| Weak Iron Ore Prices Are Taking a Toll on Integrated Steelmakers | |
| | |
|
Key for Investors: Iron Ore's Long-Term Fundamentals Remain Weak (Continued from Prior Part) Capacity cuts
In the last part of this series, we discussed how iron ore prices were steady in May. However, they have declined by close to 55% since 2014. In response to weaker iron ore prices, iron ore miners—including BHP Billiton (BHP) and Vale SA (VALE)—have announced the cancellation of some capacities. However, amid weak Chinese demand growth and supply glut, these cancellations won’t be enough to move the needle upwards on iron ore prices.
US integrated steel companies feel the heat
Some integrated steel companies in the US have also started to feel the heat from low iron ore prices. Recently, Steel Dynamics (STLD) decided to idle its Minnesota iron-making operations for a period of at least 24 months.
Previously, AK Steel (AKS) also wrote off its investment in the Magnetation joint venture because of economic project dynamics under the current iron ore pricing environment. AK Steel forms 4.5% of the SPDR S&P Metals and Mining ETF (XME) and 0.14% of the iShares Core S&P Small-Cap ETF (IJR).
Other integrated steelmakers like ArcelorMittal (MT) are also negatively impacted because mining operations’ profitability has diminished.
Cliffs to benefit
Cliffs Natural Resources (CLF) is a major US iron ore pellet provider. It will likely benefit to the extent the steelmakers’ captive capacity goes offline. The above chart shows the iron ore pellet capacity in the US. One of Cliffs’ major contracts with ArcelorMittal comes up for renewal in 2016. In the absence of excess capacity elsewhere, the chances for contract renewal increases. This is also positive for Cliffs.
Continue to Next Part Browse this series on Market Realist:
|
|
|
CLIFFS Natural Resources
|
|
PRODUCER |
CODE : CLF |
ISIN : US18683K1016 |
|
| |
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$ 5.5 billions as of today (€ 5.1 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. |