Swiss-headquartered company Ferrexpo, whose main interests are in Ukrainian iron ore assets, has said that demand in its core markets has strengthened as Europe restocks and as the global economic outlook improves.
"It should be noted in particular that the majority of Ferrexpo's European customers are now taking their full contract volumes, despite in many cases not being at 100 percent capacity utilization themselves," Ferrexpo's CEO Kostyantin Zhevago said.
During the third quarter of 2009, Ferrexpo has reverted to selling the majority of its production to its portfolio of long-term contract customers. All its markets, except for Ukraine, the steel production of which is still in transition to higher capacity utilization, are now normalized in terms of long-term contractual offtake, which will be reflected in its pellet sales from Q4 2009. Ferrexpo has long-term contracts in place for approximately 90 percent of its output, with the remainder comprising trial cargoes to prospective new long-term customers.
Meanwhile, at the end of July this year, Ferrexpo suspended its spot market pellet sales to China in favor of increasing term-contracted sales; however, the company continues to supply its Chinese long-term contract customers.
Accordingly, Ferrexpo has already settled contract prices with customers representing over 85 percent of its long-term contract portfolio by volume. These prices will apply to the relevant contracted period from Q4 2009, with most applicable through to March 31, 2010. The new contract prices reflect a decrease of about 48.3 percent compared to the contract prices settled for the 2008-2009 contract year.
In Q3 2009, Ferrexpo's sales volume amounted to 2.414 million mt, the average achieved DAF/FOB price was $62.1/mt - up 4.7 percent compared to the average price achieved in Q2 2009, while the C1 cash cost of production was $33.5/mt - up 2.9 percent over the average C1 cost in the first half of the year.