Ferrexpo keeps production flat yoy in 1Q12

Ferrexpo (FXPO LN) reported yesterday a 0.5% yoy increase in total pellet production to 2.3 mmt in 1Q12. Pellet production from its own ore grew 6.3% yoy to 2.26 mmt, while output in the less profitable segment of pellet output from purchased concentrate fell 2.2x yoy to 57 kt. Total pellet production declined 9.4% qoq in 1Q12, representing a decrease in output in both segments – pellets made from its own ore and purchased ore.

Roman Topolyuk: We expect the company to increase production in the second half of 2012, after the consumption of iron ore rebounds in China, following local government steps there to loosen monetary policy. The current short-term outlook for the global iron ore market is also improving, with inventories in Chinese ports sharply declining to 94 mmt down from a record of 100 mmt. This was accompanied by a 5% increase in spot prices on iron ore fines, since mid-February to USD 150/mt (63.5% Fe, China port, CFR). The main driver of both factors has been a 1.1% increase in daily steel production in China in mid-March to 1.9 mmt.