Exclusive Ferrexpo reduced pellet production by 34% y/y in 1H2025

Due to non-reimbursement of VAT, the company was forced to suspend part of its capacity, which affected its performance

Ferrexpo, an iron ore producer with assets in Ukraine listed on the London Stock Exchange, reduced its iron ore pellet production by 34.2% y/y – to 2.17 million tons in January-June 2025 compared to the same period in 2024. This is stated in the company’s report.

Production of DR pellets (Fe 67%) fell by 49.7% y/y – to 81.79 thousand tons, and premium pellets (Fe 65%) fell by 33.4% y/y – to 2.09 million tons. Commercial concentrate output increased 2.8 times y/y, to 1.22 million tons.

Amid financial constraints caused by non-reimbursement of VAT, Ferrexpo was forced to reduce production activity, shutting down one of its two operating pelletizing lines, as well as reducing the production of concentrate with high Fe content. In January-April 2025, the tax authorities refused to refund VAT in the amount of $31 million, which directly affected the company’s liquidity.

During the second quarter, the company produced 821,880 tons of pellets (-39% q-o-q). The entire output currently consists of premium pellets, while the production of DR pellets has been suspended.Concentrate production volumes fell by 42.7% q-o-q to 445.79 thousand tons.

«The strong momentum at the start of the year, including our best quarterly production since the full-scale invasion in February 2022, was significantly curtailed in the second quarter as we started to experience the full impact of the Ukrainian tax authorities’ decisions to suspend the refund of VAT to our Ukrainian subsidiaries… Despite a weaker iron ore pellet market, we were able to significantly pivot our production mix and benefit from strong demand in China for our high-grade low-alumina iron ore concentrates… In the challenging operating environment and iron ore market, it is pleasing that we were able to be so agile, and benefit from the demand for high-grade concentrate products,» commented Lucio Genovese, interim chairman of Ferrexpo.

At the same time, he said, falling iron ore prices and reduced production had a significant impact on the company’s profitability. Additional pressure was created by rising energy prices, particularly gas and electricity. In response, Ferrexpo took a number of anti-crisis measures: about 37% of employees were transferred to reduced working hours or temporary furlough, procurement costs were reduced, and all non-priority investments, social and humanitarian programs were suspended.

At the same time, the company is actively engaged in dialogue with Ukrainian and international institutions to resolve the issue of VAT refunds.

Despite the challenges, Ferrexpo remains focused on people. As of the end of June 2025, 738 company employees are serving in the Armed Forces of Ukraine, the highest number since the start of the full-scale invasion. At the same time, the number of those returning to peaceful life is growing: 186 employees have already been demobilized, 98 of whom have resumed work at the company.

In the context of war and a difficult external economic situation, state support for strategic industries such as iron ore should be a priority. Without this, the country risks losing one of its key sources of foreign exchange earnings and national currency stability.

In 2024, Ukraine increased its iron ore exports by 89.9% compared to 2023, to 33.699 million tons. Revenue from mineral exports amounted to $2.8 billion (+58.7% y/y).