Metinvest attributable steel output slides 1.3% in October

Attributable steel production at Ukraine’s largest producer Metinvest (METINV) was 26.0 kt per day (or 806 kt per month) in October, a 1.3% m/m decrease in average daily terms, according to Concorde Capital’s analysis of separate news reports by Interfax-Ukraine. That result includes Azovstal (AZST UK), Ilyich Steel (MMKI UK) and a 49.9% portion of Zaporizhstal’s (ZPST UK) result (production at Metinvest’s Yenakiyeve Steel was halted on Feb. 20).
 
The two Mariupol-based mills boosted their output by 3.9% m/m to 21.3 kt per day, including Ilyich Steel (4.0% m/m drop to 8.3 kt per day) and Azovstal (9.6% increase m/m to 13.0 kt per day). Zaporizhstal’s steel output dropped 19.3% m/m to 9.4 kt per day.
 
Also, the holding’s hot iron output fell 5.9% m/m to 27.6 kt per day in October.
 
In 10M17, Metinvest’s attributable steel output was 8.1 mmt, or 7.2% less yoy. Excluding Yenakiyeve Steel, which Metinvest does not control any more, the holding’s output rose 9.5% yoy to 7.7 mmt.
 
Dmytro Khoroshun: We note that Zaporizhstal’s hot iron output drop, by 5.7% to 12.0 kt per day, was much smaller than the drop in its daily steel output of 19.3%. It is possible that Metinvest’s production for its pig iron sales is being re-allocated from its Mariupol plants to Zaporizhstal, due in part to the recent introduction by the EU of import duties for Ukrainian hot-rolled coil, the main product of Zaporizhstal.
 
Therefore, in the coming months, production of steel at Zaporizhstal might not grow much above the October daily rate, and might drop even further. Nevertheless, we are keeping unchanged our expectations that the holding will be able to reach 9.6 mmt in steel output 2017 (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 as we see a high refinancing risk for the next twelve months.