British-based Ferrexpo Plc, which controls Poltava and Yeristovo mining enterprises in Ukraine, increased the total production of pellets by 7.4% in January-March 2020 compared to the same period in 2019, to 2.725 million tonnes. According to the company’s press release on Tuesday, April 7, the total production of pellets with 65% iron content (Ferrexpo Premium Pellets and Ferrexpo Premium Pellets plus) amounted to 2.652 million tonnes (an increase of 9,1%), with 62% iron content (Ferrexpo Basic Pellets) some 73,330 tonnes (a decrease of 31.8%).
There was no pellet production from third party concentrate in Q1 2020.
Sales are expected to reach about 2.8 million tonnes in the first quarter 2020, compared to 2.6 million tonnes in the first quarter 2019 (an increase of 7.7%).
“Production in Q1 2020 was not impacted by the COVID-19 virus [disease]. Ferrexpo continues to take active measures to help protect our workforce and local communities against the spread of the virus,” the enterprise said in a press release.
In 2019, there was also no pellet production from third party concentrate, while in 2018 some 101,000 tonnes of pellets were produced.
Ferrexpo is a Swiss iron ore company with assets in Ukraine. Its core business is production and export of high quality iron ore pellets used in steel production.
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.
British-based Ferrexpo plc, which in Ukraine controls, in particular, Poltava and Yeristovo mining and processing plants (PGOK and YeGOK), continues to increase its fleet of wagons, having received 50 new high-sided cars from Kriukov Car Building Works (KCBW, Poltava region) from the ordered 400.
“Good news … We’ve received the first 50 new wagons from KCBW out of 400 ordered. Thus, there will be 3,050 high-sided wagons operating in Ferrotrans subsidiary. The planned increase in the fleet of our own wagons is necessary to implement Ferrexpo’s strategic plan to double the production of pellets within five years,” Vitaliy Oliynyk, the logistics manager at Ferrotrans, part of Ferrexpo Group, said on Facebook.
However, he noted that now an increase in the fleet of wagons will not lead to an increase in the shipment of products, “since the monopoly carrier does not have the technical ability to deliver goods to their destination.”
“Without attracting private capital to purchase locomotives and using them on trunk routes, we can’t even dream of increasing exports … We expect decisive actions from the new government, and we’ll get to work together,” the manager stated.
He regretted the loss of control over Stakhanov Car Building Plant, which was part of Finance and Credit financial and industrial group controlled by Ukrainian businessman Kostiantyn Zhevaho.
“If it wasn’t for war, then Ferrexpo would have been provided with absolutely any quantity of quality high-sided cars and dump cars produced by PJSC Stakhanov Car Building Plant,” Serhiy Zelensky, the plant’s ex-manager for sales and marketing, noted.
Ferrexpo mining company with assets in Ukraine in H1 2019 reported $270.35 million in net profit, which is 77.6% higher than the same period in 2018.
According to the financial statements posted by the company on the website of the London Stock Exchange (LSE), higher iron ore fines prices and an increase in sales volumes account for the increase.
Ferrexpo’s revenue was 28% up and amounted $787 million, while EBIDTA increased 59% to $372 million.
“During the period we continued to benefit from strong pricing for our high-grade iron ore pellets, which helped deliver healthy cash flows. This enabled us to allocate capital to further reduce debt, increase organic investment in our assets to drive medium term growth and declare a record interim dividend to shareholders,” Ferrexpo Non-Executive Chairman Steve Lucas said.
British-based Ferrexpo plc in January-March 2019 invested UAH 1.3 billion (over $47.5 million) in the development of Poltava, Yeristovo and Belanovo mining and processing plants (GOK) it controls, which is 73.6% more than the investments for the same period in 2018 in the hryvnia (over UAH 748.9 million) and 71% in U.S. dollars (over $27.8 million).
According to the investment program approved by the board of directors, Ferrexpo Group for January-March 2019 invested more than UAH 855 million, or more than $31.4 million, in Poltava GOK (Ferrexpo Poltava Mining), over UAH 438.3 million, or more than $16.1 million in the development of Yeristovo and Belanovo GOKs (Ferrexpo Yeristovo Mining, Ferrexpo Belanovo Mining).
The main capital investments of PGOK were the costs of supporting existing production in the amount of over UAH 209 million, or more than $5 million and large strategic projects worth over UAH 272 million, or more than $16.3 million, components worth over UAH 373 million, or more than $10 million.
The funds of YeGOK and BGOK were invested in processing, the development of railway tracks and objects, in projects for capital construction of infrastructure, quarrying, geological and other work.
Ferrexpo with assets in Ukraine in 2018 saw $335.22 million in net profit, which is 15% lower than the figure of 2017.
According to the annual financial statements posted by the company on the website of the London Stock Exchange (LSE) on Tuesday, its revenue last year grew by 6.4%, to $1.274 billion with a fall of 2.3% in sales of pellets, to 10.227 million tonnes and growth of pellet production by 1.6%, to 10.607 million tonnes.
Gross profit fell by 2.5%, to $766.09 million, earnings before interest, taxes, depreciation and amortization (EBITDA) – by 8.7%, to $502.88 million and operating profit – by 12.7%, to $427.58 million.
Net debt fell by 14%, to $339 million with capital investment growing by 31.1%, to $135 million.
“We continued to benefit from the strong global demand for our high-grade iron ore pellets, which helped deliver strong cash flow despite a rise in costs. This enabled us to increase investment, reduce debt further and pay a record dividend,” Non-executive Chairman Steve Lucas said.
He said that “our balance sheet is now strong and this gives us a platform to deliver the next stage in our planned expansion.” “This year we plan to increase investment once more to be able to hit our medium-term production target of 12 million tonnes per annum by 2021 and lay the foundations for our longer-term intention to move to annual output of 20 million tonnes per annum,” he said.