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*News from our friends and informational partner...> James Brooke-is a former New York Times foreign correspondent and : Ukraine Business News - Your Morning News
Wednesday, May 19
Ferrexpo to Invest $2 billion to Double Iron Production…Metinvest Produces Enough Steel for 20,000 Eiffel Towers…Iron and Steel Boom…Privatization ‘Irreversible’…Big Bond Sale
🔵 Betting on strong Chinese demand for iron, Ferrexpo plans to spend $2 billion in capital investments to double its production of iron pellets by 2030, reports Interfax-Ukraine. This year, the LSE-listed company is increasing production by 14%, to 12 million tons. A combination of strong Chinese demand and the Biden Administration’s planned infrastructure renewal plan have contributed to a doubling of world iron ore prices over the last year, to $208 a ton yesterday.
🔵 Ferrexpo has started using the first unmanned mining dump trucks in Europe. A US company, Autonomous Solutions Inc., installed remote controls on several large capacity Caterpillar trucks now in use at the Eristovsky open pit mine in Poltava region. A company video of one driverless monster truck can be seen here.
🔵 Marking Metinvest’s 15th anniversary, company engineers calculate that the company, Ukraine’s largest steel maker, has produced 142 million tons of steel since 2006 – enough steel to build 20,000 Eiffel Towers. “We are also affectionately called ‘Ukrainian steel giant’ because we are engaged in the extraction of raw materials, steel smelting and the sale of metal products all over the world,” wrote the publicists for Metinvest, 71% of which is owned by Rinat Akhmetov. “And we are the only company with Ukrainian roots that is included in the list of the world's leading steel producers and iron ore miners.”
🔵 Prices for the iron and steel products exported by Metinvest have skyrocketed over the last year, according to Metal Expert, an industry consultancy. Compared to one year ago, the price jumps are: pig iron +71%; billet +77%; steel slab +104%; hot rolled coil steel +118%.
🔵 Concorde Capital’s Dmytro Khoroshun has predicted: Steel price “levels should remain exceptionally elevated in the short term, even though we expect a correction later in 2021. Metinvest’s monthly EBITDA will likely to reach the $400-500 million range in 1H21 because of strong steel and iron ore prices.”
🔵 Dniprospetsstal, Ukraine’s main producer of specialty stainless steels, has increased output of finished products by 19% January-April, compared to the first four months of last year. Based in Zaporizhia, the electrometallurgical plant produced 56,000 tons through the end of last month.
🔵 Interpipe, the steel pipe and Wheel Company, successfully returned to international capital markets last week, completing the placement of $300 million worth of Eurobonds, maturing in 2026. The coupon rate is 8.375% per annum. Fadi Hraibi, director general of the company, said that the bonds, now listed on the Luxembourg Stock Exchange: “Over the past years, we have undergone an impressive business transformation and achieved financial stability.” The breakdown of the investor base is: US - 43%; UK – 26%; and EU – 26%. Fitch gives the bonds a ‘B’ rating.
🔵 Largely shut out of the Russia’s railroad wheel market, Interpipe started exporting wheels last year to Germany for use on the high speed trains of Deutche Bahn. Last month, Interpipe’s exports of railroad products increased 23% over March, to 14,000 tons.
🔵 Ukzaliznytsia should move faster to open its tracks to private freight trains, said outgoing Infrastructure Minister Vladyslav Krykliy at a farewell speech presented to the Rada yesterday. Alluding to the doubling of world iron ore prices over the last year, he said: “It is impossible to observe how the cost of resources in international markets is growing, and at the same while the rates remain the same.” Krikliy also stressed the UZ should not be allowed to default and that “international partners should be involved in order to receive normal ‘transparent’ financing at a low interest rate and to restructure debts that drag the company down,” reported the Center for Transportation Strategies.
🔵 The Rada yesterday voted to approve the resignations of Krykliy and Economy Minister Ihor Petrashko. Ukraine’s Parliament also voted 292-1 to dismiss the Health Minister, Maksym Stepanov, over his handling of the coronavirus pandemic. Tomorrow, the Rada may vote on three successors.
🔵 The privatization drive is “irreversible,” Kyrylo Tymoshenko, Deputy Presidential Chief of Staff, wrote on Facebook after President Zelenskiy chaired an inter-agency Zoom call Monday on the campaign. Over the next six weeks, there are to be 100 auctions of large-scale and small-scale state properties. He said: “It will, firstly, give new life to unprofitable property and, secondly, attract billions of investments.” Arguing that investors are taking notice, he said the average number of auction bidders has risen, from 3.67 in April 2020, to 4.57 last month.
🔵 Auctions of state or communal farm land will now take place openly through electronic auctions conducted on the Internet, under a bill adopted yesterday by the Rada. “Anyone with a computer and Internet access will be able to take part in the auction,” (Interfax-Ukraine). “According to the ministry, the winners of the bidding will be those who offer the highest price per lot.” Plot sizes are limited to 20 hectares and buyers are limited to Ukrainians.
🔵 The Finance Ministry raised $513 million – in dollars, euros and hryvnia – in its weekly government bond auction yesterday. The Ministry reported on Facebook that hryvnia bonds, annual yields were virtually unchanged: 3-month at 8.5%; 1-year at 11.2%; 18-month at 11.3%; and 2-year at 12.05%. Investors bought $63 million worth of 2-year dollar bonds at 3.9%. The majority of sales were 1-year euro bonds. Investors bought €238 million – two times more than in the total sold in the two previous euro auctions this year.
🔵 On May 31, Ukraine will make its first payment on GDP warrants issued under the 2015 public debt restructuring. The payment will be $40.1 million, according to the Irish Stock Exchange. With a total face value of $3.2 billion, the bonds are to be repaid through 2040, depending on GDP growth. Analysts warn that, if Ukraine’s economy grows steadily, the warrants could become a time bomb for the nation’s finances. Yesterday morning the warrants were trading at 108.5% of face value. The first payment will be $1.26 of their notional amount.
🔵 Timothy Ash, of BlueBay Asset Management, writes: “Payouts increase markedly with higher real GDP growth. If real GDP growth accelerates to 5% in 2021, the payout might increase to around $900 million for that year. And, obviously, growth at 3% or lower and there are zero payouts.”
🔵 For Ukrainians who like to vacation without Russians, Moscow is extending its ban on tourist flights between Russia and Turkey for one more month, to mid-June, reported Bloomberg. Although Turkey’s 3-week coronavirus lockdown ended Monday, the Kremlin apparently is still annoyed about President Erdogan supportive statements for Ukraine during last month’s military standoff.
Editor’s Note: Over the last year, Ukraine has had four energy ministers and three health ministers. Of the original September 2019 Honcharuk cabinet, there seem to be only one or two men left standing among the key portfolios. If a company has four different CEOs in two years, shareholders head for the exits. Musical chairs is bad for the Ukraine brand. It also holds the nation back. And if the President cannot keep the help, it ultimately reflects on the President.
*With Best Regards Capt. Vasiliy V. Klivets … > Vasiliy Klivets
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