Ukraine's industrial production increased by 0.4% year-on-year in October following a 0.3% y/y decline in September, the state statistics service Ukrstat reported on November 22.

Chemicals (38.9% y/y growth vs 33.4% y/y in September), machinery (3.8% y/y growth vs 0.3% drop y/y) and metals (3.3% y/y growth vs 2.2% y/y) drove industry higher, while declines deepened for mining (-8.1% y/y vs -2.8% y/y in September) and utilities (-7.6% y/y vs -3.4% y/y).

"Ukraine's industrial performance remains erratic," Alexander Paraschiy at Kyiv-based brokerage Concorde Capital wrote in a research note on November 23.

According to the expert, metals grew mainly on the back of steel production (5.9% y/y growth in October) and metal semi-finished products rolled and forged (5.4% y/y), while other metal products were still in the red. 

Machinery grew predominantly due to more than a 400% surge in cargo railcar production. Mining is still reeling from the Donbas trade blockade imposed by the government in the spring as coal supplies plunged 25.4% y/y in October. 

"Remarkably, oil extraction (-11.1% y/y) is sliding, as well as iron ore mining (-2.0% y/y) despite high resource prices," Paraschiy added. "This trend promises near zero industrial growth in 2017, or 0.4% y/y growth by our projections."

Concorde expects the situation will improve in 2018 as the fallout from the trade blockade wears off. The brokerage forecasts a 4.6% y/y industrial output increase in 2018.