Iron Ore producer Cliffs Natural Resources Inc., (NYSE:CLF) is red hot and up 15% over last two days. Steel prices have been going up and steel imports have been steadily falling throughout 2016. A shortage of coking coal which is used in steel making, and the price of coking coal which has quadrupled in 2016 have helped Iron Ore Prices. Rising coking coal prices have also been supporting the demand for iron ore. Add in Donald Trump and a promised 1 trillion dollar infrastructure bill coming, this adds fuel to the fire for Iron Ore.
Cliffs Natural Resources Inc., (NYSE:CLF) is a leading mining and natural resources company in the United States. Cliffs Natural Resources is a major supplier of iron ore pellets to the North American steel industry from its mines and pellet plants located in Michigan and Minnesota.
This makes their costs lower as a result of their transportation advantages associated with the 5 mine locations near the Great Lakes. Cliffs Natural Resources U.S. Iron Ore mines also benefit from on-site pellet production and ore production facilities located a short distance from the mines. This allows for transportation via railroads and loading ports.
Cliff’s Higher-grade iron ore enables steelmakers to reduce the amount of coking coal required to produce steel. The premium between high-grade and low-grade iron ore has widened. The cost-push inflation on steel prices is also benefiting iron ore prices. Cliffs Natural Resources (NYSE:CLF) produces 13 grades of iron ore pellets, including standard, fluxed and high manganese for North American customers. They also supply Asia Pacific steelmakers with direct-shipping fines and lump iron ore.
Since May 2015, US steel imports have fallen by an average of 18% YoY each month. US companies have filed several trade cases against unfairly traded steel in the United States. Duties on importing steel have risen significantly. This rise has minimized the incentive for US steel buyers to import steel products. Falling steel imports provided much-needed pricing power to US steelmakers such as U.S. Steel (X), AK Steel (AKS), and Nucor (NUE). Going forward, steel imports into the United States are expected to be restricted due to President-elect Donald Trump’s protectionist policies. This is all good news for Iron Ore producers, especially US based Cliffs Natural Resources.
Will the Run Continue?
Cliffs Natural Resources (NYSE:CLF) is up 15% in last 3 days and 70% in the last 3 Month’s, Moreover, it is up over 400% in 2016! Cliffs Natural Resources (NYSE:CLF) (US Iron Ore) USIO segment mainly sells iron ore to integrated steel companies in the United States and Canada. The stock just recently passed its 20- and 50-day moving averages. At this point, the stock is likely to ride its momentum higher. Cliffs Natural Resources has scheduled it’s fourth quarter conference call for Feb. 5th and a beat on Earnings and Revenue with stronger guidance for 2017 and this stock could easily be back to $15.00 by mid-summer if not sooner.