WOOD Flash – MMK: 3Q18 trading update – production growth, but declining prices
MMK has just reported its 3Q18 trading update. Sales volumes recovered 7% from the low level of 2Q18 after the end of scheduled maintenance, and coal concentrate volumes were up 8% qoq. MMK remains on track to add c.1.5mtpa to mined coal volumes, reducing its reliance on third-party purchases. These should be taken as positives, in our view. However, a 51% fall in sales from the Turkish plant (a result of the lira crisis) contributed to a deterioration of the product mix qoq and, with individual product prices falling 1-15% qoq, the average price realisation from the main site was down 6.7% qoq. Management also gave predictably bearish guidance for falling volumes and prices in 4Q18E, which is in line with seasonal trends and our expectations, although it believes more pig iron in the converter mix and operational efficiency should help to offset this. All of this should have been expected, however, so we expect a neutral reaction from the stock.
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