Metinvest boosts steel production 1% qoq, iron ore stays flat

Metinvest (METINV), Ukraine’s largest steel producer, reported a 1% qoq increase in 2Q13 steel production on August 2 to 3.2 mmt, or a 8% yoy decline in 1H13 steel output to 6.2 mmt. A portion of the semi-products in the total product mix grew 4pp qoq to 26% in 2Q13, driven by a significant (16% qoq) decrease in flat products output (representing 46% of total production in 2Q13).

Iron ore concentrate output remained stable qoq in 2Q13, and grew 2% yoy to 18.7 mmt in 1H13. Coking coal mining built up 5% qoq in 2Q13 to 3 mmt, but slid 3% yoy to 5.9 mmt.

Roman Topolyuk: The company’s 2Q13 production performance did not offer any surprises, which was in the middle range when compared to Russian peers. The 1% qoq increase in steel output outperformed 0.2% qoq growth from Evraz (EVR LN) and a -4% qoq decline from Mechel (MTL US), though lagged behind a 2.5% qoq advance by Novolipetsk Steel (NLMK LI) and 5% growth from Severstal (SVTS LI). Contrary to its four major Russian peers, Metinvest decreased its share of finished products following a sharp decline in flat steel output.

We think output declined because Metinvest decided to decrease the supply of flat products against the background of weakening prices throughout 2Q13, thereby triggering a destocking process in this segment. If compared to Russian producers, Metinvest has undertaken the largest production cut in flat products in 2Q13.