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Cliffs Natural Resources (CLF) is a leading mining and natural resources company in the U.S., and is also the largest producer of iron ore pellets in North America. It competes with other international mining and natural resources companies like Vale, BHP Billiton (BHP) and Rio Tinto (RTP).
Cliffs' North American Iron Ore division accounts for more than two-thirds of the company's total revenue, and around 60% of Cliffs' stock value, by our estimates. Long-term contracts with customers like ArcelorMittal (MT), Algoma and Severstal ensure substantial sales of the firm's mineral produce.
iron ore posts
FeedArcelorMittal Is a Crucial Customer for Cliffs
Continue reading ArcelorMittal Is a Crucial Customer for Cliffs
Iron Ore Tops All Commodities
In the mining industry, iron ore is the biggest money maker. Profit reports from the world's largest miners indicate that iron ore brings in the most money, the Financial Times reported.- BHP Billiton (BHP), the world's number one miner, had earnings before interest and taxes of $14.82 billion. Of that amount, iron ore accounted for $5.8 billion, up 177%
- Number three miner, Rio Tinto (RTPPF), had earnings of $26.6 billion. Iron ore unit accounted for 60%, or $16.6 billion, up 133% for the year.
Rio Tinto Boosts Iron Ore Output, Ups Spending
Australian mining firm Rio Tinto (RIO) revealed plans to triple its capital expenditure to around $11 billion. The company also plans to up its iron ore production by more than 50% during the next five years.
The boost in production stems from new drilling and a reevaluation of deposits in Western Australia where the company found an extra two billion tons of iron ore reserves. The expansion of the iron ore division should help RIO take advantage of the "growing demand for raw materials to make steel" in China.
Continue reading Rio Tinto Boosts Iron Ore Output, Ups Spending
Rio Tinto Clamps Down in Australia
A mining tax proposal in Australia, dubbed the Resource Super Profit Tax (RSPT), has caused the mining company Rio Tinto (RTP) to put some projects on hold. According to a report from Bloomberg, "Rio has plans to suspend an A$11 billion ($10 billion) expansion of its iron ore operations in Western Australia."What does this mean to the company's investors? Really, not much. This move represents no fundamental change to Rio Tinto. It's merely a change in schedule. The item of concern here is the proposed tax itself. Bloomberg states: "The tax may reduce Rio's earnings by 21 percent and earnings at Melbourne-based BHP by 17 percent in 2013, according to UBS AG estimates."
New Iron Ore Pricing Scheme Should Be Good for American Steel
A new method of setting the price on iron ore for export is upsetting Chinese and European steel makers and auto manufacturers, but that same pricing scheme is most likely going to benefit U.S. steelmakers such as AK Steel (AKS), Nucor (NUE) and U.S. Steel (X).
In the past, iron ore pricing was largely set on an annual basis, with the first negotiated ore contracts of the season setting the price for the duration of that season. However, this year, the three largest iron ore miners, BHP Billiton (BHP), Rio Tinto (RTP) and Vale SA (VALE), have decided that they will seek quarterly renegotiation of ore contract pricing. This will allow those companies to take better advantage of increases in iron ore demand and spikes in spot prices.
Continue reading New Iron Ore Pricing Scheme Should Be Good for American Steel
Vale S.A. (VALE): Mining for value in iron ore
"We're adding Brazil's Vale S.A. (NYSE: VALE), the world's leading iron ore producer, to our model growth portfolio," says growth stock expert Stephen Leeb.
In his The Complete Investor, he explains, "This outstanding company offers investors simultaneous stakes in two key areas: iron ore-a commodity essential to any and all infrastructure projects-and Brazil's appreciating currency, the real.
"When it comes to understanding the importance of a commodity such as iron ore, the tale starts with China. Even with China's GDP growth again approaching double digits, the Chinese government continues to aggressively promote growth, offering consumers incentives to buy cars and investing in infrastructure, from roads to bridges to sewers to energy plants.
Continue reading Vale S.A. (VALE): Mining for value in iron ore
China's steel story: government slowing down demand
The whole world watches China when it comes to the natural resource play. Iron ore and steel companies have watched their share prices swing wildly based on news coming out of the Middle Kingdom in terms of what Chinese mills will be buying and how much they are willing to pay (particularly for the annual iron ore negotiations). Of late, the steel and iron sector has bounced nicely based on rising Chinese demand. Now noises coming out of China's government imply the steel bounce might have been inflated demand numbers. (via FT Alphaville).
