Swiss-headquartered company Ferrexpo, whose main interests are in Ukrainian iron ore assets, has announced that, maintaining its ore production at full capacity and registering very strong sales demand, it expects to realize a strong financial performance as a result of a positive outlook for prices in the remainder of the year compared to 2009 levels.
From the beginning of the current year up to April 30, Ferrexpo's pellet production, including pellet produced from concentrate purchased from third parties, amounted to 3.2 million mt - up 20.3 percent year on year. Of this amount, 2.9 million mt was produced from the company's own iron ore, a 10.4 percent increase over the previous period. The split of production between 62 percent Fe and 65 percent Fe was 51.5 percent and 48.5 percent respectively for this period.
Iron ore demand has recovered from its 2009 lows, suggesting that iron ore pellet prices should remain well above 2009 levels for the remainder of 2010. For the April to June 2010 quarter, Ferrexpo has already secured or expects to secure significant average DAF/FOB price increases in line with international pricing for all of its production. Over 90 percent of the company's sales are based on long-term volume framework agreements.
The average C1 cash cost to April 30, 2010 was $38.84/mt. Ferrexpo has been experiencing local inflationary pressures and increases related to cyclical price inputs such as oil and steel. Operational efficiencies and productivity initiatives as well as a small depreciation of the hryvnia versus the US dollar, however, have partly mitigated these pressures.
Ferrexpo, like all exporters, has been affected by the issue of late repayment of VAT in Ukraine. To resolve this problem, it has been announced as part of the recent budget that the Ukrainian government may convert all or part of these balances into a tradable financial instrument designed to allow the industry to collect these overdue balances.