Metinvest steel output rises 8% qoq in 2Q18

Ukraine’s largest steelmaker Metinvest (METINV)
reported on Aug. 2 an 8% qoq increase in steel production to 1.969 mmt at its
subsidiaries in 2Q18. Azovstal’s output swelled 13% qoq to 1.159 mmt in 2Q18,
while Ilyich Steel’s output inched up 1% qoq to 810 kt, according to the
holding’s operational update.

 

Metinvest’s 1H18 crude steel output rose 4% yoy to
3.794 mmt on like-to-like basis (for 1H17 Metinvest excluded production at
Yenakiyeve Steel, which was halted on Feb. 20, 2017) due to an 8% yoy jump to
1.613 mmt at Ilyich Steel, helped by a 1% yoy increase to 2.181 mmt at
Azovstal.

 

The holding’s output of pig iron in 2Q18, 2.136 mmt,
declined 1% qoq, whereas 1H18 pig iron production rose 14% yoy to 4.292 mmt due
to a 23% yoy jump to 2.292 mmt at Ilyich Steel and a 5% increase to 2.0 mmt at
Azovstal.

 

Total coke production in 2Q18 was down 2% qoq to 1.317
mmt, while merchant coke output rose 21% qoq to 437 kt. During 1H18, Metinvest
boosted its total coke production 25% yoy to 2.664 mmt, whereas output of
merchant coke jumped 82% yoy to 800 kt.

 

The 2Q18 output of semi-finished products at
Metinvest, 857 kt, rose 9% qoq (merchant pig iron output dropped 15% qoq to 401
kt, but slabs output jumped 46% qoq to 456 kt). During 1H18, the holding
boosted its semi-finished product output 43% yoy to 1.644 mmt, owing to a 60%
yoy surge in merchant pig iron output to 875 kt and a 27% yoy increase in slab
output to 769 kt.

 

The holding’s finished product output was unchanged
qoq in 2Q18 at 1.473 mmt despite a 15% qoq drop in long products output to 196
kt, owing to a 3% qoq increase in flat products output to 1.232 mmt. During
1H18, finished products output improved 6% yoy to 2.949 mmt owing to a 34% yoy
jump in long products output to 427 kt and 2% yoy growth in flat products to
2.431 mmt.

 

Total iron ore concentrate production in 2Q18, 7.062
mmt, rose 2% qoq, whereas output of merchant iron ore products advanced 9% qoq
to 3.931 mmt due to a 17% qoq rise in merchant pellets production to 2.021 mmt.
For 1H18, total iron ore concentrate output  increased 2% yoy to 13.987
mmt, while production of merchant iron ore products dropped 3% yoy to 7.536 mmt
due to a 27% yoy slide in merchant concentrate output to 3.792 mmt that was
offset in large part by a 45% yoy boost in merchant pellet production to 3.744
mmt.

 

Dmytro Khoroshun: It is
positive that Metinvest was able to improve by 3% qoq 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. The qoq jump
in 2Q18 slab production volume at the expense of merchant pig iron production
is also positive. However, in light of the worldwide trend of rising steel
trade protectionism, we are 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.