Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

IRC Limited (IRC) expects better profitability and sales in H2 2020 due to strong iron ore demand and higher prices for the material. Demand is expected to receive continued support from the Chinese government’s increased infrastructure spending. 


The company expects its Brazilian competitors to face the challenges of growing COVID-19 infections, shipping delays, and weather-related logistics delays in H2 2020. 


In H1 2020, IRC’s iron ore production volumes increased by 14.3pc to 1.4mn mt from 1.2mn mt in the same period last year. The company’s sales volumes of 65pc iron ore concentrate also increased by 11.4pc to 1.38mn mt from 1.24mn mt during the same period under comparison.


The gains in production and sales were attributed to the successful ramp-up of the K&S site in Russia which operated at 89pc capacity in H1 2020 and is expected to ramp-up to full capacity in H2 2020. As such capacity utilization in H1 2020, was 11pc higher than the same period last year. Demand for iron ore volumes increased in H1 2020, especially from China, which resulted in an increase of approximately 9pc in prices in the first half of the year. 


IRC’s cash costs decreased by 4.7pc to $48.8/mt in H1 2020 from $51.2/mt in H1 2019. The cost in H1 comprised of $14.9/mt for mining, $15/mt for transportation, $9.6/mt for processing and drying, $9.6/mt for administration and overhead, and $0.3/mt as other costs. 


The selling price of iron ore surged in H1 2020 by 7pc on dry metric ton terms to $82.6/mt compared to $77.2/mt in the same period a year ago. 


Group net revenue increased by 19pc to $106mn in H1 2020 compared with $89mn in the same period last year, resulting in the group’s EBITDA more than doubling to $33mn in H1 2020 against $13mn in the same period the previous year. As the group’s expenses are noted in Russian Roubles while revenue is tracked in dollars, the depreciation of the rouble in H1 2020 by approximately 13pc provided support for a healthier EBITDA. 

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