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the percent margin for pellet premiums has averaged roughly around 25% over fines. Today it stands at 60%. why? one reason is that in China many of the high cost shell making mills got severely hurt in the last year, and even the current price of $56 keeps 80% of iron ore producers out of the market. 80% of them have costs higher than $80 a ton. So these guys are shut up for now. Over at the steel mills, the older less productive mills have also been squeezed into mothballs and shut up. The new Steel mills with quality furnaces want and need the pellets and especially the fe65 pellets. So, when the going gets tough, the pellet buying clients weather the storm and dominate the market. add in the chinese environmental restrictions and the pellet sellers are to the fore again.

The pellet premium is $34 or if your prefer 60% extra on regular iron ore quoted prices. so what does this really mean if the market collapses back. Lets suggest that Iron falls to $46 a ton, now thats a sharp winter fall, that would leave pellets ( plus 60% ) at $73. and Ferrexpo clearing $23a ton, or $250m operating profit The percentage premium could collapse too mind you. I'll check some figure to see of historically the premium widens with higher prices or tightens with lower ones. and report back. I do know this, with an extra $120m in the saddle bags from Q3. Ferrexpo no immediate worries or need for operating cash financing. the volatility of iron ore, and Ukraine will make re-financing hard. But, as things stand the end of year 2016 profits will open many investors eyes.

There is a lot to answer there, and I will in time and in detail. for now allow me a quick response. Yes iron ore pellets are a manufactured product and yes it commands a premium price over fines and lump. The premium is the extra steel companies are willing to pay. why wold they? several reasons pellets are better, 1, higher iron content, 2, cheaper to produce iron with them, 3, stabilizes the furnace 4, less waste 5, environmentally better, 5, and produces less maintenance in the steel plants. Yes they cost more to make, Premiums range from $10 ( last Dec in China ) to a normal $20 to $30 inn the EU. .. Today Monday, Once again ore dropped to $56 a tonne, and again Pellets remained at $90 a ton. creating a premium of $34 a ton. But, they always track each other closely enough, but not so much in the last month or two. Chinese cities are plagued with smog and the pellets help reduce this. so its a bonus. the 65fe pellets are vastly superior. In q1 and q2 China was paying less than $20 in a premium� today its $34. In real terms that's a 60% premium. Normally that would be 20% to say 35%. we are now in mid Sept and still selling at $90t . That's a $40m a month profit EBITDA. this will give Ferrexpo Q3 operating profits of $120M.

Hi Lemmink, The price of Pellets hasn't dropped in over a week, Iron is dropping, but Pellets are stick on $90t on today Friday. Why? I think that the Chinese Govt are putting an environmental squeeze on many city based steel makers and using pellets is the only way around this. also, the steel prices created a demand that required the steel plants a window of time to make money, using the pellets insures less downtime and less danger hemorrhage in supple due to production shut downs. Pellets should track downwards with ore, and will, but there is a near 34c premium being paid in China today for pellets. In the rest of the world this is traditionally higher. EU having steady growth this year of 1.8% will add to optimism here. Ferrexpo had opened recent new clients in several new countries, easing away from the Chinese market, that the CEO diplomatically indicates is not a perfect place to do business. But this weak Chinese market is today paying $90 a tonne. the RoW will be equally as good if not better. Moreover, the really good new is Ferrexpo now has a widening choice of clients with the Chinese now coming up to the plate price wise. South Korea steelmakers have stated this week they expect a record year this year for exports. so, Ferrexpo's orders there are presumably better too. It seems to me that the premium pellet market is more insulated to with base iron ore price drop.

Another day another dollar, pellets selling at $90 a t, and the premium is now 33c to 35c. If and its a big If, but if this orice holds - Ferrexpi will be making $500m per annum . EBitda . Meanwhile the profits keep coming .

as someone pointed out already, there will be no news ( bar production figures ) until march 2017. So until then its about watching the price of pellets. The market just posted for today Monday 5th Sept, and it is $90 a tonne. Up 1% on Friday's close. We were expecting the a slow down that has not came yet.

