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Related: Canada’s Oil Sector Cautiously Optimistic About Late 2016 Recovery Mining is a business with very high upfront sunk costs. It costs a lot to set up a viable mining operation, but once those funds are spent, the marginal cost of extraction for each pound of minerals is limited. here has been a twenty year boom in mining investment driven by massive levels of Chinese demand and that country’s drive to build 200 different cities of a million people or more. Now, after much of the easy urbanization has been completed across the country, and China is shifting from an investment-led economy to a consumption-led one, there is simply not enough demand left to keep all of the extant mining infrastructure going. That has been a major factor in the plunging prices of steel stocks like U.S. Steel (X) and suppliers to the industry from Cliffs (CLF) to Mesabi Trust (MSB) many of which are trading at levels associated with extreme business risk and financial distress. Related: Is Iran Opening A “Secret Passage” To Asia For Russian Crude? India’s move to export more iron ore at cut rate prices could presage the same thing happening in the coal markets. Price competition for coal suppliers has become increasingly desperate in recent months, with Japanese buyers now reportedly paying less than $95 a ton for metallurgical coal. In particular, Australian mine owners are desperate to sell product abroad since internal demand does not come close to rivaling supply. If substantial quantities of Indian iron ore start to supplant Australian iron ore, then Aussie infrastructure costs like shipping and wages will likely fall. As that happens, Australian coal costs may fall prompting suppliers there to lower prices even more in an effort to take market share from U.S. coal producers. Regardless of how fast any of that plays out or the magnitude of potential Aussie price cuts, one thing is clear; coal and iron ore markets look set to remain hypercompetitive (and mostly unprofitable) for at least the next year. By Michael McDonald of Oilprice.com More Top Reads From Oilprice.com:
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CLIFFS Natural Resources
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PRODUCER |
CODE : CLF |
ISIN : US18683K1016 |
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ProfileMarket IndicatorsVALUE : Projects & res.Press releasesAnnual reportRISK : Asset profileContact Cpy |
CLIFFS Natural Res is a iron producing company based in United states of america. CLIFFS Natural Res produces iron, coal in Australia, in Brazil and in Canada, and holds various exploration projects in Canada. Its main assets in production are WABUSH MINE, EMPIRE AND TILDEN MINES, HIBBING TACONITE, NORTHSHORE MINE, UNITED TACONITE, OAK GROVE MINE, GREEN RIDGE MINE and PINNACLE MINE in Canada, AUSTRALIAN IRON ORE and SONOMA in Australia and AMAPA in Brazil and its main exploration properties are MT JACKSON J1 in Australia and DIAGNOS, WAWA, FREEWEST, MC FAULD'S LAKE, MACFADYEN, WAWA CLAIMS and BIG DADDY in Canada. CLIFFS Natural Res is listed in France, in Germany and in United States of America. Its market capitalisation is US$ 3.4 billions as of today (€ 3.1 billions). Its stock quote reached its highest recent level on May 16, 2008 at US$ 99.17, and its lowest recent point on January 15, 2016 at US$ 1.20. CLIFFS Natural Res has 297 400 968 shares outstanding. |