Cliffs CEO Says US Will Protect Their Turf Against Foreign Steel Imports

U.S. iron ore pellet sales volume increased 26 percent to 7.8 million tons in the fourth quarter due to increased customer demand and catch-up from spring 2014.

The Cleveland-based iron ore company has been undergoing an overhaul under CEO Lourenco Goncalves for the past six months. Cliffs has been divesting itself of its non-U.S. operations including Bloom Lake in Quebec which is now undergoing restructuring and eventual sale under CCAA administration. Bloom Lake liabilities will no longer be impacting Cliffs earnings. “Let me make it clear,” said Goncalves, “the liabilities associated with exit of Bloom Lake will actually be funded by cash on hand in Bloom Lake Group and the proceeds of sales from assets of Bloom Lake, and not cash coming from Cliffs Natural Resources. To simplify, the previous $650-$700 [liability] figure now equals zero.”

The company completed the sale of Cliffs Logan County Coal in the fourth quarter. The company took a loss of $420 million on the sale but received a Q4 2014 income tax benefit of $306 million. Goncalves said the company is open to selling the remaining coal operations Pinnacle and Oak Grove if the value of the offer is right.

The Logan County coal sale and the Bloom Lake CCAA are very important steps in executing our strategy to transform Cliffs into a stronger, pure-play U.S. iron ore supplier,” said Goncalves. “As I have stated several times, our new Cliffs is a differentiated mining company and should be seen as a proxy for the U.S. economy, which is a lot more resilient than any other.”

Asia Pacific Iron Ore (APIO) sales volume decreased 2 percent to 2.9 million tons in Q4, but for full year 2014, APIO achieved record production of 11.4 million tons. The company plans to operate the mine until its life runs out in five years and then exit Australia completely. Goncalves noted that depreciation of the Australian dollar against the US dollar has lowered operating costs for all Australian producers including Cliffs. Despite that he is seeing layoffs in mining throughout Australia due to oversupply. “The consequence of the glut promoted by the majors will be seen for many year and we’re happy that we are strategically removing Cliffs from seabourne trade in the near future.”

When asked to give a prediction on iron ore prices in 2016, Goncalves replied that because it is so far away it is difficult to give any guidance right now. “Iron ore is at very low point right now. The Australians don’t know what to do anymore. They are putting even their kangaroos for sale and the iron ore prices are not going anywhere at this point right now. They are starting to manipulate their currency and the situation is starting to smell bad over there. So I don’t know what is going to happen in 2016. Nobody knows. So you have to plug in your spreadsheet whatever you want.”

On imports Goncalves had the following to say, “The United States has been flooded with imports. That is not new stuff. The new stuff is the depth and intensity of the avalanche of imports reaching this country. This will be taken care of as we have done in the past. Make no mistake, we will defend our turf, and we will use the trade laws and every single weapon that that is in our disposable to protect what’s ours.”

For 2015, Cliffs expects to have annual U.S. iron ore sales and production volume of 22 million tons, 11M tons from Asia Pacific iron ore, and 5.5M tons of metallurgical coal from its North American coal business.