Ukraine slams duties on coated steel imports from Russia, China

Ukraine introduced anti-dumping duties on imports of
coated flat steel products from Russia (duty rate: 47.57%) and China (22.78%),
the economy ministry reported on June 27. The investigation into the duties was
initiated in October 2018 on a request by Ilyich Steel, a plant owned by
Metinvest (METINV), Ukraine’s largest steelmaker.

The duties will be applied for five years, but the
starting date for their application was not made clear.

Dmytro Khoroshun: The duties
will concern mostly zinc-coated hot-dip galvanized (HDG) flat products, and
will benefit Metinvest, which has annual HDG production capacities of about 400
kt at Ilyich Steel (2018 production: 320 kt) and 100 kt at Unisteel (35 kt).

We estimate that Ukraine imported about 134 kt of HDG
products in each of 2017 and 2018, of which 25 kt came from Russia in 2018 (a
40% yoy increase from 18 kt in 2017) and 44 kt was imported from China (a 30%
yoy decrease from 62 kt in 2017).

It also should be noted that Ukraine exports large
volumes of HDG, or 253 kt in 2018 (up 6% yoy), including 87 kt to Russia (down
31% yoy).

These duties, however, will not apply to pre-painted
galvanized iron (PPGI) products, which Ukraine produces in small quantities (less
than 25 kt in 2018) and mostly imports (309 kt in 2018). Recall, at the end of
2017, Metinvest revealed it was considering constructing two PPGI
lineswith a total capacity of 240-300 kt per year. If these
plans are realized, Ukraine might introduce protective measures for its
domestic PPGI market as well.

We maintain our bullish view on METINV bonds.