Ferroalloy Output Up 13% yoy in 2007, Stakhaniv Outpaces Sector Growth 2x

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Company, ths mt                                         2006    2007 Chg,yoy
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Stakhaniv Ferroalloy (SFER: BUY)    SiMn      146.2   148.1    1.3%
                                    FeMn                        6.0     0.0      -100.0%
                                    FeSi                         61.0   115.1     89.9%
                                   Total                         213.2   263.2    23.5%
Nikopol Ferroalloy (NFER: HOLD)     SiMn       613.4   747.1    21.8%
                                    FeMn                        255.0   272.5    6.9%
                                    FeSi                            3.4     0.0     -100.0%
                                   Total                        871.8  1019.6    17.0%
Zaporizhya Ferroalloy (ZFER: HOLD)  SiMn    335.1   324.0     -3.3%
                                    FeMn                      104.8    97.4      -7.1%
                                    FeSi                         48.2    73.4       52.3%
                                   Total                        488.1   494.8     1.4%
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Total                                                            1573.1  1777.6   13.0%
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Source: Ukrainian Ferroalloy Producers Association

Andriy Gerus: We see upside in Stakhaniv stock on positive market environment: in August 2007 the EU imposed antidumping duties on Chinese and Russian imports of FeSi, generating strong demand from Ukraine. In addition, the EU decided to impose five-year duties starting Sept. 2008 for SiMn on Ukraine’s major competitors, China and Kazakhstan. We believe Zaporizhya Ferroalloy is fairly priced due to its highly utilized capacity. We reiterate HOLD on Nikopol, while expecting the resumption of trading after approval of the additional share issue at their EGM scheduled on Feb. 7.