In an interview for Forbes Ukraina, Metinvest general director, Yuriy Ryzhenkov says 2014 has been a year of two halves for the mining and steel group. Its first-half financials “radiated optimism”, as the group managed to increase net profit by 46%, he says.

The region’s problems only caught up with Metinvest in August, when military operations in Ukraine’s East forced some production stoppages, and because of the global fall in iron ore prices.

 
Today, Metinvest’s Yenakiieve longs mill (EMZ) is at around 30% capacity, while the group’s two plants in Mariupol – Azovstal and Ilyich - are at 70%, according to the interview, published on Metinvest’s website. It aims to ramp EMZ back up to 40-50%, but production levels are very strongly linked to the state of the infrastructure, like the railways, and how the fighting progresses, Kallanish understands.

For the full year, Ukraine’s conflict could mean roughly 10% less output than planned across the group, however, for the second-half, the decline is already at roughly 20% across all group plants, including Zaporizhstal, adds Ryzhenkov.

Avdeevka Coke plant has been cut off completely from power and transport four times in the last three months, he says: At the moment, it has only been possible to get back to 20-25% of desired capacity, but next year, it is hoped this could rise to 60-70%.

“We expect the domestic steel market will continue to shrink, however, the fall in demand has been offset by falling output levels,” Ryzhenkov says. Anyway, domestic sales account for no more than 10-15% of Metinvest’s over all “supply portfolio”, which is sufficiently diversified, he adds.

After stopping some of its steelmaking, the group first had to find a new outlet for its excess iron ore, which it is now exporting. The priority customers are European steelworks, and the rest will go to Asia, according to Ryzhenkov.

“If before, we used to sell around 15m tonnes/year [of iron ore] to China, then now we are sending 20-23mt there.”

“The current price situation [still] enables us to sell to China,” despite lower margins, what with prices falling from $125/tonne at the start of the year, to $75. Metinvest will carry on selling its iron ore like this, so long as the prices make it possible, even if there is little profit, he adds.

Ryzhenkov concludes that next year, his group hopes to invest a similar amount as in 2014 in capital expenditure. In the first six months of 2014, Metinvest’s capex plans have not been stopped and spending was $253m, although because of the fighting some projects have had to be put on ice, such as EMZ’s new sinter plant, he says.

Among the plans for next year are to continue the project for coal injection at the blast furnaces at Azovstal, as well as reconstructing the continuous casters at Ilyich and Azovstal, in Mariupol.