Ukrainian iron ore pellet maker Ferrexpo says further Russian military action has reduced its ability to export cargo by ship.
The London-listed company said a Russian missile strike in southwest Ukraine has reduced its ability to use its barging operations that serve its European customers.
Due to the closure of Ukraine’s Black Sea ports, Ferrexpo has had to divert all its iron ore pellet sales to European markets via Ukraine’s diverse railway network, as well as via barges.
But Russia’s invasion of Ukraine has also resulted in periodic disruption to the railway network across the country, with the national rail operator having to consistently repair and re-open damaged sections of the railway network following Russian air strikes.
Ferrexpo, which is headquartered in Switzerland, said the group’s barging operations accounted for 800,00 tonnes of iron ore deliveries in 2021.
Separately, the company said it is in advanced discussions with additional port operators in central Europe for seaborne exports, while the Black Sea ports remain closed.
“Russia’s invasion of Ukraine has created a changeable and unpredictable situation, and one in which our management team is continually having to adapt and evolve our approach to operating,” said Ferrexpo chief executive Jim North.
“It is a credit to our operators and marketing team that our year-to-date production in the first five months of 2022 was only 8% below the same level seen in 2021.”
However, North said the company will now lower its short-term production schedule for the summer months due to the latest development and will look to increase production once there is greater clarity on logistics going forward.
“The gradual reopening of our access to the seaborne market is a positive for the group and we will prioritise these efforts as we understand the importance of reconnecting with this segment of our customer portfolio,” he added.
Ferrexpo’s seaborne export activities at the port of Pivdennyi were suspended in late February after the invasion following notification from the port authorities.
As a result, the group’s marketing department had to issue force majeure notices to certain customers that were due to receive the group’s products via oceangoing vessel in the near term.
Prior to its listing in 2007, Ferrexpo predominantly loaded panamax vessels with a capability of carrying approximately 120,000 tonnes of pellets.
Through an investment in a transhipment vessel, the 89,846-dwt Iron Destiny (built 1982), the group began loading capesize vessels in 2011.
Following further upgrades at Pivdennyi, the group successfully loaded its first newcastlemax bulker for a single customer in 2021.
