Poltava Iron Ore to Increase Pellet Deliveries to Alchevsk Iron & Steel by 30-35%

Poltava Iron Ore (PGOK: U/R) is planning to raise pellet deliveries to Alchevsk Iron & Steel (ALMK: BUY) by 30-35% in 2008 to 208-216 ths mt per month, according to Ukrainian News. Eugene Cherviachenko: Alchevsk Iron & Steel contracted 160 ths mt of monthly deliveries of pellets from Poltava Iron Ore for three years, according to its parent, IUD (see our November 2007 note). The deal is favourable for both parties. Poltava Iron Ore secures a market for 25-30% of its pellets based on 2007 production, while Alchevsk will be able to increase pellet consumption to load its modernized facilities with more quality inputs. According to our calculations, this will cover 100% of Alchevsk Iron & Steel’s need for pellets. We reiterate BUY on ALMK; we expect it to post the higher growth in tonnage than its domestic producers in 2008 due to the new facilities coming on stream, additionally supported by strengthening its raw materials supply.