Cleveland-Cliffs: A Strong Player in Iron Ore

06/05/2019 5:00 am EST

Focus: COMMODITIES

David Fried

Editor, The Buyback Letter

Cleveland-Cliffs, Inc. (CLF) is the largest and oldest (founded in 1874) independent iron ore mining company in the U.S. It operates here, Canada, and internationally, serving integrated steel companies and steel producers, notes David Fried, editor of The Buyback Letter

It is a major supplier of more environmentally friendly iron ore pellets to the North American steel industry from mines and pellet plants in Michigan and Minnesota.

The company was formerly known as Cliffs Natural Resources Inc. and changed its name to Cleveland-Cliffs Inc. in August 2017. It is headquartered in Cleveland, Ohio.

By 2020, CLF expects to be the sole producer of hot briquetted iron (HBI) in the Great Lakes region with the development of its first production plant in Toledo, Ohio. HBI metallics are sought by electric arc furnace steelmakers, which are gaining share on older blast furnaces.

A major dam rupture disaster struck in Brazil in late January, causing a serious supply disruption from Vale (VALE), the world’s largest producer of iron ore pellets.

These pellets are CLF’s main product in the U.S., and because of this disruption in the worldwide supply chain, the CLF CEO expects iron ore prices and pellet premium to gain even more and stay high for a while.  

Since a new CEO took over in 2014 and shed non-core businesses, improved operations and renegotiated contracts with customers, CLF has been able to pay down debt.

That mission was so successful, last fall CLF was comfortable reinstating its dividend and instituting a $200 million share repurchase program, which it just upped to $300 million.  Shares outstanding have been reduced by 5% in the last 12 months.

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