DJ PJSC Magnitogorsk Iron and Steel Works: MMK Group Trading Update for Q1 2020
PJSC Magnitogorsk Iron and Steel Works (MMK)
PJSC Magnitogorsk Iron and Steel Works: MMK Group Trading Update for Q1 2020
14-Apr-2020 / 10:04 CET/CEST
Dissemination of a Regulatory Announcement that contains inside information
according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
14 April 2020
Magnitogorsk, Russia
MMK Group Trading Update for Q1 2020
PJSC Magnitogorsk Iron & Steel Works ("MMK", or "the Company") (MICEX-RTS:
MAGN; LSE: MMK), one of the world's largest steel producers, is pleased to
announce its Trading Update for Q1 2020.
Q1 2020 key operating results in comparison to Q4 2019
- Pig iron output decreased by 9.6% quarter-on-quarter (q-o-q) and
amounted to 2,355 thousand tonnes amid the suspension of blast furnace ?2
production due to a capital overhaul in February. The overhaul will allow
to improve environmental performance through constructing dust exhausting
units at casting house and stock house.
- Steel output was down by 1.6% q-o-q and amounted to 3,022 thousand
tonnes due to maintenance work at converter facilities and scheduled
reconstruction of hot rolled Mill 2500.
- MMK Group's total sales of finished products totalled 2,745 thousand
tonnes, down 1.3% q-o-q.
- MMK Group's sale of HVA products amounted to 1,308 thousand tonnes, up
1.0% q-o-q. The share of HVA products in total sales amounted to 47.7%.
This growth was due to higher demand for coated metal products.
- MMK Coal's coal concentrate production totalled 814 thousand tonnes, up
12.9% q-o-q due to higher demand for concentrate at MMK.
Q1 2020 key operating results in comparison to Q1 2019
- Pig iron output decreased by 1.7% year-on-year (y-o-y) amid longer
maintenance work scheduled at blast furnace facilities compared to the
previous year.
- Steel output was down by 2.7% y-o-y due to lower steel demand amid
scheduled maintenance work at rolling facilities.
- MMK Group's total sales of finished products declined by 1.3% y-o-y.
- MMK Group's sale of HVA products declined by 2.5% y-o-y. The share of
HVA products in total sales was down to 47.7%.
- MMK Coal's coal concentrate production increased by 4.8% y-o-y.
MARKET OVERVIEW
- Following the partial recovery of global prices for rolled metal
products at the end of Q4 2019, the global market conditions sharply
deteriorated in mid-Q1 2020 due to widespread quarantine measures and
weaker economic activity amid the coronavirus pandemic outbreak.
- In the beginning of Q1 2020, price dynamics on the Russian market
reflected the global quotes growth initiated in Q4 2019. At the end of Q1
2020, prices for rolled metal products were supported by a significant
rouble devaluation.
- Global iron ore market: in Q1 2020, iron ore quotes were high and ranged
from $80-90/tonne CFR China. Despite the active development of the
coronavirus pandemic, the blast furnace capacity utilization in China was
nearly the same as in early 2019 - demand and end consumption of iron ore
was stable. In addition, high prices were also a result of a weak supply
at the global iron ore market. Shipments from Brazil were quite low during
almost all of Q1 2020 due to heavy rain season. At the end of the quarter
a number of other countries such as South Africa, India, and others
decreased iron ore exports due to restrictions aimed at preventing the
spread of coronavirus.
- Russian iron ore market: at the beginning of Q1 2020 iron ore exports to
EU countries increased. In April 2020 the pace of exports declined
sharply, following the pandemic outbreak in Europe. Russian iron ore
suppliers redirect export volumes to China amid phased economic recovery
in the region. However, the challenging situation for metal producers
around the world and logistic issues of iron ore exports from Russia may
have a negative impact on the sales volumes of Russian suppliers. Base
prices in Russia are following Chinese indices adjusted for changes in
USD/RUB rate.
- Global coking coal market: in January-February, quotes demonstrated
growth due to high sales volumes in China. However, in March, demand from
China declined as the local mining volumes resumed to normal levels, while
a sharp decline in capacity utilisation at metal facilities in the EU, US,
India and other countries started to accelerate on the back of pandemic.
As a result, all unclaimed volumes were redirected to China, leading to
spot prices declining by $20-25/tonne within the month.
- Russian coking coal market: the volume of raw materials supply in Russia
continue to exceed demand; exports slightly increased in Q1 2020 prior to
the pandemic, but external demand is quite limited in the current
environment. While Russian coal producers have started to reduce mining
rates, this has not significantly affected the market balance so far.
