Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Agreed
It is frustrating I will give you that
They are playing every trick in the book to keep SP down
Wow thank you for taking the time to enlighten me!!
That was very very helpful
It really is a terrible thing what is being done to CLF
I almost wish they would take it private
Of course
240 million shares outstanding
200 million locked up with institutions
CLF buying back 20million+
That does NOT leave any wiggle room for the shorts
Dividend Jan 3
Debt retirement after Next earnings
They will not have to spend that much on DRI since they are working with passive investors. LG is very smart and is NOT going to leverage the company again.
ASIO is slowly winding down and will be done in two and a half years. By then that revenue will be replaced with higher margin DRI in the USA.
Every month that IO stays about sixty and HRC stays above six-hundred CLF makes excellent EBITDA. Every month.........
I do not know how they would have paid off all their debt.
They ponly had EBIDTA of two-hundred million for second quarter.
To retire the debt they would have needed another eight-hundred million.
Plus they need money for the DRI
Ho can they afford a dividend at this point?
Based upon LG's track record I have no doubt that he has already lined up the passive investors. He does not play games and is thinking way ahead of pack. Look how soon he announced the HBI plant (after losing the leases). He has been planning everything aggressively for the past nine months or more.
What would be great is if one of the investors is a steel company like MT or X.
There is a big demand for DRI and it is the future. So having both of these plants built is just fine. LG wants to build five or six of them.
He will need ore for the plant and whether they have enough now or whether they have to acquire ore is the question
CLF proceeding with DRI plant in Toledo. Announcement this AM.
Of interest is that they are looking to work with several passive investors. This implies that they will NOT be raising more monies themselves but rather will continue to reduce debt.
Does anyone have a price for the bonds? No doubt LG will be buying them back on the open market as we speak.
Paul
Good morning,
I was not able to make it. My six month old was not co-operating!
From the reports I have read it was very well received.
I agree.
My point was that the "discussion" of tax reform and IS was sufficient last time to drive the SP up. If it looks like both are going to happen this year (whether they do or not) then the SP will move again.
Good article today from Credit Suisse. They are predicting that IO prices will trend back to the 70 level by Q3 and stay there. That is huge for CLF as it will make the average IO price for 2017 around 75.
This alone should lift the share price. The infrastructure bill is going to come sooner rather than later but if the GOP just starts talking about the SP will start to move up.
They are already talking tax reform so that is great news. If the AHCA is delayed who cares as long as the former two get done or talked about a lot.
The completion of the plant is also great news and I am going to be at the grand opening so I can glean more information.
This Gordon Johnson fellow is really a piece of garbage.
He just creates any old scenario to bash CLF. He now says that the insider buys are a sell indicator. I am so sick and tired of him!
I agree that is is bottoming.
LG bought 200,000 shares at 6.31 yesterday
Another insider bought 6000 yesterday
We are in good shape!
I agree with your numbers
Just wanted to throw a few ideas out there. Hard to believe that Gupta is going to be able to make a go of Nashwauk.
Of course, but you are getting a known entity.
Debt is 1.2 billion which is what Nashwauk will cost them at very very minimum.
So put that towards CLF. Then pay the 2.5 billion to 3 billion for CLF. Retract Nashwauk offer.
Circle the wagons and get Nashwauk for a steal.
Just a thought:
Why would'nt the group buying Nashwauk site just buy CLF.
They are going to spend north of a billion for Nashwauk alone. They could buy CLF and then still get Nashwauk but for a LOT less money.
I too have and will continue to be buying.
He did all the right things when times were very very very adverse. Now he has the company in good shape and the macro environment in the USA is improving nicely.
Day by day.
People are too hung up on the daily gyrations in politics, IO pricing, HRC pricing, X, Nue, MT and AKS pricing and just about everything else. This is a company that will really do well in the next six months to three years. Heck even in the next few months is only people would understand the metrics.
For example, the price that Cliff;s gets for its IO is determined by the average for the year and is retroactive therefore for Q1.
They are trading at 3X forward earnings. Am I wrong on this number?
