OREANDA-NEWS. On 13 February 2008 was announced, that General Director Volodymyr Boyko of Mariupol Metals Plant n.a. Ilich (MMKI) said the company will move to decrease the number of workers not employed in main production. According to Boyko, 28,000 workers are involved in production, which implies that as much as 50% of the current workforce of 57,000 is redundant. Other sources estimate that the first decrease will be 10%, or 5,700 workers. In addition, Boyko hinted that the company may cut its social programs.

Currently, MMKI has the industry’s highest worker headcount of 57,000, or 2.8x more than Azovstal, which is a company of a similar size. In our view, rising commodities prices and declining margins in 2008 have inspired management to look for ways to improve MMKI’s profitability. We estimate that higher prices for iron ore (+50%), coal (30%), gas (38%), and transportation (39%) will drive down the EBITDA margin from 16% to 12% and the net income margin from 10% to 7% in 2008.