Ukraine steel production surges 9% mom in January, up 1% yoy

Ukrainian steel makers manufactured 2.8 mmt of steel in January, which is 1% higher yoy and a 9% jump mom. Among the strongest advancers were Alchevsk Steel (ALMK UK), increasing steel output 22.9% yoy and 8% mom to 399 kt. Production at Azovstal (AZST UK) rebounded 15% mom to 390 kt (-1% yoy). Steel output by Yenakiieve Steel (ENMZ UK) surged 34% mom (-1% yoy) to 244 kt. The January operating results for Illich Steel (MMKI UK) improved 6% mom to 436 kt (-5% yoy). The sector intends to smelt 2.54 mmt of steel in February (-8% mom in monthly, -1% mom in daily terms), according to preliminary plans announced by the Metallurgprom industry association in mid-January.

Roman Topolyuk: Steel output in January came in 3% more than the industry association had previously forecasted, and much better than our conservative expectations. Thus, Ukrainian producers improved their steelmaking capacity load to 76% in January from 70% in December. The industry performance would have been even better if the non-listed Donetsk Electrometallurgical Steel Works, a subsidiary of Russian company Mechel, didn’t remain idle in January (2% of Ukraine’s total production in 2012) due to problems with raw material supplies and finished product sales.

The construction finished steel market subsegment got worse by the year’s end, partly reflected in a price correction that we estimate was seasonal (average rebar prices in December slid 2% mom to USD 585/t). ArcelorMittal Kryviy Rih, the largest Ukrainian steelmaking enterprise that also produces construction steel, underwent a 2% mom production decline as well. The bright exception in the subsegment was Yenakiieve Steel, which spent December with a rare low capacity utilization, but recovered its output in January.

On the contrary, prices for slabs (semi-product for flat steel) surged 10% mom in December to USD 493/t and prices for hot rolled coil rose 2% mom to USD 522/t. This helped flat steel producers – including Azovstal, Alchevsk Steel and Illich Steel – to declare a 10-23% mom increase in sales, triggering production growth.