| Assessing Cliffs’ Position after Its 2Q15 Results | |
| | |
|
Cliffs Natural Resources Misses 2Q15 Consensus Estimates (Continued from Prior Part) Oversupply to pressure iron ore prices
Pressure should still remain on Cliffs Natural Resources’ (CLF) US Iron Ore, or USIO, and Asia Pacific Iron Ore, or APIO, segments—due to sustained iron ore weakness.
The structural nature of oversupply—due to capacity ramp-ups from major iron ore players, including BHP Billiton (BHP), Rio Tinto (RIO), Vale SA (VALE), and Fortescue Metals Group (FSUGY)—combined with weak demand growth from China should see continued pressure on iron ore prices in the foreseeable future. China (FXI) consumes two-thirds of the seaborne iron ore.
To learn more about iron ore indicators, please read Long-Term Iron Ore Price Fundamentals: Tough to Love. The decline in seaborne iron ore prices could impact the pricing of the contracts, which come up for renewal in 2016. This would be negative for Cliffs’ cash flows. Currently, only USIO is generating cash. Asia–Pacific is also generating some cash, but it is directly impacted by seaborne iron ore prices, so its sensitivity is quite high.
Cliffs’ management is doing what is under its control, including cutting costs and selling non-core assets. However, the biggest factor impacting Cliffs—iron ore prices—is not under its control, which could mean further pressure on cash flows.
Question of debt remains
The question still remains whether Cliffs will be able to service its debt from its USIO segment alone. This is the only segment that management considers to be core. Management would like to operate it going forward. Structurally weaker seaborne iron ore prices should have a fallout impact on the US-realized iron ore prices, as we discussed previously in this series. At this point, the task seems daunting for the company.
Cliffs Natural Resources (CLF) forms 3% of the SPDR S&P Metals and Mining ETF (XME).
Browse this series on Market Realist:
|
|
|
CLIFFS Natural Resources
|
|
PRODUCTEUR |
|
CODE : CLF |
|
ISIN : US18683K1016 |
|
|
| |
ProfilIndicateurs
de MarchéVALEUR :
Projets & res.Communiqués
de PresseRapport
annuelRISQUE :
Profile actifsContactez la cie |
CLIFFS Natural Res est une société de production minière de fer basée aux Etats-Unis D'Amerique. CLIFFS Natural Res est productrice de fer, de charbon au Bresil, au Canada et en Australie, et détient divers projets d'exploration au Canada. Ses principaux projets en production sont WABUSH MINE, EMPIRE AND TILDEN MINES, HIBBING TACONITE, NORTHSHORE MINE, UNITED TACONITE, OAK GROVE MINE, GREEN RIDGE MINE et PINNACLE MINE au Canada, AUSTRALIAN IRON ORE et SONOMA en Australie et AMAPA au Bresil et ses principaux projets en exploration sont MT JACKSON J1 en Australie et DIAGNOS, WAWA, FREEWEST, MC FAULD'S LAKE, MACFADYEN, WAWA CLAIMS et BIG DADDY au Canada. CLIFFS Natural Res est cotée aux Etats-Unis D'Amerique, en Allemagne et en France. Sa capitalisation boursière aujourd'hui est 3,3 milliards US$ (3,1 milliards €). La valeur de son action a atteint son plus haut niveau récent le 16 mai 2008 à 99,17 US$, et son plus bas niveau récent le 15 janvier 2016 à 1,20 US$. CLIFFS Natural Res possède 297 400 968 actions en circulation. |