Cliffs Natural Resources Inc., the largest U.S. iron ore mining company, is quitting the seaborne trade in the commodity after the world’s biggest suppliers flooded the market with low-cost output and hurt prices.
The Cleveland-based company will focus on the U.S. market, where demand for steel is increasing, Chairman and Chief Executive Officer Lourenco Goncalves said at an industry conference in Perth, Australia, on Wednesday. The company’s operations in Western Australia are for sale, he said.
Iron ore tumbled 47 percent in 2014 and has extended losses this year as surging low-cost supply from Rio Tinto Group and BHP Billiton Ltd. outpaced demand growth, triggering a global glut. Goncalves, who took over as CEO in August after an activist investor ousted the previous management, has sold mines and rationalized other operations in the face of the slumping prices. Cliffs’ stock lost 71 percent over the past 12 months, and is at the lowest since 2004.
“Here in Australia, we have a very good operation,” said Goncalves. “The asset is for sale, even if someone comes and buys to shut it down, that’s fair game. We’d like to sell to someone that will continue to keep the mine in operation.”
Ore with 62 percent content at Qingdao fell 0.9 percent to $57.61 a dry metric ton on Wednesday, declining for a seventh day, according to data from Metal Bulletin Ltd. That’s the lowest since at least May 2009, when Metal Bulletin started compiling weekly prices.
Cliffs fell 3.5 percent to $5.27 at 10:28 a.m. in New York.
‘Completely Refocused’
Cliffs’ Asia-Pacific iron ore unit mines from deposits at Koolyanobbing, Mount Jackson and Windarling in Western Australia, according to the company’s website. Expected sales and production for 2015 are about 11 million tons, according to Cliffs’ full-year results statement last month, which said that a divestiture of the business may or may not occur.
“We’re completely refocused on the U.S. iron ore business,” Goncalves said. “That’s a different business from the rest of the iron ore business in the world. I don’t want to have anything to do with the seaborne iron ore business.”
Cliffs said Jan. 27 it was seeking creditor protection in Canadian courts for the shuttered Bloom Lake iron ore mine in Quebec after efforts to sell the operation failed. The company will complete the asset sales and bankruptcy process at Bloom Lake this year, Goncalves told analysts Feb. 3.
Bloom Lake “wasn’t making any profit,” so Cliffs decided to pull the plug, Goncalves said in an interview on Wednesday. “We’re basically completely set up for prices in the seaborne iron ore market to continue to deteriorate, which confirms our strategy is correct. Exit the seaborne market and staying within the market where you have the value, and that’s the U.S.”¼
Source: Bloomberg
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