Ferrexpo plc, a mining company with assets in Ukraine, produced 3.845 million tonnes of pellets in 2023, down 36.5% from 6.053 million tonnes in 2022, due to the fact that 2022 included a period of full-scale production before the Russian invasion of Ukraine.
According to the company’s announcement on Thursday, pellet production in the fourth quarter of 2023 fell by half compared to the previous quarter to 0.627 million tons, but this is 50.4% more than in the fourth quarter of 2022.
It is noted that in 2023, only premium pellets with an iron content of 65% were produced, while direct reduced iron pellets (DRI, 67% iron) and pellets with an iron content of 62% were not produced.
In addition, it is specified that the total production volume includes 50 thousand pellets produced in the fourth quarter from third-party concentrate.
“Even with the onset of winter, we were able to operate one and sometimes two of our four pellet production lines to meet our reduced export capacity and continue to supply premium products to our premium customers,” Interim Executive Chairman Lucio Genovese said in the release.
Speaking about the past year, the company notes the deaths of 14 employees who served in the Armed Forces of Ukraine, which increased the total number of employees killed since the beginning of the Russian invasion in 2022 to 34. It is specified that 754 of our employees are currently serving in the Armed Forces of Ukraine.
It is indicated that the company continues to retain most of its employees, despite the fact that it was forced to significantly reduce production. This, together with rising logistics costs in the absence of access to Black Sea export routes, has led to a decline in profitability.
However, the report notes that Ukraine’s recent success in opening Black Sea export corridors has made it possible to resume shipping from certain ports.
“When the time is right, Ferrexpo plans to launch an additional pellet production line and resume exports via this route, provided it is safe and cost-effective,” the release said.
In addition, it is noted that iron ore prices rose by more than 20% in the fourth quarter, thanks to China’s support for more steel-intensive sectors of its economy, and continued to hold at this level until the New Year.
“We are also seeing the first signs of a pick-up in pellet demand in Europe. Together, these factors can support our large fixed cost base and higher logistics costs. In my view, the improved demand and higher prices bode well for Ferrexpo for the year ahead,” Genovese concluded.
It is noted that the group’s net cash position, including minor adjustments, at the end of the year was approximately $109 million compared to $106 million a year earlier, with minimal lease obligations and no debt.
Ferrexpo owns 100% of Yeristovo Mining, 99.9% of Bilanivsky GOK and 100% of Poltava Mining.
In the first half of 2023, Ferréxpo cut its net profit threefold to $27.01 million, while revenue fell 2.8 times to $334.01 million, and its EBITDA fell 7.6 times to $63.64 million.
