U.S. finds Metinvest dumped wire rod

The U.S. Commerce Department announced on Oct. 25 its preliminarily finding that the subsidiaries of Ukraine’s largest steel producer Metinvest (METINV) dumped wire rod on the U.S. market. It assigned preliminary dumping rates of 22.06% for Ferriera Valsider and 44.03% for Yenakiyeve Steel. ArcelorMittal Kryvyy Rih, the largest Ukrainian steel plant on a standalone basis, was assigned the same preliminary dumping rate of 44.03%, whereas all other producers and exporters in Ukraine were assigned a preliminary dumping rate of 34.98%. The case will be finalized on Mar. 1, 2018.

During 2002-2014, the U.S. applied a 116.37% anti-dumping duty on imports of wire rod from Ukraine. The U.S. Department of Commerce reported that imports of wire rod from Ukraine increased to 146.5 kt in 2016 from 13.3 kt in 2014.

Dmytro Khoroshun: Metinvest lost control of its assets capable of producing wire rod (Yenakiyeve Steel and its Makiyivka Steel re-rolling branch) as of March this year, when a trade blockade was imposed by the Ukrainian government on Russian-occupied Donbas. We believe the U.S. investigation excludes the long steel products of Metinvest’s only long re-roller currently under its control, Promet Steel in Bulgaria. We also think that the involvement in this case of Ferriera Valsider, which is one of Metinvest’s flat products re-rollers, was limited to being a re-seller of Ukrainian products. Therefore, we think that this news in itself is neutral for Metinvest, at least until returning control over Yenakiyeve Steel becomes realistic.
Nevertheless, we continue to view the current international trade environment trends, particularly deglobalization, as a substantial risk factor for Metinvest and the Ukrainian steel-producing industry in general, which are unable to rely on the domestic market for any commensurate consumption capacity. One way to survive is to boost the sales of its semi-finished products, which Metinvest has been doing recently: in 1H17, it raised the production volumes of its merchant pig iron by 10% yoy and slabs by 72% yoy.

We are keeping our neutral view on METINV Eurobonds as we see a high refinancing risk for the next twelve months.