Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

Rating agency Fitch affirmed Metalloinvest’s BB+ rating and a stable outlook based on the steelmaker’s operational strength and its ability to produce low-cost iron ore.


Apart from iron-ore, Fitch noted that the Russian steel maker’s ability to produce hot briquetted iron (HBI), long steel and pellets also contributed to the agency’s decision to affirm the rating and outlook.


Metalloinvest’s mining division produces iron ore, pellets, and HBI, and the demand for all these products remains high because of requirements from Chinese steelmakers. According to Fitch’s estimates, the company’s projected EBITDA of $1.9bn would be attributable to its mining division only. Moreover, iron-ore supply is expected to remain tight even though prices for the material remained resilient through the first half of 2020, contributing to Metalloinvest’s core strengths. 


Among the risks that could impact Metalloinvest’s current rating, Fitch lists a projected contraction in steel consumption in 2020 because of COVID-19 restrictions that impacted the industry through the first half of the year. However, it noted that the pandemic had impacted the market for flat steel more than that of longs, which are generally used in construction. As a result, while Metalloinvest would look at lower earnings from its long steel business, it will not be as impacted as businesses of companies that produce flats.


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