LONDON--Ukrainian iron ore producer Ferrexpo PLC (FEEXF) said Monday it has cut its December production due to power constraints and said it will reduce spot iron ore sales in order to give priority to its long-term contracts if the situation continues in the first quarter of 2015.

Ferrexpo, the world's fifth largest supplier of iron ore pellets, cut its December production forecast of the steelmaking ingredient by 140,000 tons due lack of sufficient electricity, making the Switzerland-based firm the latest company to suffer setbacks as a result of the ongoing crisis in eastern Ukraine.

The country has until recently been self-sufficient in coal but the heated conflict between separatists in eastern Ukraine has meant that coal-fired power stations haven't been able to source enough coal from a region that accounts for a large portion of the country's coal mines. Ukraine has responded by imposing rolling blackouts to compensate for a roughly 10% power-supply shortfall.

Ukrainian authorities are introducing measures to mitigate this situation, including importing coal and electricity as well as allowing companies to directly import electricity.

Ferrexpo said it has enough iron ore stocks to make up for the shortfall in December but may have to operate at current reduced levels if the power shortfall persists into the first quarter. The company plans to prioritize long term contract sales over spot sales and increase production of iron ore with 65% ferrous content to cope with reduced production capacity.

Analysts at JP Morgan estimate that the power crunch crimped the company's production to 85% of its full capacity in December. Should the power constraints persist next quarter, the bank forecast it would have to cut its 2015 Ferrexpo iron output estimate by 4% to 11.5 million tons.

Ferrexpo said the situation should improve in the second quarter, once the old winter period of high power demand ends. It also noted that it has enough liquidity to cover two months worth of costs, taking into account the hyrvnia's devaluation which has reduced its production cost to $44 a ton in November from $47.80 a ton in the first half of the year.

The company also said iron ore production rose 3% to 10.2 million in the first 11 months of the year, just before the Ukraine crisis began to take its toll on its operations.

At 1419 GMT, the company's shares were flat at 50.5 pence a share, having fallen by more than a fifth over the past two weeks.

Write to Alex MacDonald at alex.macdonald@wsj.com

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