Metinvest abstains from steel export market

Обзоры по компаниям и отраслям 05.08.2014 Ukraine’s largest steel producer Metinvest (METINV) announced officially on Aug. 4 that it has abstained from concluding new contracts for selling its finished steel products. At the same time, the holding reported it’s doing all its best to execute fully its concluded contracts for August and September, despite logistical risks in its core region, Donbas, which have emerged owing to the ongoing war. Metinvest stated it has decreased production at Azovstal, Yenakiyeve Steel and Ilyich Steel (without specifying exact numbers), which will operate at lowered capacity load until reserve stockpiles of raw materials will be renewed. The key reason is damage caused to key railway sections in Donbas, which complicates logistics. Metinvest and Ukrainian state railway operator Ukrzaliznytsia are working to find new ways to deliver iron ore and coke to steel mills in Donbas, the holding reported, adding that it’s trying to partially offset decreased production at its three Donbas-located steel mills with higher output at its other enterprises, including Zaporizhstal and EU-based assets. Roman Topolyuk: Despite the ongoing warring in Donbas and reduced throughput capacity of the Ukrainian railways, we estimate that Metinvest’s abstention from the market won’t yet have material consequences for the annual result. We expect the company’s operating result in 3Q14 to be somewhat, but not dramatically lower qoq, at 1Q14 levels (at 2.8 mmt of steel production, -11% yoy), which could be counterbalanced in 4Q14. Usually, steel and mining enterprises sell their production one to two months in advance, so Metinvest can wait until the beginning of September to start building its October book of orders, when market demand can bounce back due to seasonality.