Metinvest affiliate Pokrovske Coal output jumps 26% in 2019

Private joint stock
company Pokrovske Coal produced 16.5 kt of raw coking coal per day in December,
a 27.2% m/m jump, according to Concorde Capital’s analysis of Energy Ministry
data as reported by Interfax-Ukraine on Jan. 20.

In 2019, Pokrovske
Coal produced 5.0 mmt of coal, a 25.8% yoy jump.

Recall, Pokrovske
Coal said in its 2018 annual report that it plans to boost coal production
42% yoy to 5.63 mmt
in 2019.

Metinvest (METINV),
Ukraine’s largest steelmaker, owns 25% of Pokrovske Coal assets.

Dmytro Khoroshun: Recently, Pokrovske’s coal daily
output had peaked at 17.0 kt on average in September, bottomed out at 13.4 kt
in November, and rebounded substantially in December. This dynamic is
consistent with the FOB Ukraine iron and steel prices bottoming out in early
November and having rebounded since. However, in the next few weeks the FOB
Ukraine steel prices face a likely correction following a strong 10-week run.

For 2020, because
Pokrovske Coal should be able to replace some imported volumes in comparison
with the early 2019 situation at Ukraine’s coal market, we expect its output to
drop less than the 10-15% yoy decrease we expect for Metinvest’s steel
production volume in a downside scenario for 2020. However, if the steel
markets rebound further from their mid-January level, Pokrovske Coal might even
boost its production by 10-15% yoy to 5.5-5.8 mmt in 2020.

We maintain our neutral view on METINV bonds.