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into net profit, from which we pay the rent.” If royalties go up, ArcelorMittal Kryvyi Rih may abandon a plan to $1bn in new production, Mauro Longobardo, the company CEO, tells Ekonomichna Pravda “[If royalties go up] it creates an additional financial burden in the production of iron ore and runs counter to the possibility of investing $1bn,” he said.
Ukraine’s largest steel and iron ore producer Metinvest%age plans to invest over $1bn into a cold-rolled steel facility at its Ilyich Steel plant, according to the company’s June 10 press release.
Over $800mn will be invested in the next five years into the first phase of the cold-rolling shop that will comprise a continuous cold-rolling mill, a pickling line, and three coating lines (zinc, aluminium zinc, and polymer). Once the first phase is completed in 2025, the shop will have an annual production capacity of around 1.2mmt of high-value-added products, including 400 kt of cold-rolled coils, 600 kt of galvanized coils, and 140 kt of polymer-coated coils, Metinvest said.
The second phase will bring the total cold-rolled-product annual capacity to more than 1.6mmt.
The cold-rolling shop will form a technological chain with the reconstructed Mill 1700 (launched in late 2019) and a new concasting machine (launched in early 2019), stated Metinvest CEO Yuriy Ryzhenkov, according to the release.
Metinvest said that the cold-rolling shop will be its largest construction project for the next five years. The products are intended mainly for replacing low-quality imported steel in the Ukrainian market, but will also be exported to CIS and Europe, according to the release. On June 10, Metinvest signed a contract with Danieli Group in relation to this project, the release said, adding that the emissions of harmful substances will be 1.5-3 times lower than the Ukrainian norms.
Metinvest will add $200-400mn per year to its CapEx for this project, more than doubling the average amount Metinvest invested into strategic projects during the last few years.
The additional investments will amount to 30-60% of Metinvest’s average total (including maintenance) CapEx of about $700mn per year during the last decade.
Metinvest apparently plans to remain exposed to margins in production of iron ore and semi-finished slabs, as follows from the fact that this cold-rolling shop is planned to be its largest construction project during the next five years. The addition of the high-value-added capacities should increase Metinvest’s cash flows and make them more stable throughout the cycle.
Nevertheless, it remains possible that Metinvest modifies its product mix further via M&A, such as by acquiring a re-rolling mill or an integrated iron and steel plant.
● Interpipe
69 UKRAINE Country Report July 2021 www.intellinews.com