Higher output and prices to drive 1H profits: Ferrexpo

Swiss-Ukrainian iron ore producer Ferrexpo expects its first-half profit to increase as a result of higher prices, production and sales volumes amid lower-than-anticipated costs.

The average cost of production in the first half is likely to increase on the year, the company said. But cost inflation has been lower than expected because the falls in Brent crude and European gas prices have been partly offset by a stronger Ukrainian hryvnia against the US dollar, it added.

"Ferrexpo continues to be well positioned to supply a high-quality iron ore product to the top steel mills in the world, receiving a record price premium for its product. The group's balance sheet remains strong, with net debt expected to further reduce compared with 31 December 2018," Ferrexpo chairman Steve Lucas said.

Iron ore prices have been supported by supply tightness this year, with Brazil's Vale and UK-Australian firms BHP and Rio Tinto — the world's three largest iron ore producers — announcing production cuts.

BHP has told its customers that it will conduct equipment maintenance on 1-15 July that will delay shipments of Newman fines (NHGF), while Rio Tinto has told customers that it expects to finish repairs to cyclone damage by late June or early July. The latter's Pilbara operations in Australia have been disrupted this year by a fire at a Robe River screen facility in January and a cyclone in March.

Vale is expecting to ship 50mn-75mn t less iron ore in 2019 after a January accident at the Feijao dam in Minas Gerais province. But latest export data suggest shipments from Brazil are recovering.

Investigations are still continuing over how Ferrexpo's donations to a charity were used and it remains inconclusive if the charity was controlled by its chief executive Kostyantin Zhevago.

Ferrexpo's pellet output is expected to be roughly flat on 2018 this year, at around 10.6mn t. It will carry out a 75-day pellet line shutdown in the second half of the year, but will adjust production rates during the remainder of the year to offset the impact on volumes.