Metinvest launches slab casting machine at Ilyich

Ukraine’s largest steelmaker Metinvest (METINV) has launched
its continuous casting machine No. 4 (2.5 mmt p.a. of slabs, a USD 150 mln
investment) at Ilyich Steel, according to its March 1 release. Metinvest said
that it plans to reduce its pig iron exports in order to boost steel
production, for which its lack of casting capacity had been a bottleneck.

Dmytro Khoroshun: This launch
is a positive development, in part because the quality of the relevant
Metinvest products, slabs and HRC, will be improved as a result. Their
production costs should also decrease. However, we are skeptical that Metinvest
will be able to achieve the maximum steel-casting capacity load in the near
future, for two reasons.

Firstly, Metinvest reported earlier that the
commissioning of the new machine will increase Ilyich Steel’s slab casting
capacity to 4 mmt p.a. However, the crude steel capacity of Ilyich Steel’s
oxygen converters amounts to only 3.1 mmt p.a., according to Metinvest’s 2018
prospectus. So there are concerns that Metinvest might experience ecological
problems when it tries to squeeze 4 mmt p.a. of steel from Ilyich Steel
converters, similar to the issues it has experienced with Azovstal’s converter shop
from time to time.

Secondly, the situation on the world steel markets,
particularly the rising protectionism trend, complicates Metinvest’s sales of
finished steel products (although slab sales continue to be mostly
barrier-free).