Ukrainian-based iron pellet producer Ferrexpo PLC (LSE:FXPO) might be able to open Black Sea export routes, said Liberum, which expects Russia’s invasion of Ukraine to reach an impasse by the middle of the year.
Analysts at the investment bank held its BUY rating on the stock, noting that a stalemate in Ukraine would play into the hands of Ferrexpo.
Liberum, which held its target price of 250p, believes the Kremlin will find it increasingly difficult to mobilise in the future with falling gas and export revenues reducing the invasion budget.
As a result, it is feasible to assume that Black Sea export routes could open in the second half, facilitating a return to production capacity.
Liberum is also optimistic that Ferrexpo can open its second pelletiser by the Spring as the power situation improves, with only one-out-of-four currently in operation due to energy problems as a result of Russia’s invasion.
Currently, Liberum forecasts 2.3Mt production in the first half at roughly 40% capacity.
Earlier today, Ferrexpo released its fourth-quarter trading update which showed pellet production fell to 0.4Mt compared 3.1Mt in the same period last year on the back of the loss of electrical power.
Full-year sales were down 46% to 6.2Mt compared to the previous year, again as a result of the war in Ukraine, with full-year production falling at the same rate to 6.1Mt.
“We hope that the coming year will bring peace, and we look forward to being a part of the process to deliver a new future for our people, their families and communities across Ukraine,” said chief executive Jim North.