Zaporizhstal updates on its converter shop construction plans

Zaporizhstal (ZPST UK), Ukraine’s fourth-largest iron
and steel plant in which a 49.9% stake is owned by Ukraine’s largest steelmaker
Metinvest (METINV), estimates the total cost of its converter shop construction
project at USD 1.5 bln, according to Metinvest CEO Yuriy Ryzhenkov, as cited by
GMK Center, an industry consultancy, in a July 22 interview.

The documentation for the project should be finished
by mid-2020, and it will take five years to construct the converter shop once
the money is available, Ryzhenkov said, adding that the discussions with a
portfolio of creditors are underway and should be finished by the end of 2019.

Recall, in February 2018 Zaporizhstal’s CEO said in an interview
that the plant was in talks with European banks on financing a USD 1 bln
three-year project on replacing its open-hearth furnaces with an oxygen
converter shop.

Dmytro Khoroshun: We continue
to think that Metinvest will have to support Zaporizhstal’s ambitious financing
plans because Zaporizhstal is unlikely to secure the financing on its own after
the recent collapse of its profitability.
Metinvest needs Zaporizhstal’s ability to purchase Metinvest’s iron ore with
minimal logistics costs, and is therefore interested in Zaporizhstal’s boosting
its steelmaking efficiency. Therefore, we think it would be justified if
Metinvest helps Zaporizhstal in some way with converter shop financing, but it
is crucial that such help comes in a transparent, economically justified form.

We maintain our bullish view on METINV bonds.