July 14, 2009 / 6:33 AM / 11 years ago

Ferrexpo output up; upbeat on demand

LONDON (Reuters) - Ukranian iron ore producer Ferrexpo (FXPO.L) said on Tuesday that pellet output rose 19 percent from the first quarter and was positive about the demand outlook, lifting the shares.

Total pellet production from its own raw materials rose to 2.24 million tonnes in the second quarter, although it dipped 1.4 percent from the year-earlier quarter.

Ferrexpo said it saw a gradual improvement in demand over the first half of the year in Ukraine and its traditional markets, and that it traded profitably in the first half.

Sales volumes in the first half exceeded production while output costs continue to trend lower, the producer said.

Liberum Capital called the production report positive.

“Its production volumes have recovered and it is producing at full capacity, costs continue to decline and the company now anticipates a recovery in core markets, all of which point to stronger margins and earnings in the second half,” Liberum said.

At 1014 GMT (11:14 British time), the shares were up 6.5 percent at 123 pence.

However, Ferrexpo also said high levels of spot sales to China had exposed the company to higher freight rates, reducing margins.

It expects the pressure of freight rates to be temporary.

“The outlook for iron ore is improving for the next quarter, particularly in our traditional markets, which will reduce our reliance on the Asian seaborne spot market to some degree,” said Chief Executive Kostyantin Zhevago.

Reporting by Julie Crust; editing by Paul Sandle and Karen Foster

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