Metinvest iron ore concentrate output rises 3% in 4M20

The attributable production of iron ore concentrate at
the subsidiaries of Metinvest (METINV), Ukraine’s largest steel producer,
amounted to 2.93 mmt (97.6 kt per day) in April, according to Concorde
Capital’s analysis of separate news reports by Interfax-Ukraine. This is a 0.5%
m/m loss on a daily average basis. The holding’s pellet output was 257 kt in
April, a 69.3% m/m plunge on a daily average basis.

Concentrate production at Inhulets Iron Ore dropped
7.2% m/m in April to a daily rate of 32.8 kt. Production at Northern Iron Ore
added 2.1% m/m to 35.4 kt per day. Production at Central Iron Ore slid 1.7% m/m
to 13.0 kt per day, whereas output at Southern Iron Ore advanced 10.3% m/m to
35.8 kt per day.

In 4M20, Metinvest’s attributable output of iron ore
concentrate rose 3.3% yoy to 11.45 mmt, or 94.7 kt per day.

Dmytro Khoroshun: Metinvest’s
stable iron ore concentrate production volumes are continuing to support its
overall profitability. This will help to offset April’s plunge in Ukraine’s export steel prices
and in Metinvest’s steel production volumes.

The plunge in Metinvest’s pellet output in April
should not be a concern. Provided that total concentrate output is stable,
which was the case in April, the variations in pellet production volumes might
be due to the holding’s calculations that producing concentrate might be more
profitable. This might be the case especially at the time when closer European
markets are under coronavirus-related shutdowns.

We tentatively expect Metinvest to produce 33.7 mmt
(92 kt per day) of iron ore concentrate in 2020, or 1% more yoy (including the
attributable share of Southern Iron Ore volume). However, if the situation at
the iron ore and steel markets deteriorates, Metinvest’s iron ore production in
2020 might drop up to 8% yoy to 30.5 mmt (83 kt per day).

At a recent conference call with investors
Metinvest’s CEO said the holding expects its total iron ore concentrate
production (excluding Southern Iron Ore) will remain at the 2019 level.

We maintain our negative view on METINV bonds.