Russia-Ukraine War at Play Ferrexpo Share Drops by 70%

April delivery leaped 4.7% to 18,775 yuan a tonne, tracking a 3.5% increase in prices of its raw material nickel as its supply was disrupted due to the Russia-Ukraine conflict. Russia is the world's major nickel supplier.

Trading in other steel products was range-bound during the session. Construction steel rebar inched up 0.3% at 4,901 yuan a tonne, while hot-rolled coils used in the manufacturing sector dipped 0.02% to 5,210 yuan per tonne.

Credit Suisse sees global steel demand seasonally will rise into the second quarter on geopolitical events and raw material and energy inflation.

The share price of Ferrexpo (LON: FXPO) has typically tracked iron ore prices. This association is predictable, given that the Swiss firm is the world's third-largest exporter of iron ore pellets.

At the end of July 2021, Ferrexpo shares were valued at 481p, with the iron ore price hovering around a near-record of $225/tonne. However, by November 11th, the metal had dropped to $85 a tonne, and the company's stock had dropped below 300p. With pollutionrelated steel output curbs and the potential collapse of building behemoth Evergrande, China, which accounts for over 75% of global iron imports, has alarmed investors.

Despite the rise in iron ore prices to $145 per tonne, Ferrexpo shares have dropped 70% to 145p as a result of Russia's invasion of Ukraine. Ferrexpo owns three iron ore mines and an iron pellet plant at Horishni Plavni in central Ukraine. Every year, the mine produces roughly 12 million tonnes of iron ore pellets, half of which are shipped by rail and the rest via the Pivdennyi seaport.

The Ukrainian railway network, on the other hand, only offers 'limited capacity to its freight customers,' allowing the company to transmit just 'a percentage of its production across Ukraine's western border to customers in Europe.' Ferrexpo is unsure how many pellets it can continue to deliver to Europe because near-term railway capacity "remains unknown."

Worse, the miner has informed investors that export activities at Pivdennyi have been 'temporarily paused,' probably as a result of Russian troop movements towards Odesa.