Coronavirus threatens steel recovery: Metinvest

A recovery in spot steel prices at the end of 2019 is at risk from the spreading coronavirus as well as political instability, the chief executive of Ukrainian steelmaker Metinvest, Yuriy Ryzhenkov, told Argus in an interview today.

"[The recovery] has happened because most of the producers reached their breakeven costs in the key steel markets," Ryzhenkov said. The upward momentum took place earlier than anticipated — Metinvest had expected a recovery from the second half of this year. But fob Black Sea prices have gained around $100/t in the period from the lows observed at the end of October/beginning of November, according to Argus assessments.

The company today posted its 2019 financial results, which showed a 71pc slump in profits on the year to $341mn, owing to lower sales revenues and a sharp fall in operating profits.

"Having said that, there's still some uncertainties, which may damage [the recovery]," he added, singling out the impact of the coronavirus and political instability in the Middle East as key threats to steel pricing.

"There are also positive things that have happened since then — the trade deal between the US and China, and the relaxation of US trade barriers — that certainly have a positive effect on the steel market. Also the measures that the Chinese government has announced, again in relation to this coronavirus… can bring certain improvements to steel demand."

Metinvest sees demand as stable at the moment, but at risk from the uncertainties that the virus has brought to the market. "At this point in time, we don't have any effects from this virus on our operations, even though the markets where we see many of the cases are some of our key markets, for example Italy. But at the moment, we don't feel any significant effect," he said.

The company expects an 8pc increase in crude steel production this year, as a result of an almost 20pc ramp-up at the Ilych steel mill, where the company in 2019 completed the construction of a continuous casting machine and the first stage of the revamp of its hot-strip mill. The increase will mostly filter into higher output of hot-rolled coils, rather than slab, but this depends on the market conditions and which products are more profitable, Ryzhenkov said.

The hot metal production increase will be more moderate in 2020 to reach 8.1mn t, while Metinvest expects flat year-on-year iron ore output at 27mn t. The split between third-party iron ore sales and own consumption will be similar to 2019, with 11mn-12mn t to be consumed by the company's mills.

By Lora Stoyanova