Metinvest iron ore concentrate output falls 5% in 10M16

The attributable production of iron ore concentrate at leading Ukrainian steel producer Metinvest (METINV) rose 5% m/m in October to 2.5 mmt (though fell 10% yoy) after a 7% m/m decline in September, according to Concorde Capital’s analysis of separate reports by Interfax-Ukraine. In 10M16, the holding’s output of total attributable concentrate decreased 5% yoy to 28.3 mmt. Output of merchant iron ore products decreased 6% yoy to 27.0 mmt, based on our estimates.

Andriy Perederiy: The performance of the holding’s mining division fell below our projections of a +1% yoy increase in output of merchant iron ore products to 35.2 mmt in 2016. However, the decrease in output will be compensated by much better iron ore prices in 2016 (about USD 54/t on average, or 10% above our initial forecast), thus contributing positive EBITDA to Metinvest’s mining division. This suggests our forecast of Metinvest’s 2016 EBITDA of about USD 1.2 bln will be outperformed. We affirm our positive stance on Metinvest’s Eurobonds.