Prices in Russia slightly declined in Q1 2020, following a sharp decline
throughout the whole of 2019, however they are remained flat in Q2 as
prices in Russia are already close to cash costs levels for many coal
companies.
- Russian metal scrap market: the increase in scrap prices in Russia in
early 2020, which occurred amid a period of low scrap collection dynamics,
supported the supply volume. However, starting from February 2020, steel
companies have been reducing purchasing prices, due to lower exports
quotes for scrap. At the end of Q1 2020, prices continued to drop amid
potential decline in capacity utilisation of steel companies due to
unfavourable macroeconomic conditions.
MMK GROUP: CONSOLIDATED RESULTS
(thousand tonnes)
Q1 2020 Q4 2019 % Q1 2020 Q1 2019 %
Crude steel 3,022 3,070 -1.6% 3,022 3,107 -2.7%
production
Pig iron 2,355 2,604 -9.6% 2,355 2,396 -1.7%
production
Coal concentrate 814 721 12.9% 814 777 4.8%
production
Iron ore 658 678 -3.0% 658 716 -8.2%
production
Finished products 2,745 2,781 -1.3% 2,745 2,782 -1.3%
sales, including:
Long products 357 313 14.1% 357 329 8.3%
Flat hot-rolled 1,080 1,173 -7.9% 1,080 1,111 -2.7%
products
HVA products, 1,308 1,296 1.0% 1,308 1,342 -2.5%
including:
Thick plate (Mill 231 211 9.1% 231 293 -21.1%
5000)
Flat cold-rolled 245 260 -6.1% 245 257 -4.8%
products
Downstream 833 824 1.1% 833 793 5.1%
products,
including:
Tin plate 42 30 39.1% 42 32 29.0%
Galvanised steel 443 426 4.1% 443 414 7.2%
Polymer-coated 140 150 -6.4% 140 156 -10.4%
steel
Band 32 33 -3.4% 32 35 -8.0%
Formed section 44 39 11.9% 44 41 8.5%
Pipes 13 16 -20.6% 13 11 12.5%
Metalware 108 117 -7.7% 108 93 16.3%
Other metal 11 13 -13.4% 11 11 3.4%
products
Share of HVA 47.7% 46.6% 47.7% 48.2%
products
Consolidated prices for metal products
(USD / tonne)
Q1 2020 Q4 2019 % Q1 2020 Q1 2019 %
Average price per 591 577 2.3% 591 619 -4.5%
tonne:
Long products 497 498 -0.2% 497 517 -3.8%
Flat hot-rolled 520 469 10.7% 520 528 -1.6%
products
HVA products, 675 694 -2.7% 675 719 -6.1%
including:
Thick plate (Mill 688 710 -3.1% 688 708 -2.8%
5000)
Flat cold-rolled 602 603 -0.2% 602 601 0.0%
products
Downstream 692 719 -3.7% 692 762 -9.1%
products,
including:
Tin plate 773 816 -5.3% 773 783 -1.3%
Galvanised steel 651 688 -5.3% 651 728 -10.5%
Polymer-coated 827 848 -2.4% 827 871 -5.1%
steel
Band 663 680 -2.5% 663 675 -1.7%
Formed section 760 739 2.8% 760 762 -0.3%
Pipes 555 531 4.6% 555 579 -4.0%
Metalware 659 668 -1.3% 659 769 -14.4%
Other metal 692 773 -10.5% 692 765 -9.6%
products
? The average selling price, expressed in US dollars, for Q1 2020
increased by 2.3% q-o-q and amounted to $591 per tonne. The increase was
mainly driven by recovery in global prices for hot-rolled steel in Q4
2019, which had a positive impact on the prices of the domestic market in
Q1 2020, despite of the rouble devaluation at the end of Q1 2020. The
average selling price for Q1 2020 decreased by 4.5% compared to Q1 2019
amid lower global steel prices.
