MINING INDUSTRY SHIPPING
Cleveland-Cliffs’ Year of Great Expectations Charging a premium to reflect lower transportation costs explains the continuous profits made by Cleveland-Cliffs over the past couple of years. However, these gains were quickly eaten up by expenses. This is just another component of the business where Cleveland-Cliffs' direction changed things considerably.
I
n less than five decades , the company trimmed its debt burden by over half and carried a signif-
icant quantity of money on the balance sheet.
There are two things to keep in mind here. First, the cyclical nature enables companies to always trade at a discount in the market. Purchasing in the middle of a commodity boom makes money disappear faster than any other approach. Second, the rise in steel tariffs makes way for a possible increase in the overall demand and
18 | SKILLINGS MINING REVIEW March 2019
prices even if those tariffs were to go away. Despite these modifications, Cleveland-Cliffs’ stocks continue to trade as though nothing has changed. Investors are waiting for Wall Street to catch up and begin evaluating this inventory in its current state. Will 2019 be the year this happens? Let us dive deep into what’s working in favour and against Cleveland-Cliffs, and if its stock is worth a purchase today. The price of iron ore started declining in 2010 when the Chinese commodity boom began to wane. To make things
worse, the Cleveland-Cliffs’ management made certain business decisions to acquire questionable assets. Iron ore is a relatively inexpensive product on foundation, but its weight and transportation costs cannot be neglected. With mines in the U.S. that produce a quality grade of iron ore comparatively close to facilities of need, Cleveland-Cliffs is able to realize higher costs per ton sold to an identical ore coming from places like Brazil. Additionally, it only signs contracts with customers that guarantee consistent volumes. This indicates that what's under the hood in Cleveland-Cliffs is vastly different from the way things were prior to the new management team taking over. But despite the motor tune-up, it still remains an ugly
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