Metinvest steel output plunges 26% m/m in June

Steel production at Ukraine’s largest producer
Metinvest (METINV) was 17.5 kt per day (or 526 kt per month) in June, a 25.7%
m/m plunge, 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 19.7% m/m loss in steel
production to 8.2 kt per day, while Azovstal’s output dove 30.4% m/m to 9.3 kt
per day in June. The holding’s hot iron output dropped 22.8% m/m to 18.5 kt per
day.

In 1H19, Metinvest’s steel output was 3.92 mmt, or
3.7% more yoy.

Dmytro Khoroshun: A plunge in
Metinvest’s steel production in June had to be expected because of heavy
repairs (one blast furnace and one converter at both Ilyich Steel and
Azovstal), and the actual 25.7% m/m drop in average daily steel production rate
was better than a 30-35% plunge we expected.

We tentatively expect Metinvest’s July daily steel
production rate to remain roughly in line with June’s reading, well below the
22-24 kt per day levels the holding demonstrated during February-May.

We expect Metinvest’s 2019 steel production to reach
8.0-8.3 mmt, up 9-14% yoy. The management’s recent guidance for 2019 was 8.32 mmt
(up 14% yoy).

We maintain our bullish view on METINV bonds.