But why? the Q3 operating profits here will be comfortably above $100m. This is a right money maker at the moment. I'd rather work on today's figures and take my chances that the drop will not be as soon or a severe as expected.

ore remains high and stable, http://219.238.233.84/uec/priceIndex.do?method=toIndexOre_zonghe_en yet the price continues to drop. another day of $91 a tonne pellets. I expect the slow down must be coming , but no sign of it as we enter the first day of Sept tomorrow.

probably correct. However, it would make sense to release qtr results in this market.

never assume the market knows more than you…. On Sat the pellet premium hit 34c in China, its highest in years. It can't stay up forever but every week this goes on Ferrexpo is filling its saddle bags.

we are quite some distance from the conflict zone and we are not in an area under dispute, most citizens want to ne with ukraine. hence russia would not advance on it.

why the drop, mainly because several banks forecast iron ore will have a dismay winter. The odd thing is pellet prices remained at $91.50 in China today, the premium in EU is unclear but it's over 32c. I think Ferrexpo will make $110m operating profit in this quarter assuming Sept price doesn't completely tank. maybe they should release Q3 financials along with Q3 production figures . Pellets are better for the environment so many city shell plants may be forced to use them in the future, even in China…. i'm holding

$70m Capex for 1 million tonne .

... Ensure stability . Even if we're bought over it would never be closed . It makes $300m a year , has $2 billion recent investment , and capacity to increase production by 50% for a Capex of $70m per extra tonne . That's a IRR return of 33% ! Who is going to close this ? Trump ?

This is not stake-over target. It's in a political sensitive region that requires local management to hg

Ah, slight correction ! The company pays tax mostly in the Ukraine. At 18%. I'm not sure of the structure but I guess it's a subsidiary of the Swiss reg company . Not sure of tax treaty mechanics - worth looking into

Ferrexpo should move it's headquarters to the Republic Of Ireland. There remains no logical reason to be based in Switzerland. The main reason is the obvious - Ireland's corporation tax is a ready 12.5% Vs the Swiss rate of 17.9%. presuming we have a profit of around $200m that's a saving of $10.8m annually. Think of there years times and its another $32.4m in cash. It's madness staying in Switzerland. Also, Ferrexpo banks in Ireland already, plus it gives us levy free access to the EU markets should any trade blocks emerge in the future. We sell no iron to Switzerland so there is no reverse dangers. Plus, the moving the HQ to Ireland will upset nobody in the EU orUK as the HQ is already outside the EU. Indeed should the Ukraine find itself in deep financial water, it would be better having the EU going in to bat ( argue ) for us than the Swiss government. Ferrexpo's profits are high but its debt is also high. The problem is tax is applied 'before' capital debt repayments. also Ireland has near identical business laws to the UK where a lot of its investors are based, and where investor meetings take place. an announcement that they are moving to ireland because their business is increasing in the EU, and for tax reasons, would add $100m to the market Cap instantly. and from there they could sell shares on the Irish Stock exchange where institutional investors and pension funds would be obligated by regulations to invest as part of irish tracker baskets. while a rise to our stock value would be welcome, it is the extra cash annually of $10.4m that makes this move the most sensible ….on a darker note the Irish Republic has a very company friendly examiner protection that would hold any banker or bondholder aggression at bay should the **** hit the fan in 2018/9. i'm going to write to the CEO to propose the move. I normally don't like inter country transfers of HQ, but in this case the company is not EU based and its EU business has grown to a level that warrants it.

pellet prices on Monday morning in China are up to $91.50c ….. the high prices continue. This really is a pretty savage price. I don't see a collapse coming any day soon, and its late august.

looking good, premiums pellets still get $91 as of friday… of course we need a year of decent pricing of $75a ton. Securing $91 gives us protection from the downside to follow. But, I have a hunch that the downside will not be as bad as some think. because high cost producers can simply shut down.

market Cap of $2billion by 2020, not 2010.