Metinvest discloses more marketing and investment plans
Roman Kurashev, the marketing director of Ukraine’s leading steel holding Metinvest (METINV), has revealed more about its mid-term marketing and investment plans, as reported by various media over the last week. In particular, last year Metinvest purchased the fixed assets of AG Steel, a Mariupol-based maker of welded pipes, according to Kurashev, as reported by the hromadske.ua news site. These fixed assets include two electric resistance welding (ERW) mills BTM-160 and BTM-520. The fixed assets of AG Steel are already working as a unit of Ilyich Steel, according to hromadske.ua’s sources.
In addition, Metinvest is considering investing into pre-painted galvanized iron (PPGI) capacities, according to Kurashev, as reported by the uaprom.info site. One of the possibilities is constructing two PPGI lines, each with capacity of 120-150 kt per year. Metinvest might either paint hot-dip galvanized (HDG) steel it produces at existing capacities, or choose to install an additional HDG line with a capacity of 300 kt per year. Kurashev estimates the Ukrainian PPGI demand at 300 kt per year, and expects it to increase to 400 kt per year in a few years.
Dmytro Khoroshun: The news about the acquisition of AG Steel’s capacities might explain the increase in pipe production volumes at Ilyich Steel: from 50-60 kt per year in 2012-2015 to 88 kt in 2016 and already 144 kt in 11M17, according to Metal Expert, an industry consultancy. The assets acquired likely include a strip-making shop with a capacity of 360 kt per year that was launched by AG Steel in 2005.
Even though it was not clear at which site Metinvest is considering constructing PPGI capacities, we think it is also Ilyich Steel (a less likely alternative would be Zaporizhstal, a Metinvest’s joint venture).
The markets for the main products of Metinvest, in particular for semi-finished products, are currently strong enough to allow the holding to invest in downstream capacities such as welded pipes and PPGI.
We think such investments are the right strategic moves (provided the costs of such investments are adequate) that would make Metinvest’s sales portfolio more diverse and robust.
We are keeping our neutral view on METINV Eurobonds.