Metinvest steel output drops 17% qoq in 2Q20

Ukraine’s largest steelmaker Metinvest (METINV)
reported on Aug. 4 a 17% qoq drop in steel production at its subsidiaries to
1.792 mmt in 2Q20. Azovstal’s output lost 16% qoq to 936 kt in 2Q20, while
Ilyich Steel’s output dropped 19% qoq in 2Q20 to 856 kt, according to the
holding’s quarterly operational update. Year-on-year, Metinvest’s 1H20 crude
steel output inched up 1% due to a 2% yoy gain at Ilyich Steel while Azovstal’s
1H20 output was flat yoy.

 

The holding’s hot iron output in 2Q20, 1.976 mmt, slid
5% qoq, and the 1H20 volume was up 1% yoy.

 

The 2Q20 output of semi-finished products at Metinvest
jumped 38% qoq to 880 kt as its merchant pig iron output skyrocketed 3.7x qoq
to 397 kt while its slab output slid 9% qoq to 483 kt.

 

The holding’s finished product output retreated 17%
qoq in 2Q20 to 1.294 mmt due to a 28% qoq loss in hot-rolled plate production
to 589 kt and a 32% qoq plunge in long product output to 155 kt.

 

For 1H20, Metinvest’s output of semi-finished products
improved 5% yoy to 1.517 mmt and its finished product output was down 7% to
2.824 mmt.

 

Total coke production gained 11% qoq to 1.25 mmt in
2Q20, while merchant coke output advanced 24% qoq to 533 kt. For 1H20, total
coke production slid 4% yoy to 2.373 mmt, while merchant coke output jumped 37%
yoy to 964 kt.

 

Total 2Q20 iron ore concentrate production slid 1% qoq
to 7.567 mmt, whereas output of merchant iron ore products gained 9% qoq to
5.124 mmt due to a 29% qoq jump in merchant iron ore concentrate production to
4.11 mmt that was partially offset by a 34% qoq plunge in merchant pellet
production to 1.014 mmt.

 

Total 1H20 iron ore concentrate production rose 5% yoy
to 15.174 mmt, whereas output of merchant iron ore products increased 13% yoy
to 9.828 mmt.

 

Dmytro Khoroshun: By
maintaining at high levels of output of merchant iron ore products in 2Q20 amid
the high iron ore prices at the global markets, Metinvest was likely able to
avoid breaching its 3x net leverage covenant as of end-June, which was a narrow miss as its net leverage reached 3.04x at end-May.

 

Metinvest also responded to global steel market
weakness in 2Q20 by offsetting the loss in steel product volumes with increases
in merchant pig iron production.

 

We maintain our neutral view on METINV bonds.