| Low Steel Prices May Hurt Cliffs Natural Resources’ USIO Division | |
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What to Expect from Cliffs Natural Resources’ 4Q15 Earnings (Continued from Prior Part) Realized revenues
In 3Q15, Cliffs Natural Resources’ (CLF) realized revenues from its USIO, or U.S. Iron Ore, division were lower than expected. The USIO division reported revenue realization of $76.50 per ton in 3Q15 compared to $100.70 per ton in 3Q14.
Average realized prices were negatively affected to an extent of $24.20 per ton on a year-to-date basis. This was mainly due to lower hot rolled steel prices in the United States (SPY) (IVV), which in turn affect US steelmakers, including Nucor Corporation (NUE), United States Steel Corporation (X), Steel Dynamics (STLD), and ArcelorMittal (MT). Currently, Nucor forms 2.8% of the Materials Select Sector SPDR Fund (XLB). Metal producers currently make up ~9% of XLB’s portfolio.
Increased realized revenue guidance
Cliffs Natural Resources had increased its USIO realized pricing guidance by $5 per ton for when seaborne iron ore prices are between $55–$60 per ton and $80–$85 per ton. This was mainly due to the improved customer mix, which generated a benefit of $4 per ton.
Downside to realized revenue?
However, since then, seaborne iron ore prices have fallen below $45 per ton. This should negatively impact the USIO division’s realized prices, as well. Cliffs Natural Resources’ (CLF) pellet supply agreements with steelmakers include the hot band steel price as one of the variables. Lately, hot rolled steel prices have been on a downward spiral. This has made spot sales unprofitable for several US steel companies. Steel companies have reduced their spot sales in response to depressed spot steel prices.
Despite lower volumes, CLF’s management maintained its guidance for the cost of goods sold at $60–$65 per ton. These costs include expected idle costs.
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CLIFFS Natural Resources
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PRODUCER |
CODE : CLF |
ISIN : US18683K1016 |
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ProfileMarket IndicatorsVALUE : Projects & res.Press releasesAnnual reportRISK : Asset profileContact Cpy |
CLIFFS Natural Res is a iron producing company based in United states of america. CLIFFS Natural Res produces iron, coal in Australia, in Brazil and in Canada, and holds various exploration projects in Canada. Its main assets in production are WABUSH MINE, EMPIRE AND TILDEN MINES, HIBBING TACONITE, NORTHSHORE MINE, UNITED TACONITE, OAK GROVE MINE, GREEN RIDGE MINE and PINNACLE MINE in Canada, AUSTRALIAN IRON ORE and SONOMA in Australia and AMAPA in Brazil and its main exploration properties are MT JACKSON J1 in Australia and DIAGNOS, WAWA, FREEWEST, MC FAULD'S LAKE, MACFADYEN, WAWA CLAIMS and BIG DADDY in Canada. CLIFFS Natural Res is listed in France, in Germany and in United States of America. Its market capitalisation is US$ 3.8 billions as of today (€ 3.5 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. |