Ferrexpo pellet output slides 10% yoy in October

Ukraine’s largest iron ore pellet exporter Ferrexpo (FXPO LN, FXPOLN) produced  930 kt of pellets in October, Interfax-Ukraine reported on Nov. 14, citing the company’s information. October’s result is 15% better than in September (when output fell 14% m/m and 21% yoy), but 9.8% weaker than a year before. In 10M16, Ferrexpo’s pellet output fell 4.6% yoy to 9,257 kt.

Andriy Perederiy: Ferrexpo’s October results, being weaker than we expected, implies 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 from mid-December (USD 39/t in mid-December 2015, CFR, China ports vs. USD 79/t in mid-November 2016). An iron ore price increase would compensate weaker production. However, seeing the risk of another dip in iron ore prices in end-2016, we are keeping our neutral view on Ferrexpo’s Eurobonds.