Metinvest steel output jumps 30.5% m/m in January

Steel production at Ukraine’s largest producer
Metinvest (METINV) was 24.5 kt per day (or 761 kt per month) in January, a
30.5% m/m jump, according to Concorde Capital’s analysis of separate news
reports by Interfax-Ukraine.

Ilyich Steel reported a 25.0% m/m increase in steel
production to 11.3 kt per day, while Azovstal’s output jumped 35.6% m/m to 13.3
kt per day in January. The holding’s hot iron output rose 6.4% m/m to 22.6 kt
per day.

Dmytro Khoroshun: Metinvest’s
daily steel production in January, 24.5 kt per day, is the highest average
monthly rate since at least the beginning of 2018.

The jump in Metinvest’s production volumes is
consistent with the trend in FOB Ukraine steel prices, which had been
rebounding since early November and reached a peak in mid-January. However,
during the past few weeks these prices have been correcting, and the situation
with the coronavirus is likely to accelerate the downward price trend.

If the average 2020 steel prices remain at their
end-2019 level or improve, Metinvest’s 2020 steel output might remain at its
2019 level, around 7.6 mmt (20.8 kt per day). However, if the situation
deteriorates, Metinvest’s steel output might drop by as much as 10-15% to
6.4-6.8 mmt (17.5-18.6 kt per day).

The coronavirus situation in China is negative for
steel demand and prices worldwide, potentially for the next several months.
However, if China decides, as a response to the economic slowdown, to stimulate
its construction of infrastructure and especially residential real estate, the
demand and prices for steel products might rebound later in 2020.

We maintain our neutral view on METINV bonds.