- Demand for high-quality iron ore products, such as pellets, is increasing globally, while there is an oversupply of iron ore fines. This shows that our strategy of being a supplier of high-quality, climate-smart iron ore pellets is timely despite the fact that the global market for iron ore products continues to be challenging, writes Lars-Eric Aaro, LKAB's CEO, in the Interim Report for the third quarter 2014.
The iron ore market during the third quarter was characterized by a continued increase in the supply of new volumes, mainly from Australia. The spot price of iron ore in the third quarter was at its lowest level in five years (USD 78/tonne), and the average for the
quarter was USD 90/tonne. By the end of September, the spot price had gone down 42 percent since year-end 2013.
In response to the drop in iron ore prices over the last two quarters, LKAB intensified its ongoing cost reduction program in mid-September with further efforts to curb costs in the short term.
Operating profit before expenses for urban transformation decreased by 63 percent and totalled MSEK 1,074 (2,884), equivalent to an operating margin of 22 (44) percent. The year-on-year differences are primarily due to lower iron ore prices.
During the quarter, the provision for urban transformation mainly in Kiruna and Malmberget totalled MSEK 2,238 (132), resulting in an operating loss for the quarter of MSEK -1,164 (2,752). Additional provisions for urban transformation may effect LKAB’s income statement and balance sheet for the year.
July - September
• Net sales totalled MSEK 4,943 (6,526)
• Operating profit before exenses for urban transformation was MSEK 1,074 (2,884)
• Operating loss was MSEK -1,164 (2,752)
• Loss before tax was MSEK -1,195 (2,815)
• Loss for the period was MSEK -979 (2,201)
• Operating cash flow was MSEK -983 (844)
• Delivieris of iron ore totalled 6.7 (6.8) MT