Iron ore production increased slightly in the second quarter at Ferrexpo, the Swiss-based mining group whose assets are based in Ukraine.
However, the amount of iron ore pellets created from this ore – and destined for use by steelmakers – fell during the period, as spot sales to Asian markets ate into profitability.
“Ferrexpo continued to trade profitably in the second quarter of 2009,” said Kostyantin Zhevago, chief executive.
“Freight rates from the Black Sea to China did put pressure on our average achieved...prices during the period, but this is likely to prove a temporary phenomenon. The outlook for iron ore is improving for the next quarter, particularly in our traditional markets [ones closer to eastern Europe], which will reduce our reliance on the Asian seaborne spot market to some degree.”
In the second quarter of 2009, Ferrexpo produced 7.5m tonnes of iron ore, 3.8 per cent more than the 7.2m produced in the second quarter of 2008, with the company operating at full mining capacity throughout the period. However, the total number of pellets produced from this ore fell 1.4 per cent to 2.2m tonnes.
For the first half of 2009, sales volumes outpaced production.
There was a strong divergence in demand for the two different grades of iron ore pellets. Production of higher quality pellets that have a greater iron content increased 6 per cent compared with the same period last year to 1m tonnes, while production of pellets with a lower iron ore content dropped 7 per cent to 1.2m tonnes.
Ferrexpo saw a jump – albeit from a very low base – in so-called ‘toll’ production, where miners produce iron ore pellets from ore mined by third party companies. Toll production of pellets grew by 56 per cent in the period to 15,000 tonnes.
Ferrexpo is currently facing a wave of investor unrest. In May, dissident shareholders who believe that controls on management are insufficient tried to prevent the group from a share buyback. Then last month, Mr Zhevago suggested that shareholders who dislike his management style should simply sell their stakes in the group.
Source: Financial Times
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