Fitch Downgrades Uzmetkombinat Credit Rating to 'B'

Tashkent, Uzbekistan (UzDaily.uz) — International rating agency Fitch Ratings has downgraded the long-term Issuer Default Rating (IDR) of JSC Uzbek Metallurgical Plant (UMK) to 'B' from 'B+'. The rating outlook remains Positive.

The agency attributed the decision to a slower-than-expected ramp-up of the new flat-rolled steel production complex to its design capacity. According to Fitch, reaching planned targets will require three to four years due to raw material supply constraints and logistical difficulties. Consequently, the company's Standalone Credit Profile (SCP) was revised down to 'b-' from 'b'.

Fitch forecasts that the ratio of gross debt to EBITDA will drop below 4x only by 2028. At the end of 2025, this indicator was estimated at 7.0x. The agency expects gradual profit growth as capacity utilization at the new production complex increases.

UMK's rating continues to be determined under the methodology for government-related entities and stands one notch above its standalone credit profile due to expected state support. Fitch noted that an upgrade in Uzbekistan's sovereign rating could lead to a further upgrade of the company's rating.

According to the agency, the state maintains a high level of control over the company, holding a 93% stake, and exerts significant influence on operational activities and the implementation of the investment program. More than half of the external financing for the new casting and rolling complex project was provided by the state, while recent additional support measures have strengthened the company's liquidity.

Fitch also highlighted Uzmetkombinat's strategic importance to the national economy. The plant accounts for approximately 70% of steel production in Uzbekistan and more than a third of domestic steel consumption. The agency believes a potential default by the company would negatively impact the metallurgical, construction, and mining sectors.

The new casting and rolling complex, built using Danieli technology with electric arc furnaces at a cost of 785 million euros, was commissioned at the end of 2025. Its design capacity is 1 million tonnes of hot-rolled coil per year. In the first half of 2026, the enterprise produced 67,000 tonnes of liquid steel and 48,000 tonnes of hot-rolled steel.

Fitch cited raw material supply as the key constraint on expanding production. The plant currently depends on scrap metal supplies, for which it holds exclusive domestic purchasing rights, and requires direct reduced iron (DRI). The agency estimates that insufficient DRI volumes will prevent full capacity utilization in the medium term.

The company expects to begin purchasing DRI from the Tajik Metallurgical Plant after its launch in 2027. In addition, UMK is considering constructing its own DRI production plant in cooperation with the Fund for Reconstruction and Development of Uzbekistan. The project cost is estimated at approximately US$180 million, with a design capacity of 600,000 tonnes per year. If approved, construction could begin in 2027.

Following completion of the investment program, the plant's production capacity is projected to double to 2.1 million tonnes of steel per year. This will allow the company to expand flat-rolled steel production to replace imports and increase the output of grinding balls.

In the medium term, Fitch expects EBITDA to remain at US$80–US$85 per tonne until raw material supply constraints are resolved and capacity utilization increases.

Compared to other state-owned companies in Uzbekistan, UMK's standalone credit profile remains weaker. Fitch rates the company's SCP at 'b-', compared to 'b+' for the Almalyk Mining and Metallurgical Complex and 'b' for Uzbekneftegaz.

Factors that could trigger a further rating downgrade include weakening ties with the state, maintaining a gross debt to EBITDA ratio significantly above 5.5x, and deteriorating liquidity.

A rating upgrade could occur with an improvement in Uzbekistan's sovereign rating, a sustainable reduction in debt load below 4x, increased capacity utilization, strengthened liquidity, and enhanced state support.

According to Fitch, UMK held 448 billion soums in cash against short-term liabilities of 941 billion soums at the end of 2025. Following additional state support, the company's liquid assets increased to approximately US$100 million by 30 June 2026. The agency considers these resources sufficient to service obligations in 2026–2027, though the company will likely require refinancing or additional government support thereafter.

Fitch also noted that in 2025 and the first half of 2026, Uzmetkombinat breached covenants on the net debt to EBITDA ratio for loans from international financial institutions. The company has already obtained waivers from some creditors and expects similar decisions from the remaining lenders.