Metinvest steel output drops 4% qoq in 4Q18

Ukraine’s largest steelmaker Metinvest (METINV)
reported on Jan. 31 a 4% qoq drop in steel production to 1.725 mmt at its
subsidiaries in 4Q18. Azovstal’s output dropped 8% qoq to 0.912 mmt in 4Q18 due
to a scheduled overhaul of basic oxygen converter No. 1. Ilyich Steel’s output
was flat qoq in 4Q18 at 813 kt, according to the holding’s operational update.

 

Metinvest’s 2018 crude steel output slid 1% yoy to
7.323 mmt due to a 4% yoy drop to 4.082 mmt at Azovstal, which was mostly
offset by a 5% yoy rise at Ilyich Steel to 3.241 mmt.

 

The holding’s pig iron output in 4Q18, 1.971 mmt,
inched up 1% qoq. Its 2018 pig iron production rose 3% yoy to 8.205 mmt due to
an 8% yoy jump to 4.498 mmt at Ilyich Steel, which was offset by a 2% yoy
decrease to 3.707 mmt at Azovstal.

 

The 4Q18 output of semi-finished products at
Metinvest, 723 kt, grew 9% qoq (merchant pig iron output jumped 43% qoq to 452
kt, while slab output plunged 22% qoq to 270 kt). During 2018, the holding increased
its semi-finished product output 10% yoy to 3.026 mmt, owing to a 17% yoy rise
in merchant pig iron output to 1.644 mmt and a 3% yoy increase in slab output
to 1.382 mmt.

 

The holding’s finished product output dropped 6% qoq
in 4Q18 to 1.367 mmt due to a 94% qoq plunge in railway product output to 2 kt,
a 2% qoq drop in flat product output to 1.144 mmt, a 7% qoq loss in long
product output to 188 kt, and a 27% loss in tubular product output to 33 kt.
During 2018, finished product output increased 3% yoy to 5.769 mmt owing to a
14% yoy increase in long product output to 817 kt and 2% yoy growth in flat
product output to 4.747 mmt.

 

Total coke production in 4Q18 rose 9% qoq to 1.358
mmt, while merchant coke output gained 13% qoq to 487 kt. During 2018,
Metinvest boosted its total coke production 11% yoy to 5.269 mmt, whereas
output of merchant coke jumped 42% yoy to 1.717 mmt.

 

Total iron ore concentrate production in 4Q18, 6.813
mmt, rose 4% qoq, whereas output of merchant iron ore products slid 2% qoq to
3.794 mmt due to a 14% qoq decrease in merchant pellet production to 1.730 mmt,
which was largely offset by a 10% qoq increase in merchant iron ore concentrate
production to 2.064 mmt.

 

For 2018, total iron ore concentrate output was flat yoy
at 27.353 mmt, while production of merchant iron ore products inched up 1% yoy
to 15.218 mmt due to a 30% yoy jump in merchant pellet output to 7.484 mmt,
which was offset in large part by a 17% yoy drop in merchant concentrate
production to 7.734 mmt.

 

Dmytro Khoroshun: Metinvest
commented that the 8% yoy increase in pig iron production at Ilyich Steel was
due to improved stability of raw material supplies, and we expect the recent improvements in rail communications with Mariupol
will enable Metinvest to maintain pig iron production volumes and possibly even
boost them by up to 10% yoy in 2019, approaching 9 mmt. Nevertheless, we also
see substantial risks to iron and steel production volumes in 2019 due to the
plunge in prices during 2H18.

 

On the other hand, Metinvest has a chance to increase
its sales of iron ore products in 2019, which should be in robust demand and
command higher prices at the world markets in the next few months due to the
recent Vale mine disaster in Brazil.