Continue reading China's steel story: government slowing down demand
Tug of war between miners and steelmakers
In almost every raw materials industry there is a tug of war between miners of the raw materials and manufacturers who refine their materials.
Today's struggle is between Chinese and Japanese steelmakers and iron ore miners. Steelmakers want a 40% cut in iron ore prices, while miners are holding out for a cut of 20% or less. China's leading steelmaker said that iron ore prices will fall by at least 40-50% in 2009.
China is threatening to cancel contracts with the three main iron ore companies, VALE (NYSE: RIO), Rio Tinto (NYSE: RTP) and BH Billiton (NYSE: BHP) if their demands for price cuts are not met.
Iron ore prices reached a high of $200 a ton in 2008 and then fell to $55 a ton. Prices have since rallied back to $72 a ton.
Do you think these price cuts will help our infrastructure projects?
NYT's Krugman: Speculators schmeculators - demand is pushing oil higher, not traders
One of the major economic debates on Main Street and in Washington concerns the influence of speculators during oil's record price rise. (Oil currently trades above $140 and is up 100% during the past year, and more than 400% since 2000).
More than one Congressional committee is investigating the role of speculators, who critics say have 'distorted' or artificially boosted oil's price -- driven it higher than a level the commodity would trade at if the price were based solely on supply and demand fundamentals.
New York Times columnist Paul Krugman, while not denying speculators have contributed to oil's record rise, nevertheless offers perhaps the strongest evidence regarding how a commodity's price can rise a great deal, without the influence of speculators. His evidence: iron ore.
More than one Congressional committee is investigating the role of speculators, who critics say have 'distorted' or artificially boosted oil's price -- driven it higher than a level the commodity would trade at if the price were based solely on supply and demand fundamentals.
New York Times columnist Paul Krugman, while not denying speculators have contributed to oil's record rise, nevertheless offers perhaps the strongest evidence regarding how a commodity's price can rise a great deal, without the influence of speculators. His evidence: iron ore.
Rio Tinto's value seen enhanced by high-price gold mine sale
Rio Tinto's above-consensus sale price for its gold mine to Barrick Gold almost certainly increases Rio's negotiating stance vis-a-vis takeover bids from BHP Billiton or from other potential suitors, an analyst told BloggingStocks Friday.
"Rio's sale of its gold mine to Barrick for $1.7 billion when the market was expecting something like $570-$700 million is a fundamental data point the market cannot ignore," independent stock analyst C. Leonard Bauer said Friday. "It will force BHP Billiton and others receptive to a deal to redo their fair-value projections for Rio."
Rio (NYSE: RTP) has twice rejected hostile buyout offers from BHP Billiton (NYSE: BHP), the last for $147.4 billion, involving at least 3.4 BHP shares for each Rio share, arguing that the bids substantially undervalue Rio. Rio gained 64 cents to $452.89 while BHP gained $1.01 to $72.89 in Friday afternoon trading.
At first glance, the idea of bidding wars for targets appears to be a paradox in the current economic environment. After all, the U.S. economy is barely inching along, and the credit markets can be described, at best, as being cautious regarding potential deals. But the mining sector is another story, Bauer said. Strong economic growth in emerging markets has created surging demand for raw materials, minerals, and commodities. Further, the sector is in the midst of mergers and expansions that will produce miners with global market capabilities.
Iron ore war?
The above demand, particularly from Asia, Bauer said, has offset recent, modest quarterly earnings performance from some miners, and has driven up the value of miners like Rio and Freeport McMoRan (NYSE: FC).
In addition, China's size and its economic development plan has further increased miners' value. China, which with Alcoa (NYSE: AA) earlier this year jointly purchased a 9% stake in Rio Tinto through its Chinalco aluminum company, has said it will continue to seek acquisitions of foreign companies, including mining companies, Bauer said. Bauer added that he does not have a rating on any mining company nor own their shares.
"China may ultimately try to outbid BHP because a BHP / Rio union would unite two of the three largest suppliers of iron ore, which China needs for its economy," Bauer said. "A BHP / Rio union would likely leave China in a weaker negotiating position regarding iron ore prices. So you can see why Rio feels BHP's offers so far have not valued the company fairly. Rio knows that as long as China grows, it has a commodity likely to increase in value substantially for years to come. And that's a good place to be in, from a corporate standpoint."
