Ferrexpo’s iron ore pellet production volumes remain high

Production levels at mines owned by Ukraine-focused Ferrexpo have remained relatively stable despite the closure of the critical Black Sea port.

The London-listed miner generated 2.7 million tonnes of iron ore pellets from its three sites in central Ukraine in the first three months of 2022, which was only slightly down on the same period last year.

Nonetheless, Russia’s full-scale invasion of Ukraine has inevitably affected the firm’s operations, with around 400,000 fewer tonnes of pellets excavated than in the fourth quarter of 2021.

Production: The London-listed miner said it generated 2.7 million tonnes of iron ore pellets from its three sites in central Ukraine in the first three months of 2022

Ferrexpo has been unable to transport the raw material – a common ingredient used in steelmaking and valued for minimising carbon emissions – from the port of Pivdennyi since late February.

Prior to the conflict’s escalation, the seaport was responsible for transporting around half of the group’s output on dry bulk carriers, where it would then be delivered to steel mills in countries such as Germany, South Korea and the US.

But while shipments have been choked off, the Swiss-based company has been able to keep exporting pellets via railway and river to customers across Europe in defiance of fears that these routes would suffer significant disruption.

Chief executive Jim North noted that Ferrexpo’s mining sites, which are based around 220 miles east of Kyiv, have managed to keep operating as they are located outside the main theatre of conflict.

He added that the firm was ‘reviewing alternative methods of delivering our products to seaborne markets’ to try and offset the closure of Pivdennyi. 

After plunging for much of the last six weeks, Ferrexpo shares climbed 12.5 per cent in morning trading to 188.6p, although their value remains around a quarter lower than on the day before the Russian invasion.

Steel: Ferrexpo mines iron ore pellets – a common ingredient used in steelmaking and valued for minimising carbon emissions – at its three sites in Central Ukraine

Even before then, the company’s share price had been gradually declining since last summer despite heavily benefiting from surging iron ore prices amid a recovery in the world economy. 

On the same Russian President Vladimir Putin announced his forces were launching a ‘special military operation’ into eastern Ukraine, Anglo American declared record profits in its full-year results.

The blue-chip corporation attributed higher demand for iron ore, as well as copper and platinum group metals, for its underlying earnings doubling from $9.8billion in 2020 to $20.6billion the following year.

Antofagasta, BHP Group and Rio Tinto have likewise declared exceptionally strong results, with the latter firm also handing out a record £12billion in annual dividend payments to shareholders.

Peel Hunt analysts Tim Huff and Peter Mallin-Jones expressed surprise at Ferrexpo’s performance, considering the dire situation ongoing in Ukraine, and have maintained a hold recommendation for the company.

‘It is positive that operations have continued and long-term customers in Europe remain supportive of the group. That said, clearly there is still substantial risk to Ferrexpo’s operations and logistics chains.’

This post first appeared on Dailymail.co.uk