- As a result of the recently announced iron ore settlements between major Asia-Pacific iron ore producers and consumers, as well as the rising price of hot band steel, Cleveland-Cliffs Inc (NYSE: CLF - News) today updated its 2008 iron ore revenue and cost-per-ton guidance. In addition, the Company provided commentary on expected pricing for its North American Iron Ore segment for 2009.
- With the recent iron ore pricing settlements in Australia of an 80% increase for fines and a 97% increase for lump, Cliffs said its Asia-Pacific Iron Ore segment is expected to achieve average revenue per tonne of approximately $102 in 2008 based on its anticipated product mix. This is an 87% increase from the previous year, and up from previous guidance of $89 per tonne.
- Cliffs expects costs per tonne in Asia-Pacific Iron Ore of approximately $55. The increase from the Company’s previous expectation of $53 per tonne is primarily the result of higher expected royalty payments related to higher than expected year-over-year price increases, along with increased energy costs. ($2 is not bad considering the huge increases in input prices for many companies)
- In estimating Cliffs’ revenue-per-ton guidance in its North American Iron Ore segment, the Company updated its steel pricing assumptions, which is one of many adjustment factors used to determine prices in its North American Iron Ore supply agreements.
- Cliffs said it now expects an approximate 34% increase in adjustment factors related to steel pricing, using an annual average hot band steel price of $750 per ton at certain customer’s steelmaking facilities. This is an increase from the Company’s previous assumptions of 25% and $700 per ton, respectively.
- This new expectation, combined with the other factors used in determining pricing for its North American Iron Ore supply agreements, results in estimated revenue per ton of $85 for 2008, compared with previous guidance of $81 per ton. The Company said each $10 change from $750 per ton in the average hot rolled steel price at certain steelmaking facilities will result in a change in average realization of $0.24 per ton.
- Cliffs expects 2008 North American Iron Ore costs per ton to increase approximately 16% compared with 2007 to approximately $56 per ton. The increase from the Company’s previous expectation of $53 per ton is primarily the result of rising energy costs and higher than previously projected royalty payments. (again we are going to see a lot of this across earnings reports in the coming quarters - inflation is a tax on all things producers and consumers - the only companies we want to hang out in are those who can raise prices at a faster rate than their costs are going up)
- In addition to providing an update to its 2008 outlook, Cliffs provided commentary on its 2009 pricing expectations for its North American Iron Ore segment, which sells virtually all of its production under long-term supply agreements. Cliffs indicated that, assuming no change in World Pellet Prices in 2009 and no changes in producer price indices or steel pricing (all adjustment factors that determine its pricing in North American Iron Ore), average realized 2009 price per ton would be approximately $107. This 26% increase compared with the expected 2008 average price realization is based on contractual base-price adjustments, lag-year adjustments and price caps contained in the Company’s current supply agreements.
- Mining company Cleveland-Cliffs Inc. said Tuesday that its board declared a quarterly cash dividend of 8.75 cents.
Long Cleveland Cliffs in fund and personal account
