Ukraine iron ore prices decline 24% since mid-June
8 July 2015
Spot prices for iron ore fines crossed USD 50/t in China (CFR) on July 7, having declined 24% since mid-June to USD 49.6/t. The plunge in prices is the result of the first increase in iron ore stockpiles in Chinese ports since the beginning of 2015, from 74 mmt to 76 mmt, which occurred during the first week of July. The key global consumer of iron ore, the Chinese steel industry, has slowed its output as production in the country’s biggest steelmaking province decreased 2.4% yoy in May to 16.1 mmt.
Roman Topolyuk: The bounce in iron ore prices, which had lasted since April, proved to be short-lived. The slide to new lows is a negative development for Metinvest (METINV) and Ferrexpo (FXPOLN), which might face a further squeeze of their margins in 2H15. Ferrexpo reported an adjusted EBITDA margin of 30% in 2014, and we project around 20% in 2015. Metinvest’s mining division reported an EBITDA margin of 38% in 2014, while we project around 20% in 2015, as part of the iron ore concentrate capacities of Metinvest might be merely breaking even, at the current levels of fines prices.
