Cliffs Natural Resources Inc. (NYSE: CLF) (Paris: CLF) today
provided an update for its North American Business Unit, including 2009
North American Iron Ore contractual obligations for volume and the
Company’s expectations for North American Coal sales volumes.
North American Iron Ore
Cliffs indicated that based on amendments to customer supply agreements
it expects to defer approximately one million tons of purchase
obligations for iron ore pellets from customers to the first quarter of
2010.
As a result, the Company now has contractual obligations for 17 million
tons of iron ore pellets in 2009 and expects to collect cash from
customers for this amount in the current year. The amount of sales
volume recognized in 2009 will depend on accounting principles for “bill
and hold” sales. The 17 million tons referenced above excludes revenue
recognition of 1.2 million tons deferred at the end of 2008, which are
being recognized as these tons ship in 2009.
Recently, Vale and a steelmaker in Europe agreed to a price settlement
decrease of approximately 48% for iron ore pellets. Assuming this
settlement price is adopted by Eastern Canada and other iron ore pellet
producers, and combined with the impact of the amendments referenced
above, the Company expects average revenue per ton in the North American
Iron Ore business segment to be approximately $75 in 2009.
Currently, the North American Iron Ore business segment is expected to
produce 15 million tons in 2009 at a cost of $70 to $80 per ton.
Extended Plant Shutdown at Hibbing Taconite
Cliffs also indicated that the owners of the Hibbing Taconite Joint
Venture (ArcelorMittal -62.3%, Cliffs Natural Resources - 23%, and U.S.
Steel Canada - 14.7%) in Minnesota have made the decision to extend the
plant’s current shutdown status through the first quarter of 2010 as a
result of continuing soft demand for iron ore pellets. The facility was
originally shut down in May 2009, following an idling of two of
Hibbing’s three pelletizing furnaces in March 2009. The initial shutdown
had been expected to last 15 weeks.
