Metinvest steel output falls 8% m/m in August

Attributable steel producation at Ukraine’s largest steel producer Metinvest (METINV) fell 8% m/m to 850 kt in August (+1% yoy), according to Concorde Capital’s analysis of the results of its subsidiaries and a 49.9% portion of Zaporizhstal’s results, accounted for as a JV. The main factor was the weaker performance of its two Mariupol plants, caused by lower availability of railcars.

In 8M16, Metinvest’s attributable steel production was 6.953 mmt (+6% yoy), according to our estimates.

Roman Topolyuk: Despite the lower m/m performance in August, we leave our 2016 forecast of Metinvest’s attributable steel production unchanged at 10.5 mmt (+9% yoy). The short-term instability of railway connections between Mariupol and the Kryviy Rih region, where Metinvest’s iron ore mines are located, occurs from time to time due to inefficient railway operations.

In the mid-term, the state railway operator claims it will debottleneck this route, striving to increase its throughput capacity. We maintain our positive view on Metinvest’s Eurobonds.