Page 165 - RusRPTNov21

terms, while Alrosa’s diamond inventories were as low as 8.6mn ct (down 72% y/y, but slightly up 2% q/q).
· Diamond revenue fell 20% q/q, but surged 70% y/y to $938mn, on the back of lower average realized gem-quality prices and sales
· Diamond output rose by 26% q/q and fell 5% y/y to 8.8mn ct. Quarterly growth was due to the seasonal rise in gravel processing from Almazy Anabara, an increase in ore processing at Udachny Division and a planned output hike at the Nyurbinskaya pipe
· Diamond sales fell 19% q/q – mainly driven by the lack of rough inventories for sale and the high base effect of 2Q21 – and rose 83% y/y to 9.2mn ct
· Gem-quality sales fell 13% q/q, but rose 58% y/y to 6.5mn ct
· Gem-quality prices dropped 6% q/q to $136/ct on changes in the sales mix (increased supplies from assets with lower prices). Y/Y
growth of 2% – amid an increase in the price index (+22% y/y and +10% q/q) – was driven by the normalization of sales volumes and changes in the sales mix
· Jewelry demand remains strong in all key markets, except China (due to economic factors). The market is optimistic ahead of the upcoming Christmas season, which is expected to begin earlier this year. Meanwhile, miners’ rough stocks are at minimal levels, as supply has declined.
● Steel
Magnitogorsk Iron and Steel Works (MMK) trading results were good.
· Steel production totalled 3.4mnt, broadly flat q/q and in line with our
estimates.
· Steel shipments were down 17% with a drop in all categories, HRC
(-19%) and downstream products (-12%). Metal Expert reported a 20% drop in domestic deliveries in July-August (from May-June) and as such the share of premium domestic market sales was also lower, we calculate.
· Steel price dynamics in 3Q21 were more favourable, and as such partly offset the negative effect of weaker volumes. Therefore, we expect only a 5% decline in revenues q/q. Higher iron ore and coal prices, meanwhile, weigh on margins.
· We expect the company to report a double-digit decline in EBITDA q/q on the back of weak volumes. Production, though, remained above shipments and we calculate that FCF will be further hit by working capital accumulation, arriving at below $300mn (2.7% yield)
Steel production down 15% QoQ, hit by an accident at the oxygen production facilities in August.
● Sales volumes lost 4% QoQ on lower output, with the decline fully absorbed by low-margin semis. Finished
165 RUSSIA Country Report November 2021 www.intellinews.com