Ferrexpo daily pellet output drops 7% m/m in September

Ukraine’s largest iron ore pellet exporter Ferrexpo
(FXPO LN) produced 817 kt of pellets in September, which amounts to 27.2 kt per
day, a 7.1% m/m decrease, according to our analysis of the company’s 3Q19
production report released on Oct. 8.

In 9M19, Ferrexpo’s pellet output amounted to 7.89 mmt
(28.9 kt per day), a 1.7% yoy increase.

The company said that the planned major refurbishment
of one of its four pellet lines will start on Oct. 28 and will last for
approximately 55 days.

Citing the current market environment, Ferrexpo
lowered its 2019 production guidance to 10.4-10.6 mmt, compared with 10.6 mmt both
in 2018 and in the previous guidance for 2019.

Dmytro Khoroshun: Ferrexpo
cannot blame exclusively the market environment for the likely decrease of
production volumes in 2019. For example, in July, when the iron ore prices were
close to their recent highs, Ferrexpo’s production rate was only 26.2 kt per day. Compared
with the recent high of 31.5 kt per day in April,
Ferrexpo underproduced by about 160 kt in July.

Because of the planned refurbishment, the daily
production rate might drop to about 25 kt per day during the 55 days in the
4Q19, we estimate. For example, during the previous major refurbishments,
Ferrexpo produced at the rates 25.0 kt per day (April 2017) and 24.7 kt per day
(May 2018). We estimate that Ferrexpo’s 2019 production will amount to
10.3-10.5 mmt, or 1-3% lower yoy.