You're reading: Ukraine’s Metinvest sees steel outshining iron ore

AMSTERDAM - Ukrainian mining group and steel producer Metinvest plans to shift its investment focus from iron ore to steel for the rest of this decade, as it sees value moving back from the raw material to the alloy, a company executive said on Wednesda, June 27.

The company is planning to boost its steel production to 25 million tonnes by 2020 from 15 million tonnes per year currently while it is not planning to increase its iron ore production over the same period.

“By the end of this decade value is going to move back to steel and away from raw materials as we think steel prices are going to perform better than raw materials,” Kostantin Golovo, the company’s head of strategic planning said speaking at a Metal Bulletin iron ore conference.

“Clearly the steel industry is going through a really difficult time because of low levels of consolidation and overcapacity. A lot of steelmakers are in the red and we see this continuing for 3 or 4 years,” Golovo said.

“But the industry is now going through a self-healing period, where less is invested in expansion… capacity utilisation will grow again and will increase the steel producers’ pricing power. We believe steel margins will improve.”

Metinvest sees iron ore prices slowly falling from around $140-150 currently to $120-130 a tonne by 2020 and then stabilize around this level.

Iron ore prices IODBZ00-PLT reached a peak of nearly $200 per tonne on a cost-and-freight China basis in February 2011, boosted by supply constraints and Chinese appetite for the steelmaking raw material. Since the second half of last year however, slowing economic growth and increased supply availability have put pressure on prices.

Metinvest, which is currently self-sufficient for about 200 percent of its iron ore needs, is not looking to expand in iron ore. Its current production level will be enough to make it 100 percent self-sufficient once it has implemented the planned steel expansion, Golovo said.

It is however, currently a bit short when it comes to coking coal, another steelmaking ingredient, and it is looking to increase its self sufficiency in this material.