MMK GROUP HIGHLIGHTS BY KEY SEGMENTS
Steel segment Russia
(thousand tonnes)
Q1 2020 Q4 2019 % Q1 2020 Q1 2019 %
Crude steel 3,022 3,070 -1.6% 3,022 3,107 -2.7%
production
Pig iron 2,355 2,604 -9.6% 2,355 2,396 -1.7%
production
Sales of finished 2,597 2,740 -5.3% 2,597 2,779 -6.6%
products,
including:
Long products 357 313, 14.1% 357 329 8.3%
Flat hot-rolled 1,095 1,292 -15.2% 1,095 1,279 -14.3%
products
HVA products, 1,145 1,139 0.6% 1,145 1,172 -2.3%
including:
Thick plate (Mill 231 211 9.1% 231 293 -21.1%
5000)
Flat cold-rolled 245 260 -6.0% 245 255 -4.1%
products
Downstream 670 667 0.4% 670 624 7.3%
products,
including:
Tin plate 42 30 39.1% 42 32 29.0%
Galvanised steel 311 305 2.2% 311 285 9.4%
Polymer-coated 109 114 -4.3% 109 117 -6.8%
steel
Band 32 33 -3.4% 32 35 -8.0%
Formed section 44 39 11.9% 44 41 8.5%
Pipes 13 16 -20.6% 13 11 12.5%
Metalware 108 117 -7.7% 108 93 16.3%
Other metal 11 13 -13.0% 11 11 3.5%
products
Share of HVA 44.2% 41.6% 44.2% 42.1%
products
? Sales of finished products in Q1 2020 declined by 5.3% q-o-q and
amounted to 2,597 thousand tonnes mainly due to scheduled maintenance work
at rolling facilities. Sales declined by 6.6% compared to Q1 2019. In
addition to the abovementioned factor, the sales decline was significantly
impacted by a more complex production mix at thick-plate Mill 5000.
? The volume of sales of long products in Q1 2020 increased by 14.1% q-o-q
and amounted to 357 thousand tonnes, mainly due to zero capital overhauls
at long product facilities during the quarter and due to stable demand
prior to the beginning of the construction season. Sales of long products
in Q1 2020 increased by 8.3% compared to Q1 2019.
? The volume of sales of hot-rolled products for Q1 2020 declined by 15.2%
q-o-q and amounted to 1,095 thousand tonnes, which was due to the launch
of the second stage of the reconstruction of Mill 2500 as part of the
current investment programme. The volume of sales of hot-rolled products
declined by 14.3% compared to Q1 2019.
? The volume of sales of HVA products for Q1 2020 was flat q-o-q and
amounted to 1,145 thousand tonnes, while the share of HVA products in
total sales volumes increased to 44.2%. The decline in sales of HVA
products by 2.3% compared to Q1 2019 was due to lower sales of Mill 5000's
thick plate.
? The volume of sales of cold-rolled products in Q1 2020 declined by 6.0%
q-o-q to 245 thousand tonnes, mainly due to a fire outbreak at the reverse
cold-rolling Mill 1700 in February 2020. Sales declined by 4.1% compared
to Q1 2019.
? The increase in the sales volume of Mill 5000 products by 9.1% q-o-q to
231 thousand tonnes was due to higher equipment productivity. A decline of
21.1% compared to Q1 2019 was mainly tied to the more complex production
mix amid an 100% capacity utilisation rate.
? The volume of sales of tin plate in Q1 2020 increased by 39.1% q-o-q and
amounted to 42 thousand tonnes due to higher demand from the food industry
amid the threat of the coronavirus outbreak. Sales grew by 29.0% compared
to Q1 2019.
? The increase in the sales volume of galvanised steel by 2.2% q-o-q to
311 thousand tonnes was due to higher seasonal demand amid the
introduction of restrictive measures against imports of galvanised steel
from China and Ukraine by the Eurasian Economic Union starting from 1
January 2020. Sales of galvanised steel grew 9.4% compared to Q1 2019.
? The volume of sales of polymer-coated steel in Q1 2020 decreased by 4.3%
q-o-q and amounted to 109 thousand tonnes due to higher sales margins for
galvanised rolled steel. Polymer-coated steel sales declined by 6.8%
compared to Q1 2019.
Steel segment Turkey
(thousand tonnes)
Q1 2020 Q4 2019 % Q1 2020 Q1 2019 %
Sales of finished 167 159 5.1% 167 176 -4.9%
products,
including:
Flat hot-rolled 4 2 116.2% 4 5 -20.9%
products
Flat cold-rolled - - - - 2 -
products
HVA products, 163 157 3.9% 163 169 -3.0%
including:
Galvanised steel 132 121 8.9% 132 129 2.4%
Polymer-coated 31 36 -13.0% 31 39 -20.8%
steel
Intersegment sales 19 122 -84.1% 19 173 -88.8%
from Steel segment
Russia
? Sales of finished products in Q1 2020 grew by 5.1% q-o-q and totalled
167 thousand tonnes due to the expansion and diversification of the
product mix in the domestic market.