"Rio's sale of its gold mine to Barrick for $1.7 billion when the market was expecting something like $570-$700 million is a fundamental data point the market cannot ignore," independent stock analyst C. Leonard Bauer said Friday. "It will force BHP Billiton and others receptive to a deal to redo their fair-value projections for Rio."
Rio (NYSE: RTP) has twice rejected hostile buyout offers from BHP Billiton (NYSE: BHP), the last for $147.4 billion, involving at least 3.4 BHP shares for each Rio share, arguing that the bids substantially undervalue Rio. Rio gained 64 cents to $452.89 while BHP gained $1.01 to $72.89 in Friday afternoon trading.
At first glance, the idea of bidding wars for targets appears to be a paradox in the current economic environment. After all, the U.S. economy is barely inching along, and the credit markets can be described, at best, as being cautious regarding potential deals. But the mining sector is another story, Bauer said. Strong economic growth in emerging markets has created surging demand for raw materials, minerals, and commodities. Further, the sector is in the midst of mergers and expansions that will produce miners with global market capabilities.
Iron ore war?
The above demand, particularly from Asia, Bauer said, has offset recent, modest quarterly earnings performance from some miners, and has driven up the value of miners like Rio and Freeport McMoRan (NYSE: FC).
In addition, China's size and its economic development plan has further increased miners' value. China, which with Alcoa (NYSE: AA) earlier this year jointly purchased a 9% stake in Rio Tinto through its Chinalco aluminum company, has said it will continue to seek acquisitions of foreign companies, including mining companies, Bauer said. Bauer added that he does not have a rating on any mining company nor own their shares.
"China may ultimately try to outbid BHP because a BHP / Rio union would unite two of the three largest suppliers of iron ore, which China needs for its economy," Bauer said. "A BHP / Rio union would likely leave China in a weaker negotiating position regarding iron ore prices. So you can see why Rio feels BHP's offers so far have not valued the company fairly. Rio knows that as long as China grows, it has a commodity likely to increase in value substantially for years to come. And that's a good place to be in, from a corporate standpoint."
As far as Cleveland-Cliffs is concerned, today is another Iron Age
Readers of this space know that the investment bias is toward large-cap companies with demonstrated business models and who have a competitive advantage in established markets, preferably with a favorable global trend as a support. And with the above in mind, Cleveland-Cliffs is worth an evaluation.
Cleveland-Cliffs Inc. (NYSE: CLF) is the largest producer of iron ore pellets in North America, and is also a major supplier of metallurgical coal to the global steelmaking industry.
Analysts like CLF's solid fundamentals, pricing power, and high customer retention rate.
Cleveland-Cliffs Inc. (NYSE: CLF) is the largest producer of iron ore pellets in North America, and is also a major supplier of metallurgical coal to the global steelmaking industry.
Analysts like CLF's solid fundamentals, pricing power, and high customer retention rate.
Continue reading As far as Cleveland-Cliffs is concerned, today is another Iron Age
Rio Tinto (RTP) says it will charge spot price for some contracted iron ore
In a move that many customers may view as controversial, miner Rio Tinto announced Thursday that it intends to charge steelmakers market prices [subscription required] for some critical raw materials, despite the existence of long-term contracts, The Wall Street Journal reported.Rio Tinto (NYSE: RTP), via a clause in existing contracts, plans to charge spot-market prices for 10% of the iron ore in its customers' contract. Market prices are currently attracting bids in the $180-190 per metric ton range, more than double the $75-$85 per metric ton cost for Rio's fixed contract customers, The Journal reported.
Robust economic growth in emerging markets in Asia (particularly in China and India) and Latin America, combined with solid economic growth in Europe and the Middle East has propelled major price increases in minerals, commodities, raw materials and metals during the past three years.
Continue reading Rio Tinto (RTP) says it will charge spot price for some contracted iron ore
Rio Tinto denies China bid chatter
China Investment Corp, which manages China's foreign exchange reserves, and China steel companies Baosteel Shougang Group and Angang Steel are said to be working on a bid for Rio Tinto (NYSE: RTP), Forbes reported Monday, citing China Business, the state-owned Chinese weekly. Rio denied receiving an approach from Chinese investors, Agency France Presse reported.
Deal talk had sent Rio's shares up about 7% in Australia early Monday. However, in the U.S., there was little follow through: Rio's shares fell $2.20 to $433.85 in mid-day Monday trading.
Earlier this year Rio rejected an offer from BHP Billiton (NYSE: BBL), saying BHP's offer undervalued the company. Two subsequent requests for talks by BHP were also turned down.
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