**Ferrexpo Cuts Pellet Production Amid VAT Refund Suspension**
Ukrainian iron ore pellet producer Ferrexpo has scaled back its operations following the suspension of Value-Added Tax (VAT) refunds, amounting to approximately $12.5 million for January. The company’s press release on April 7 revealed that it had reduced total pellet production by a significant margin.
**Production Numbers Down**
In Q1 2025, Ferrexpo’s total pellet production dropped to 1.35 million tonnes, compared to 1.81 million tonnes in the same period last year – a decrease of around 26%. Premium pellets also experienced a more substantial decline, falling by 36% to 1.11 million tonnes.
**Cost-Cutting Measures**
Ferrexpo’s operations were reduced from two pellet lines to one after the suspension of VAT refunds. According to Interim Executive Chair Lucio Genovese, “The suspension of the VAT refund has resulted in lowering the available liquidity to fund the operations. This has forced us to immediately downscale our operations to one pellet line and to implement significant cost-cutting measures.”
**Some Positive News**
Despite the decrease in pellet production, Ferrexpo’s overall commercial output increased by 3% year-on-year to 2.13 million tonnes. This growth was driven by a substantial surge in commercial concentrate production, which reached 777,718 tonnes – an impressive increase of 223%. The company noted that this quarter marked its highest production levels since Russia’s full-scale invasion of Ukraine in February 2022.
**Commentary**
Ferrexpo’s response to the VAT refund suspension and subsequent cost-cutting measures highlights the challenges faced by businesses operating in uncertain market conditions. While the decrease in pellet production is concerning, the company’s ability to adapt and respond to changing circumstances is reassuring.
**Background on Kostyantyn Zhevago**
It is worth noting that Ferrexpo is 50% owned by Fevamotinico S.a.r.l., which is controlled by businessman Kostyantyn Zhevago. Zhevago faces charges related to the embezzlement of $33.6 million in a case involving Finance and Credit Bank, leading to its insolvency.
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