Steel Production Maintains Steady Course

Metinvest's crude steel production remained virtually unchanged in the first quarter of 2025, reaching 488,000 metric tons compared to 489,000 metric tons in the fourth quarter of 2024, representing a marginal decrease of just 1,000 metric tons. This stability suggests the company has successfully navigated the challenging market conditions that have affected global steel producers in recent months. When compared to the same period last year, the figures show a modest 4% increase from the 469,000 metric tons produced in the first quarter of 2024. This year-over-year growth, though modest, indicates a gradual recovery in Metinvest's steelmaking operations despite ongoing global economic uncertainties. The company's ability to maintain consistent production levels demonstrates operational resilience and effective capacity management in a market characterized by fluctuating demand and volatile raw material prices. This steady performance in steel production provides a solid foundation for Metinvest's downstream operations and finished product offerings.

Iron Ore Concentrate Shows Quarterly Surge

In a positive development for the mining segment of its business, Metinvest reported a significant 9% quarter-on-quarter increase in iron ore concentrate production. Output rose to 3,815,000 metric tons in the first quarter of 2025 from 3,493,000 metric tons in the fourth quarter of 2024, representing an addition of 322,000 metric tons. This quarterly improvement reflects successful operational enhancements at the company's mining facilities and possibly a strategic response to favorable market conditions for iron ore products. The increased production may also indicate improved extraction efficiencies or the successful development of new mining areas within existing operations. Iron ore concentrate serves as a crucial raw material for the company's steel production and represents an important revenue stream through external sales to other steel producers. The ability to increase production volumes in this segment demonstrates Metinvest's operational flexibility and its capacity to respond to market opportunities in the iron ore sector.

Annual Iron Ore Output Shows Concerning Decline

Despite the quarterly improvement, Metinvest's iron ore concentrate production for the first quarter of 2025 registered a substantial 21% decrease compared to the same period in 2024. Production fell from 4,859,000 metric tons in Q1 2024 to 3,815,000 metric tons in Q1 2025, representing a significant reduction of 1,044,000 metric tons. This year-over-year decline raises questions about longer-term trends affecting the company's mining operations. Potential factors contributing to this reduction could include depletion of higher-grade ore bodies, operational challenges at specific mining sites, or strategic decisions to optimize production based on market conditions and pricing. The contrast between quarterly growth and annual decline suggests that while recent operational improvements have yielded positive results, production has not yet recovered to the levels achieved a year earlier. This situation warrants attention as iron ore concentrate represents a core component of Metinvest's business model and vertical integration strategy.

Coking Coal Concentrate Faces Dramatic Quarterly Decline

The most striking aspect of Metinvest's Q1 2025 operational results is the precipitous 51% quarter-on-quarter decline in coking coal concentrate production. Output plummeted from 1,057,000 metric tons in Q4 2024 to just 518,000 metric tons in Q1 2025, representing a substantial reduction of 539,000 metric tons. This dramatic decrease suggests significant operational challenges in the company's coal mining segment. Possible explanations include technical difficulties at key mining sites, geological challenges affecting extraction rates, or planned maintenance activities that temporarily reduced production capacity. Alternatively, the company may have made strategic decisions to curtail production in response to market conditions or inventory management requirements. Coking coal represents a critical input for steelmaking operations, and such a significant reduction could potentially impact the company's production costs if it necessitates increased external purchases to meet internal requirements.

Annual Coking Coal Production Shows Similar Downward Trend

The year-over-year comparison reveals an equally concerning trend in coking coal concentrate production, with a 52% decrease from the first quarter of 2024. Production fell from 1,086,000 metric tons in Q1 2024 to 518,000 metric tons in Q1 2025, representing a reduction of 568,000 metric tons. This consistent decline across both quarterly and annual comparisons points to structural challenges rather than temporary fluctuations in Metinvest's coal mining operations. The parallel declines suggest persistent issues affecting this segment of the business that have not been resolved over the past year. Given coking coal's importance in the steelmaking process and its significant impact on production costs, this sustained reduction could have material implications for Metinvest's overall cost structure and profitability. The company will likely need to address these challenges through operational improvements, potential investments in mining technology, or adjustments to its raw material sourcing strategy.

Strategic Implications for Vertical Integration

Metinvest's operational results for Q1 2025 highlight the complex dynamics of maintaining a vertically integrated business model in the steel industry. While crude steel production has remained stable with modest year-over-year growth, the significant declines in coking coal concentrate production could potentially strain the company's vertical integration strategy. Vertical integration in steel production aims to secure reliable access to key raw materials while potentially reducing cost volatility. However, when raw material production faces challenges, companies must balance internal supply shortfalls with external purchases, potentially affecting cost structures and operational flexibility. The contrasting performance across different segments of Metinvest's operations underscores the challenges of managing a diversified portfolio of mining and metallurgical assets across various geographies and market conditions. The company's ability to maintain stable steel production despite raw material challenges demonstrates operational resilience but also highlights the importance of addressing underlying issues in its mining operations.

Market Context and Industry Comparison

Metinvest's mixed operational results should be viewed within the broader context of global steel and raw materials markets. The first quarter of 2025 has seen continued volatility in global commodity markets, with steel producers worldwide navigating fluctuating demand patterns and raw material prices. The company's ability to maintain stable steel production despite challenges in raw material supply chains reflects effective operational management in a challenging environment. However, the significant declines in coking coal production may place Metinvest at a disadvantage compared to competitors with more stable raw material supplies. The contrast between iron ore's quarterly improvement and annual decline suggests that while recent operational enhancements have yielded positive results, production has not yet recovered to previous levels. As global steel markets continue to evolve with changing economic conditions, trade policies, and environmental regulations, Metinvest's ability to address challenges in its raw material production will be crucial for maintaining competitiveness and financial performance.

Outlook and Strategic Priorities

Looking ahead, Metinvest faces both opportunities and challenges based on its Q1 2025 operational results. The stability in steel production provides a solid foundation for the company's downstream operations and customer relationships. However, the significant declines in coking coal concentrate production represent a strategic challenge that will require focused attention and potential investments to address. The quarterly improvement in iron ore concentrate production suggests that operational enhancements are yielding positive results, though further efforts will be needed to restore production to historical levels. Key strategic priorities for the company likely include stabilizing and improving coking coal production, continuing operational enhancements in iron ore mining, and maintaining the efficiency of steel production facilities. Additionally, the company may need to evaluate its raw material sourcing strategy to ensure reliable supplies at competitive costs. Metinvest's performance in subsequent quarters will provide important indicators of whether these operational challenges represent temporary fluctuations or more persistent issues requiring structural solutions.

Key Takeaways:

• Metinvest's crude steel production remained stable at 488,000 metric tons in Q1 2025, virtually unchanged from Q4 2024, also showing a modest 4% year-over-year increase from Q1 2024

• Iron ore concentrate production increased 9% quarter-on-quarter to 3,815,000 metric tons but showed a concerning 21% decrease compared to the same period last year

• Coking coal concentrate production experienced dramatic declines of 51% quarter-on-quarter and 52% year-over-year, falling to just 518,000 metric tons in Q1 2025, potentially challenging Metinvest's vertical integration strategy