? At the same time, a decline in sales by 4.9% compared to Q1 2019 was due
to the early termination of EU imports quotas for polymer-coated metal
from Turkey. Spread of coronavirus infection put additional pressure on
the market demand during the quarter.
Coal mining segment
(thousand tonnes)
Q1 2020 Q4 % Q1 Q1 %
2019 2020 2019
Coking coal mining 1,238 1,337 -7.4% 1,238 1,464 -15.4%
Coking coal 1,442 1,281 12.6% 1,442 1,422 1.4%
processing
Mined 1,358 1,267 7.2% 1,358 1,403 -3.2%
Purchased 84 14 503.1% 84 19 343.2%
Coking coal 814 721 12.9% 814 777 4.8%
concentrate
? Coking coal production in Q1 2020 decreased by 7.4% q-o-q and amounted
to 1,238 thousand tonnes due to the complex geological conditions during
the quarter. The decline compared to Q1 2019 amounted to 15.4%.
? At the same time, coal concentrate production in Q1 2020 increased by
12.9% q-o-q to 814 thousand tonnes driven by the higher demand for
concentrate at MMK. An increase in coal concentrate production was
achieved on the back of raw coal warehouse stocks consumption declining.
Coal concentrate output increased by 4.8% compared to Q1 2019 thanks to
higher yields for coking coal.
OUTLOOK
? The unfavourable pandemic environment globally and the introduction of
quarantine measures in Russia to fight coronavirus create uncertainty in
terms of demand for metal products from key consuming industries. As a
result, the Company's management sees risks of declining sales volumes in
Q2 2020. During the peak period of the coronavirus outbreak and weaker
business activity, the Company has been conducting maintenance work
leading to a planned decline in production volumes.
? Market uncertainty and reduced business activity amid the coronavirus
pandemic will significantly affect global prices for metal products in Q2
2020.
? Due to the rouble devaluation in March, in Q2 2020 iron ore prices are
expected to stay the same, with a moderate correction towards the end of
the quarter. Prices for coal concentrate in Russia should remain at the
current levels, since indices are close to cash costs for a number of coal
companies. Prices for metal scrap will decline in Q2, reflecting the
negative impact of the pandemic on business activity.
? The Company continues to closely monitor the coronavirus situation.
Active measures taken by the Company's management to avoid the spread of
the virus are helping to minimise risks both for its employees and the
business.
? Improving operational efficiency is one of the main priorities of the
Company as it works to support its financial performance despite economic
headwinds.
About MMK
MMK is one of the world's largest steel producers and a leading Russian
metals company. The Company's operations in Russia include a large
steel-producing unit encompassing the entire production chain, from the
preparation of iron ore to downstream processing of rolled steel. MMK turns
out a broad range of steel products with a predominant share of
high-value-added products. In 2019, the Company produced 12.5 mln tonnes of
crude steel and 11.3 mln tonnes of commercial steel products.
??? is an industry leader in terms of production costs and margin. MMK Group
had revenue in 2019 of USD 7,566 mln and EBITDA of USD 1,797 mln. MMK's debt
load is the lowest for the industry. Net debt/EBITDA ratio was -0.13? at the
end of 2019. The Company's investment-grade rating is confirmed by the
leading global rating agencies Fitch, Moody's, S&P.
MMK's ordinary shares are traded on Moscow Exchange, while its depositary
receipts are traded on the London Stock Exchange. Free float amounts to
15.7%.
Key upcoming events in 2020 (Financial calendar [1])
29 April Q1 2020 IFRS financials
29 May AGM
14 July Q2 and 6M 2020 Trading Update
29 July Q2 and 6M 2020 IFRS financials
13 October Q3 and 9M 2020 Trading Update
22 October Q3 and 9M 2020 IFRS financials
Investor contacts
Veronika Kryachko
tel.: +7 (3519) 25-75-01
E-mail: kryachko.vs@mmk.ru
Media contacts
Dmitry Kuchumov Oleg Egorov
tel.: +7 (499) 238-26-13 tel.: +7 (499) 238-26-13
E-mail: kuchumov.do@mmk.ru E-mail: egorov.oa@mmk.ru
ISIN: US5591892048
Category Code: TST
TIDM: MMK
LEI Code: 253400XSJ4C01YMCXG44
Sequence No.: 58044
EQS News ID: 1020921
End of Announcement EQS News Service
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(END) Dow Jones Newswires
April 14, 2020 04:04 ET (08:04 GMT)
