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Message: What Does ArcelorMittal's Deal Mean for Cliffs Natural Resources?

Steel prices skyrocketing

With US-government-imposed tariffs on steel imports from countries such as China, Russia, and the United Kingdom, US (DIA) steel prices have been on a rise lately. US steel imports fell to 8 million metric tons in 1Q16, a drop of 29% year-over-year. The graph above shows the recent trend in spot HRC prices. As you can see, prices have risen sharply in the last few months. Spot HRC prices have risen more than 65% this year and are currently at their highest level since December 2014. Spot CRC (cold rolled coil) prices have also increased, by more than 63% so far this year.

Back to normal?

A strong demand from the construction and automotive sectors is also supporting higher steel prices in the United States. This demand is motivating steel producers to produce more steel. US steel output in April was 2.5% higher YoY (year-over-year), at 6.6 million tons. Higher demand is also pushing producers to raise steel prices. While some steel customers are not happy with the higher steel prices, US steel producers have maintained that prices have only returned to normal levels. According to Nucor’s (NUE) CEO, “Prices are back to where they should be when steel is fairly traded.”

Higher spot steel prices would benefit steel companies such as U.S. Steel Corporation (X), Nucor (NUE), and CMC (CMC). In the next part of this series, we’ll address the question of competition for Cliffs, both domestically and outside the United States.

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Part 4

What Does ArcelorMittal's Deal Mean for Cliffs Natural Resources? PART 4 OF 8

How Does Cliffs’s Competition Look Post-ArcelorMittal Contract?

By Annie Gilroy | Jun 2, 2016 3:14 pm EDT

Cliffs’s US focus

Cliffs Natural Resources (CLF) is the largest and lowest-cost supplier of iron ore pellets in the United States. Cliffs accounted for ~56% of the annual rated US capacity in 2015. Most of the rest of the iron ore pellet capacity is owned by backward-integrated steel players U.S. Steel Corporation (X), AK Steel (AKS), and ArcelorMittal (MT). CLF is moving toward becoming a pure-play US (DIA) producer as its Asia-Pacific iron ore mines’ productivity comes to an end.

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