BAAR, Switzerland -- Ferrexpo Plc, an iron ore producer with Ukrainian operations, plans to fund development of its $1.3 billion Yeristovo expansion project with its own money after canceling a bond sale last month because of financing costs.
“The aim is to use our own balance sheet, which will be achieved through doing the project in a series of phases,” Chief Financial Officer Chris Mawe said in a phone interview.
Ferrexpo, which fell as much as 7.6 percent today in London trading, canceled a $500 million bond to refinance debt last month. The expansion’s first phase will cost $300 million and boost output of iron ore pellets to 12 million metric tons by the middle of 2013 from about 9 million tons.
Ferrexpo had net debt of $257 million June 30, in line with the prior six months.
The rest of the investment will be used for a concentrator and pelletizing plant over three to six years, doubling production to just less than 20 million tons, Mawe said.
“The speed at which we can increase output really depends on the amount of cash that’s generated from the business,” he said.
The company, based in Baar, Switzerland, today reported first-half net income rose almost fivefold to $138.1 million as prices increased. Rates for Ferrexpo’s iron ore pellets more than doubled in the second quarter from the 2009-10 benchmark.
Showing posts with label steel. Show all posts
Showing posts with label steel. Show all posts
Saturday, 7 August 2010
Thursday, 10 June 2010
Severstal hit by US mill shutdown
Severstal has been forced to close its largest American plant as the price of steel plummets and fears grow that global recovery is going off the rails.
Steel plants have been swinging to losses as the cost of raw materials increases and declining demand caused consumers to build up stockpiles.
“Cash costs of hot-rolled coil are above the market so the mill is generating losses at current prices,” said Dmitry Smolin, a metals and mining analyst at Uralsib.
The Sparrows Point mill accounts for a quarter of Severstal’s production in the US, and the decision to close it down for 30 days has been seen as negative for the Russia-based steel producer.
“We believe that the decision to stop Sparrows is prudent, however it will likely weigh negatively on the company’s financial performance in the US, as the fixed operating costs will be spread across other facilities in the US,” Citibank analysts wrote in a note.
Investors are hoping that demand will return to the market once consumers have run down their inventories, and while the plant may be idle for longer than planned it will resume activity in the near term.
“Basically, we believe the steel mills are facing a buyers’ strike situation, and are focusing on maintaining production discipline and avoiding oversupply,” Renaissance Capital metals and mining analyst Boris Krasnojenov wrote in a note. “The good news, in our view, is that the existing steel inventories may be largely worked out by the end of June.”
The price situation means that Severstal’s US operations are likely to run a loss for 2010, while the 20 per cent fall in steel prices, and a similar decline in aluminium, are symbolic of the world’s stuttering recovery.
Severstal were following the lead of ArcelorMittal, which shut down 3 plants in Europe last week as concerns continue that the Eurozone’s economic woes are not over. Tightening in China has also led to a fall in metals prices but the losses across the sector will eventually force prices up.
“Steel prices under the cost of current raw materials must go up, so we’ll see a price rise fairly soon,” said Smolin.
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Sunday, 21 March 2010
Russian steel: it’s a steal
Investors are looking for a steal on Russian steel stocks as a combination of returning demand and higher prices start improve the outlook for metals firms and push up valuations.
Both Evraz and Severstal outperformed the market on Wednesday, gaining 3.2 per cent and 2.2 per cent respectively while the Micex was up 1 per cent.
Rising prices of both finished products and raw steel have fueled the gains in recent days but analysts believe there are more to come with a further 5-10 per cent upside in April.
"With the rising raw material prices, the general expectation is that coke and coal prices will increase by at least $10 a tonne," said Olga Okuneva, a metals analyst at Deutsche Bank.
Therefore integrated producers will be the net beneficiaries of the trend."
In the last few months alone coke prices have risen more than 50 per cent while BHP Billiton, the world's largest coking coal producer, jumped 55 per cent on signing first-ever three month contract with Japanese steel producers.
With many contracts still to be determined for the third quarter and spot prices still on the rise, further big deals are expected in the second half of the year.
While fully-integrated firms Evraz and Severstal are the biggest beneficiaries, Russia's other steel producers are will be boosted ahead of some of their international competitors as they are at least partially integrated.
"NLMK lacks coal and MMK has coal but lacks ore," said Alexei Morozov, an analyst at UBS. "All of the companies have margin expansion this year, even the ones that are less integrated."
NLMK was up 0.5 per cent in early trading on the Micex, while MMK put on 1.5 per cent in London on Wednesday.
Investors have already been factoring in the price increases but many continue to see an upside with further growth expected throughout the year.
"The steel sector was also generally strong as investors look for further earnings upgrades as a result of still rising metal prices," Chris Weafer, chief strategist at Uralsib, wrote in a note to investors.
Although the price increases have been mostly driven by the export market and worries persist about continuing growth in China and the US, a return of domestic demand will further boost steel stocks.
"We expect at least a 15 per cent increase in domestic consumption this year," said Okuneva.
Severstal remains a favourite with investors, particularly following positive results last week, and hopes that its American assets will get back on track.
"MMK and Severstal [look good] because of the low valuations relative to the rest of the peer group," said Morozov.
Saturday, 2 May 2009
Ukrainian Purchase Overshadows Economy
KIEV, Ukraine -- A multinational steel corporation owned by Ukrainian billionaire Rinat Akhmetov acquired West Virginia-based United Coal Co. amid the economic crisis.
Though details were not available directly from Metinvest, the Dragon Capital investment bank in Ukraine put the value of the deal at somewhere between $800 million and $1 billion, the Financial Times reports.Metinvest is ranked among the Top 10 steel exporters in Ukraine, and the deal with United Coal would expand its portfolio in ore pits and coal mines.Akhmetov is considered the richest man in Ukraine. Several oligarchs have borrowed substantially in the past, putting additional strain on the foreign debt obligations for Ukraine.The deal shows a growing division in the Ukrainian economy as the wealthy few are able to thrive amid a looming economic crisis.Despite a bitter relationship over energy deals with Moscow, Russian Prime Minister Vladimir Putin agreed to waive fines on Ukraine for violating terms of a gas contract because of the deep recession."Ukraine's economic conditions have seen better times," said Putin.
Though details were not available directly from Metinvest, the Dragon Capital investment bank in Ukraine put the value of the deal at somewhere between $800 million and $1 billion, the Financial Times reports.Metinvest is ranked among the Top 10 steel exporters in Ukraine, and the deal with United Coal would expand its portfolio in ore pits and coal mines.Akhmetov is considered the richest man in Ukraine. Several oligarchs have borrowed substantially in the past, putting additional strain on the foreign debt obligations for Ukraine.The deal shows a growing division in the Ukrainian economy as the wealthy few are able to thrive amid a looming economic crisis.Despite a bitter relationship over energy deals with Moscow, Russian Prime Minister Vladimir Putin agreed to waive fines on Ukraine for violating terms of a gas contract because of the deep recession."Ukraine's economic conditions have seen better times," said Putin.
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