International credit rating agency S&P Global Ratings (Standard & Poor's Ratings Services) has announced that it has revised its outlook on Swiss-headquartered iron ore miner Ferrexpo, whose main interests are in Ukrainian iron ore assets, to positive from stable and has affirmed its “B-“ long-term corporate credit rating for the company.
According to S&P, the outlook revision to positive reflects the supportive iron ore pellet market, which suggests 2018 will be another strong year for Ferrexpo. Strong demand for and tight supply of iron ore pellets have resulted in healthy cash flow generation, enabling Ferrexpo to continue deleveraging and to meet all of its debt repayment obligations from internal cash flow generation. The credit rating agency stated that early indications suggest that the supportive pellet market conditions will continue in 2018, which means the company should easily cover its upcoming debt maturities over the next 12 months.
S&P anticipates that the iron ore pellet market will remain tight in 2018, as Brazilian pellet producer Samarco's pelletizing plant remains idle and stricter environmental regulations in China force iron ore producers to use more pelletized iron ore as feedstock in the steelmaking process. The medium-term (2019-2020) outlook is less certain, however, as the higher prices may trigger capacity additions, and S&P’s base-case expectation is for iron ore prices and pellet premiums to decline in 2019.