Metinvest steel output drops 8% qoq in 3Q18

Ukraine’s largest steelmaker Metinvest (METINV)
reported on Oct. 31 an 8% qoq decrease in steel production to 1.803 mmt at its
subsidiaries in 3Q18. Azovstal’s output plunged 15% qoq to 0.988 mmt in 3Q18
due to scheduled overhauls of basic oxygen converters No. 1 (7 days) and No. 2
(21 days). Ilyich Steel’s output inched up 1% qoq in 3Q18 to 815 kt, according
to the holding’s operational update.

 

Metinvest’s 9M18 crude steel output rose 3% yoy to 5.597
mmt on a like-to-like basis (for 9M17, Metinvest excluded production at
Yenakiyeve Steel, which was halted on Feb. 20, 2017) due to a 6% yoy jump to
2.428 mmt at Ilyich Steel, while production at Azovstal remained flat yoy at
3.169 mmt.

 

The holding’s output of pig iron in 3Q18, 1.943 mmt,
declined 9% qoq due to planned overhauls of blast furnaces, No. 5 at Ilyich
Steel (35 days) and Nos. 4 and 5 at Azovstal (7 and 19 days), Metinvest
reported. Its 9M18 pig iron production rose 8% yoy to 6.234 mmt due to a 10%
yoy jump to 3.310 mmt at Ilyich Steel and a 6% yoy increase to 2.924 mmt at
Azovstal.

 

Total coke production in 3Q18 fell 5% qoq to 1.247
mmt, while merchant coke output decreased 2% qoq to 430 kt. During 9M18,
Metinvest boosted its total coke production 15% yoy to 3.910 mmt, whereas
output of merchant coke jumped 43% yoy to 1.230 mmt.

 

The 3Q18 output of semi-finished products at
Metinvest, 661 kt, dropped 23% qoq (merchant pig iron output dropped 21% qoq to
317 kt, while slab output plunged 25% qoq to 344 kt). During 9M18, the holding
boosted its semi-finished product output 18% yoy to 2.305 mmt, owing to a 21%
yoy rise in merchant pig iron output to 1.192 mmt and a 16% yoy increase in
slab output to 1.113 mmt.

 

The holding’s finished product output slid 1% qoq in
3Q18 at 1.453 mmt due to a 5% qoq drop in flat products output to 1.172 mmt,
which was partially offset by a 67% qoq jump in tubular products output to 45
kt and an 89% improvement in railway products output to 34 kt. During 9M18, finished
products output increased 6% yoy to 4.402 mmt owing to a 28% yoy jump in long
products output to 629 kt and 3% yoy growth in flat product output to 3.603
mmt.

 

Total iron ore concentrate production in 3Q18, 6.554
mmt, dropped 7% qoq, whereas output of merchant iron ore products slid 1% qoq
to 3.888 mmt due to a 2% qoq decrease in merchant iron ore concentrate
production to 1.878 mmt. For 9M18, total iron ore concentrate output was flat
yoy at 20.540 mmt, while production of merchant iron ore products inched up 1%
yoy to 11.425 mmt due to a 32% yoy jump in merchant pellets output to 5.754 mmt
that was offset in large part by an 18% yoy plunge in merchant concentrate
production to 5.671 mmt.

 

Dmytro Khoroshun: It is
positive that Metinvest continues to maintain its output (and, presumably, also
its sales) of its finished flat products even after the introduction of a EUR 60.5/t anti-dumping duty
 on imports of Ukrainian hot-rolled coil by the EU in October 2017.
Indeed, Metinvest explained that the 60 kt qoq drop in flat product output in
3Q18 was almost entirely (57 kt) due to the scheduled maintenance shutdowns at
its European re-rolling plants. However, in light of the worldwide trend of
rising steel trade protectionism, we are remaining cautious about the prospects
of Metinvest’s steel sales.

 

In contrast, the prospects of Metinvest’s iron ore
product sales are bright due to high premiums the market pays for the holding’s
high-quality products, concentrate and especially pellets.