Ukraine Markets Daily (January 09, 2018)

Market news

  • Ukraine’s international reserves grew by 21.0% in 2017
  • Ferrexpo’s pellet production decreased by 6.0% y/y in 2017

Market comment

The UX index and the PFTS index remained unchanged yesterday due to holidays. The WIG-Ukraine index decreased by 0.3% yesterday. On the interbank exchange market, the USD/UAH remained unchanged at UAH 28.19 (mid price), according to Thomson Reuters. The official exchange rate reported by the NBU was UAH 28.01


Ukraine’s international reserves grew by 21.0% in 2017

According to the preliminary information provided by the National Bank of Ukraine (NBU), as of January 1, 2018, international reserves reached USD 18,906 mn, decreasing by USD 98 mn (-0.5% m/m) during December. Since the year beginning, reserves grew by 21.0%. Reserves were replenished by USD 589 mn in December, USD 586 mn of which were gained through the issue of foreign currency local bonds. Meanwhile, USD 423 mn were spent to service sovereign debt and USD 162 mn were repaid to the IMF during the previous month. In addition, the net sales of the foreign currency made by the NBU within the foreign currency interventions amounted to USD 183 mn. As of January 1, 2018, the amount of international reserves covers 3.6 months of future imports and all current foreign obligations of the Central Bank and the Government.

Our view:

A large amount of payments aimed at the debt servicing in combination with the need to smooth down the Ukrainian Hryvnia volatility, led to a minor international reserves reduction in December 2017. While the overall result for 2017 outperformed the latest forecast made by the NBU in October 2017 and grew by 21.0% in 2017 mostly due to external financing from the IMF for the total amount of USD 1 bn and the net purchase of USD 1.3 bn made by the NBU on the interbank foreign currency exchange market.


Ferrexpo’s pellet production decreased by 6.0% y/y in 2017

Today, on the 9th of January, Ferrexpo published its production results for the 4Q 2017, with the total results for the year 2017. According to their publication, total pellets production in 2017 reached 10,394 thsd t, which is 6.0% less than the Company produced during 2016. In the Q4 2017, total pellets production increased to 2,763 thsd t (+10.9% q/q) compared with the 2,493 thsd t in Q3 2017. Particularly, total production of 62% Fe Ferrexpo Basic Pellets (FBP) decreased to 144 thsd t (-7.9% q/q), while the production of 65% Fe Ferrexpo Premium Pellets and Ferrexpo Premium Pellets Plus (FPP and FPP+) grew up to 2,619 thsd t (+12.1% q/q). The Company produced only 28 thsd t of pellets from the third party materials during Q4 2017.

Our view:

According to the Company’s information, pellet line maintenance program was carried out during 2017, which caused the reduction of its annual production volumes, especially in the H1 2017. Meanwhile the production growth in Q4 2017 is probably connected with the end of the maintenance program, which was mentioned before. We think that Ferrexpo’s annual financial results for 2017 will not worsen from the production drop during the period and will be even much better than the previous year’s ones, as a result of the growth of an average iron ore price by 23.8% y/y in 2017.


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Kind regards

Research Team