MMK: 4Q18 trading update - in line with expectations

MMK has reported its 4Q18 trading update. Volumes were down 4% qoq, in line with seasonal norms but up 4% yoy. The qoq price decline was 5%, in line with the percentage decline reported by Severstal last week and slightly better than market pricing trends, in part due a marginally better product mix. Turkish volumes increased 47% to 202kt, after collapsing during the 3Q18 TRY crisis, as it exported more to compensate for the weak domestic market. Annual coal mining volumes reached 4.9mt in 2018, +36% yoy but slightly short of the 5.1mt guidance at the start of the year. This was due to a 19% qoq decline in 4Q18, resulting from moving the commissioning date for one of the longwalls, due to complex geological conditions. High ash content coal from the Kostromovskaya mine also resulted in a 3.4% fall in coal concentrate sales. Overall, we see the results as reasonably strong. The management outlook is predictably bearish, given declining steel prices, although management sees potential for more domestic sales in 1Q19E. We expect a neutral reaction from the shares.