China pellet price crosses safety threshold for Ferrexpo

China pellet price crosses safety threshold for Ferrexpo



15 квітня 2015 года
Конкорд Капитал

Ferrexpo (FXPO)


Iron ore pellet price (CFR, China port) declined to USD 85.5/t on Feb.10 (-22% YTD, down 43% compared to mid-April 2014) thus having crossed the level of USD 87/t, which we have estimated as a safe one for Ferrexpo (FXPOLN), and which could allow the company to go smoothly through the scheduled debt repayment, totaling USD 1.3 bln by 2019. Iron ore fines prices remained at a low level of USD 50/t, having dwindled by 31% from January 2015.



Roman Topolyuk: We estimate that Ferrexpo breaks even operationally at the pellet price of USD 76/t, including maintenance CapEx and interest payments. The company also will need to earn on average USD 11/t on top of that in order to provide sufficient capital for a timely debt repayment, given its full capacity load of 12 mmt per year and a net debt at USD 678 mln, as of Dec.14. Though with pellet prices below USD 87/t, the company does not envisage the liquidity gap immediately, the outlook for Ferrexpo’s solvency is getting dimmer, and is depending on the timing of the iron ore market’s rebound. As things are unfolding, the weakness of iron ore prices or a further decline are going to persist in the next 1-2 years, since major iron ore miners are not halting the capacity extension programs and Chinese iron ore producers, 80% of which are making losses at current prices, are likely to continue operations for an uncertain time period. We change our view on FXPOLN Eurobonds from Neutral to Negative.

Источник: Конкорд Капитал

Аналитик: Роман Тополюк
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