Cliffs reports third-quarter loss as impacts of steel

01 November 2016

Cliffs Natural Resources lost $28 million in the third quarter of this year as the impacts of the domestic steel and iron ore downturn lingered.

The Cleveland-based iron ore producer reported Thursday that it lost 12 cents per share on revenues of $553.3 million, down from $593.2 million last year.

The loss comes despite the company’s bullish outlook that saw a third-quarter turnaround with the reopening of the United Taconite operations in Eveleth and Forbes after a year-long shutdown, and new construction starting on the machinery needed to produce the new Mustang pellet at United.

Cliffs CEO Lourenco Goncalves reported that Cliffs continued to buy down its stifling debt load, by $500 million in the third quarter, with company debt down to $2 billion after peaking at more than $3 billion in 2014.

Company officials said they are standing by their forecast to produce 16.5 million tons of iron ore in the U.S. in 2016 and increase that to 19 million tons in 2017.

Goncalves reiterated his vow to take control of state of Minnesota mineral leases for taconite iron ore under the former Essar Steel Minnesota site in Nashwauk. Those leases currently are hung up in federal bankruptcy court in Delaware. State officials, including Gov. Mark Dayton, are hoping to regain control of the leases and hand them over to Goncalves to use for a new directly reduced iron product that can be used for electric arc mini-mill steel mills which are controlling a growing share of all U.S. steelmaking.

“We are going to get that iron ore in the ground” at the Essar site, Goncalves pledged again. “It will take time.”

A federal bankruptcy judge currently is deciding a request from the Dayton administration to release the leases from ongoing bankruptcy proceedings. No decision on the motion has been made.

Goncalves said he continues to seek a partner to build a directly reduced iron plant somewhere in the Great Lakes region to provide raw material for those electric arc steel mills.

“I believe that DRI-fed EAF’s are the future of steelmaking in this country,” Goncalves told industry analysts in a conference call Thursday morning, adding that Cliffs will be a key player in that transformation.

“This is absolutely our next logical strategic step. I will not stop in the next few years until we are there,” Goncalves said.

Goncalves seemed to back off some on his pledge to build a new plant at the Essar site, saying his primary goal is to get access to the ore which is well-suited for DRI products.

“We might not even need to build a pellet plant for that,” Goncalves said, noting the company would make a decision on where to produce DRI pellets and DRI iron itself after the Essar bankruptcy is settled.

He referred to bankrupt Essar operations in Canada and the U.S. as a “criminal enterprise.”

The outspoken CEO said U.S. trade sanctions on illegally imported foreign steel continue to help reduce inventories at steel suppliers across the U.S., but that those steel service centers continue to keep their inventories at “dangerously low” levels and that orders for U.S.-produced steel continue to lag.

Goncalves said he expects those orders to pick up early in 2017 and that his company will benefit with increased orders for iron ore as the year progresses.

Goncalves also noted that Cliffs is now the only domestic iron ore producer selling on the open market after the shutdown of all Magnetation operations earlier this month.

Source – Duluth