Ferrexpo mining company, with the main assets in Ukraine, increased its share in the international market of pellet suppliers to 8% in 2019 compared to 7% in 2018.
According to the company’s annual report released on the London Stock Exchange on Wednesday, March 17, Ferrexpo maintained its third position in the world ranking of pellet exporters with 10.3 million tonnes (10.2 million tonnes in 2018). Vale-group (Brazil-Oman) with the volume of 32.7 million tonnes takes the first place according to the results of the year, and the Swedish LKAB with 16.3 million tonnes takes the second place.
The Metalloinvest group (Russia) takes the sixth place with export deliveries of 7.2 million tonnes (4.2 million tonnes in 2018), the Metinvest group (Ukraine) takes the tenth place with supplies of 5 million tonnes (5.4 million tonnes in 2018), the Severstal Group (Russia) takes the eleventh place with supplies of 3.8 million tonnes (5.5 million tons in 2018).
In general, the international market for global pellet exporters at the end of 2019 is estimated at 135 million tonnes, decreased by 3% compared to 2018 (139.6 million tonnes).
The company predicted that, high barriers to entry, especially given relatively low pellet premiums, are unlikely to incentivise new pellet supply in 2020. Incumbent producers can balance supply by switching production from blast furnace to direct reduction pellets or from international export to domestic consumption. In 2020, pellet seaborne supply should not increase due to international prices moderating to historical levels and continued supply issues from Brazil. An extended period of low pellet premiums could result in some capacity reduction for producers with high pellet conversion costs. At the end of 2019, industry levels of pellet stocks were higher than the historical average and it may take some time for the market to absorb these, especially taking into account the impact of the COVID-19 virus. This could prevent pellet premiums from rising in the short term, the company said.
In 2019, Ferrexpo reduced the volume of pellet deliveries by key market regions to Central and Western Europe, as well as North East Asia (NEA), sharply increasing sales to China and Southeast Asia (SEA).
Thus, the share of pellets sales in tonnes to Central Europe is the largest one and amounted to 36% (47% in 2018). In 2019, the share of sales in Western Europe decreased from 16% to 13%, in Northeast Asia it decreased from 17% to 16%, in Turkey, the Middle East, and India sales decreased from 6% to 5%. Deliveries to China and South East Asia sharply increased from 13% to 30%. There were not any pellet deliveries to North America in 2019, while in 2018 it amounted to 1%.
In total, some 10.312 million tonnes of pellets were sold in 2019, compared with 10.227 million tonnes in 2018.
“Ferrexpo benefits from a diversified sales portfolio with leading steel mills throughout the world, while its logistics routes to customers provide a competitive advantage given Ukraine’s central geographic location. Ferrexpo’s average shipping duration to Asia is 30 days compared to its main pellet-producing competitors in Brazil (40 days), Canada (55 days) and Scandinavia (50 days). Ferrexpo is also very competitively placed in terms of shipment days to Europe and Turkey. This ensures that weakness in one region, can be compensated by sales into other regions,” the company said.
