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Ukraine's Metinvest reduces 2019 steel production outlook in 'difficult' market

Source: pixabay, November 1, 2019

 Ukrainian mining and steelmaking group Metinvest has lowered its 2019 steel production outlook by 500,000 mt, due to the overall "difficult" market conditions, CEO Yyriy Ryzhenkov told S&P Global Platts on the sidelines of the WSD European Steel Conference in Milan.

"Demand for steel is at the bottom of a downturn cycle and we do hope for a recovery that nevertheless we don't see coming yet. Prices for finished steel products are likely to rebound but not before Q1-Q2 while, regarding iron ore prices, I think prices will continue to stay in the range they are now," Ryzhenkov added.

Ryzhenkov said that the company now expects to raise steel production at its Ilyich steel works by only around 500,000 mt this year, instead of the 1 million mt previously projected. In addition, it expects to produce around 8 million mt this year at both of its Mariupol works.

Metinvest, the world's 10th largest iron ore producer, is expected to produce 1 million mt more of total iron ore concentrate in 2019, or around 29 million mt in total. The company uses around 8 million mt of iron ore internally, with 5 million mt for its partners and the rest sold to third parties.

Ryzhenkov said he is in discussions with the Ukrainian government on a new law that, if confirmed, would likely increase the tax burden on the company's iron ore production fivefold, in a move that could hurt its margins.

"We believe we will find a reasonable agreement," Ryzhenkov said.

Regarding coking coal, in 2019 the company expects to increase production by around 10% and will continue to use coking coal from its US plants -- accounting for 30-40% of its intake -- as well as from its associated Ukrainian coking coal producer and from third parties.

The company is also looking into new investments, mergers and acquisitions, and is also evaluating greenfield projects for finished steel lines.

"We are always looking for opportunities...we are looking also in Italy. Italy is the largest importer of European coils so we are considering a few options such as to increase production at our Valsider site or even to build a new greenfield finished site with an annual production of around 2 million mt of coils using our slabs from Ukraine," he said.

The decision will be taken by the end of next year's first quarter. Valsider produced around 660,000 mt of coils in 2018.

In 2018, the company invested almost $900 million, of which more than 10% went on environmental projects, the CEO said.

During 2019-2024, its capex for environmental projects could reach $400 million. In particular, next year Metinvest will de-dust its Illyich sinter plant, which is expected to decrease emissions by 80%, the company said.

In terms of other large investments done this year, Ryzhenkov confirmed that on Monday the company started testing the 2.5 million mt/year hot-strip mill at Illyich, with the ramp-up of the mill likely to start in two weeks. Investment for this project started in 2017 at a total cost of around $110 million.

At Azovstal, operations at blast furnaces Nos. 5 and 6 were halted according to plan in June 2019. Blast furnace No. 5 has been decommissioned, while No. 6 is being prepared for reconstruction.

Apart from the main equipment, numerous key environmental measures will be implemented: there are plans to install cutting-edge gas cleaning systems in the furnace, as well as dust extraction units in the casting unit and warehouse. There are also discussions about installing a pre-furnace pelletizing unit to process sinter and minimize its build-up.

News Source: S&P Global