Metinvest shuts down converter at Ilyich Steel for repairs

Ukraine’s largest steel producer Metinvest (METINV)
shut down its basic oxygen converter No. 3 at Ilyich Steel for repairs at the
end of May, according to a June 10 report by mariupolnews.com.ua, a local news
site. One of the focuses of the repairs is the replacement of a gas-cleaning
unit that costs UAH 230 mln (USD 9 mln), according to the news report.

Metinvest had been preparing for the repairs for a
long time, according to a January 2019 report by mrpl.city, another local news
site. Neither source indicated how long the repairs will last.

Dmytro Khoroshun: Ilyich Steel
operates three converters of similar capacity, whose combined average daily
production rate was at its maximum in April 2019, 11.3 kt per day. If the
repairs of converter No. 3 last beyond the end of June, Ilyich Steel’s
production rate for the month is likely to drop to 7.5 kt per day.

Combined with the likely decline in steel production
at Azovstal due to the recent shutdown of two blast furnaces,
these repairs at Ilyich should depress Metinvest’s June steel production to as
low as 15-16 kt per day, or 30-35% lower m/m.

Because of the recent debottlenecking
of steel-casting capacities at Ilyich Steel, the plant will have to squeeze the
maximum out of its converters, and repairs with a focus on ecology are very
appropriate in order to avoid problems similar to those experienced
previously at Azovstal.

We maintain our bullish view on METINV bonds.