Ferrexpo pellet output decreases 5% m/m in November

Pellet production at Ukraine’s largest iron ore pellet exporter Ferrexpo (FXPO LN, FXPOLN) decreased 5% m/m in November (-11.9% yoy), Interfax-Ukraine reported on Dec. 14. In 11M16, pellet output fell 5% yoy to 10.14 mmt.

Andriy Perederiy: The company’s operating performance is somewhat weaker than we expected, implying the company might produce 11.5 mmt of pellets in 2016 (-1% yoy). Currently, Ferrexpo is enjoying a surge in prices for iron ore, which almost doubled yoy (USD 39/t in mid-December 2015, CFR, China ports vs. USD 79/t in mid-December 2016). An iron ore price increase would compensate weaker production. However, seeing the risk of another dip in iron ore prices in mid-2017, we are keeping our neutral view on Ferrexpo’s Eurobonds.