Page 4 - bne_October 2021_20211004

4 I Companies & Markets bne October 2021
Ukraine’s biggest company, the iron and steel producer Metinvest, just reported its best results in 13 years, but the market for metals is starting to cool now and the CEO is focused on building a long-term sustainable business.
INTERVIEW:
Metinvest reports record results, but expects the market to cool from here
Ben Aris in Berlin
Ukraine’s biggest company, the iron and steel producer Metinvest, just reported its best results in 13 years. High profits and strong revenues were due to the buoyant market that has seen iron prices rise to nine-
year highs, but Metinvest’s CEO Yuriy Ryzhenkov told bne IntelliNews in an exclusive interview that the company had also added $370mn of gains from rationalisation in the first six months of this year, productivity increases and management improvements.
“A good market lifts all boats and there is a very nice rally on the metals market at the moment that started at the end of last year, but we have also added $368mn in financial gains as the result purely internal improvements,” Ryzhenkov told bne IntelliNews by phone from Kyiv.
Metinvest invested over $1bn in 2020 into improving its production, which resulted in a 5% increase in productivity, and plans to keep its capex at $1.5bn each year over the next three years to continue its modernisation programme going, says Ryzhenkov. At the same time, the investments have seen a reduction in the consumption of inputs like coking coal that has also improved the productivity of operations.
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Market to cool off
The rally in commodity prices began around last November
at the same time as the first coronavirus (COVID-19) vaccines appeared. As bne IntelliNews reported at the time, it seems that not only did populations start going back to eating out in restaurants and getting their hair cut again, but industrialists also anticipated re-opening their factories and began ordering commodities again in anticipation of a return to normality, driving up prices in the process.
However, Ryzhenkov believes that the commodities market has already passed its peak as economies start to find a new equilibrium after the shock and correction phase of the coronacrisis has passed.
“Next month we will probably pass peak and prices will begin their downward slope,” says Ryzhenko. “Iron prices have already fallen from $220 per tonne to $150 and there is a similar trend in steel that is down 20%. There is a normalisation of the market, as the previous high prices were not sustainable. There is no unusual financial crisis like in 2008 so there will be a price reduction but it will be more gradual as the market rebalances. However, there is still a risk of a fourth wave of the COVID virus