In 1H08, Ukrainian iron makers increased iron concentrate output by 5-13% y-o-y, according to Interfax. Output of finished products – pellets and sinter – at CGOK and PGZK declined marginally (-2%) and increased at SGOK by 6% y-o-y. SUBA, whose output declined in 2006-2007, posted a 5% y-o-y increase, which we view as a positive result of the company’s new ownership. We generally view the increase as NEUTRAL for all iron makers, as it was expected based on the previous month’s operational data.
In our view, Ukrainian mining companies will enjoy another two or three years of rising prices. In addition, given that Ukrainian steelmakers are targeting an increase in steel output of at least 30% by 2012, the demand for iron ore should increase proportionally. We maintain our BUY recommendation for PGZK, whose share price continues to climb despite the falling market and is obviously being supported by owners buying out the free float.

1H08 iron ore output, mmt

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