Peel Hunt sees “significant value” in Ferrexpo PLC (LSE:FXPO), but much of that is dependent on external factors, as it retains its hold rating on the miner, with target price set at 185p.
Analysts at the broker expressed concerns that war will chip away at Ukraine’s logistics network and limit output, even below current levels.
Further to that, there is a possibility that the battle could reach its site, where “significant damage” could be done.
Output was 7% lower than the broker’s original forecasts for the second quarter but given the current constraints Ferrexpo, which exports iron ore pellets, is operating under and “volatility in logistics”, the analysts view this as an in-line production rate.
Production was down 22% compared to the first quarter of 2021 and 28% in the second quarter, which was “unsurprising” given the impact of Russia’s invasion on logistics as well as an inevitable loss of employees to Ukraine’s armed forces.
Talks between the miner and rail and port operators in neighbouring countries to Ukraine have begun, which would allow it to restart sales to its Asian network.
Assuming rail and port capacity allows, this could see the company expand its production rate towards capacity.
Spot pellet prices are moving towards the historic rate over the past decade to US$140/t, although European customers are likely to be willing to purchase Ferrexpo’s pellets due to decreased supply from Russia, which could help maintain prices.