Metinvest steel output drops 2.6% m/m in January

Steel production at Ukraine’s largest producer,
Metinvest (METINV), was 20.5 kt per day (or 635 kt per month, flat yoy) in
January, a 2.6% m/m jump, according to Concorde Capital’s analysis of separate
news reports by Interfax-Ukraine. That result includes Azovstal (AZST UK) and
Ilyich Steel (MMKI UK) figures.

Ilyich Steel reported a 13.9% m/m jump in steel
production to 10.8 kt per day, while Azovstal’s output dropped 16.2% m/m to 9.7
kt per day. Interfax-Ukraine mentioned that Azovstal’s blast furnace No. 2
underwent planned maintenance that started Jan. 15.

The holding’s hot iron output lost 5.6% m/m to 21.9 kt
per day in January.

Dmytro Khoroshun: We note that
Ilyich Steel’s steel output, 10.8 kt per day, was the highest since at least
the beginning of 2016. This daily rate is equivalent to the yearly output of
3.9 mmt, which is close to the 4 mmt capacity of Ilyich’s casting machines
after the recent upgrade.

If Ilyich Steel maintains this daily production rate,
and if it is combined with Azovstal’s 2018 daily average of 11.7 kt per day,
the resulting Metinvest total output would be 22.5 kt per day, or about 8.2 mmt
per year, up from 7.32 mmt in 2018.

However, we are skeptical that such a high output
can be achieved in 2019, and currently expect Metinvest’s 2019 steel output at
about 7.3-7.7 mmt, or up to 5% more yoy.