m to 293 kt, according to the the Metal
Expert consulting firm.

Notably, Metinvest’s two Mariupol plants kept their
output steady despite the Nov. 6-9 railway maintenance work on the
Kamysh-Zarya-Volnovakha raw material supply route. Once Ukrzaliznytsya
efficiently debottlenecks this route, which is in its plans for 2018, output at
Azovstal and Ilyich Steel might increase.

We are keeping unchanged our expectations that the
holding will be able to reach our 2017 steel output forecast (9.7 mmt, or 7%
less yoy), as well as our forecast for the holding’s full-year 2017 EBITDA at
USD 1.75 bln. And we are keeping our neutral view on METINV Eurobonds.