Ferrexpo´s production to take hit from lack of power supplies

22nd Dec 2014 07:33

Power restrictions in Ukraine during the peak demand hours of the day will impact Ferrexpo´s production of iron -ore pellets, although authorities are introducing measures to address the current situation.In December, total pellet production is expected to be 140,000 tonnes lower than planned. Over the 11 months ending on 30 November the company produced 10.2m tonnes, for a 3.2% increase.The above is the result of lower domestic coal production and low stocks of the fuel at power stations.However, the firm´s shipments for this month will not be affected.Should Kiev´s attempts to resolve the lack of energy supplies not bear fruit then capacity at Ferrexpo´s processing facilities will remain at around present levels in the first three months of the new year, but with improvement expected thereafter.Under such a scenario deliveries under long-term contracts will be prioritised over spot sales.Lastly, the firm called attention to the sharp depreciation seen in the Ukrainian currency year-to-date. That saw Ferrexpo´s cash cost of production drop to an average of $44 per tonne in November.Financial liquidity in Ukraine is being maintained at approximately two months´ worth of the funding needed to ensure operations and capital expenditues are shielded as far as possible from the volatility in capital markets.