He did state that EDIBTA would be 850 million for 2017 IF IO pricing stayed at January levels.
He revised it to 700 million based on first four months.
I agree that the analysts are clueless on what determines the ebidta for this company. They set the bar way off for Q1 and it would be impossible for Cliffs to hit that number. Actually impossible.
Additional comments:
The Trump administration is aggressively dealing with all forms of steel dumping. This will tighten up the US market and keep HRC pricing elevated.
CLF's has booked its full 19 million tons for the foreseeable future.
I agree with you. There were a lot of things that people are not getting:
1) There were costs associated with the early pay down of debt and issuance of shares. These are done with now but they impacted the Q1 earnings. We have the not so smart analysts to thank for this as they did not factor that into their estimates.
2) The pricing for the USIO and APIO sold in Q1 was based on 55.00 per ton (last years average number) so again the analysts did not do their homework and factor this into their estimates
3) 2017 is in the books as far as pricing goes so LG's estimate of 700 million EBIDTA is almost guaranteed to be accurate.
4) There will be NO issuance of more shares this year. That has been weighing on the stock price
5) HRC pricing in the US is looking good going forward and this is a large part of the price Cliffs gets for its product.
6) There is no accounting for infrastructure monies that are going to be spent late 2017 and 2018. This will greatly bolster the share price and earnings.
The stock is trading at 3x forward earnings.
Trying to crunch the numbers also.
They shipped 3.0 million tons in Q1 2015 but only 1.9 Million in Q1 2016 due to decreased demand and a loss of a contract.
I presume they will ship at least 2.5 Million tons for Q1 2017.
The pricing for the USIO is not nearly as volatile as everyone thinks. See the below table for their realized prices based on IO pricing.
Apr. - Dec.
Platts IODEX (1)
U.S. Iron Ore (2)
Asia Pacific Iron Ore (3)
$40
$72 - $74
$33 - $35
$45
$73 - $75
$36 - $38
$50
$74 - $76
$39 - $41
$55
$74 - $76
$43 - $45
$60
$75 - $77
$46 - $48
$65
$76 - $78
$49 - $51
$70
$76 - $78
$53 - $55
$75
$77 - $79
$56 - $58
$80
$78 - $80
$59 - $61
Note that the price they get is not that much higher between 40 and 80 IO prices. Now we were at about 85 average so figure they will get 81-82 per ton.
Multiply that by 2.5 million and we get about 200 million conservatively. Am I wrong on this calculation? If I look at 2015 Q1 they had approx 300 million revenue for USIO. So where does that extra 100 million come from?
For the APIO I have them shipping 3.0 million tons which should put their revenue at about 190.0 million conservatlvely.
So I am at 390 million total revenue but it could be as high as 490 million if I extrapolate using the higher IO prices in 2017.
Feedback welcomed!
My understanding is that the earnings miss was due to operational matters and not due to a lack of demand or pricing.
I added to AKS at 6.18 in the after market
Tried to add to CLF at 6.88 also
This miss is an X specific issue and not reflective of the US steel industry as a whole.
Just my 0.02 cents
Here are the recent HRC prices:
APR 2017 APR 2017
Show Price Chart
- - 650.00 - - - 0 No Limit 16:45:00 CT
25 Apr 2017
MAY 2017 MAY 2017
Show Price Chart
- - 638.00 - - - 0 No Limit 16:45:00 CT
25 Apr 2017
JUN 2017 JUN 2017
Show Price Chart
- - 619.00 - - - 0 No Limit 16:45:00 CT
25 Apr 2017
JUL 2017 JUL 2017
Show Price Chart
- - 600.00 - - - 0 No Limit 16:45:00 CT
25 Apr 2017
AUG 2017 AUG 2017
Show Price Chart
- - 595.00 - - - 0 No Limit 16:45:00 CT
25 Apr 2017
SEP 2017 SEP 2017
Show Price Chart
- - 590.00 - - - 0 No Limit 16:45:00 CT
25 Apr 2017
OCT 2017 OCT 2017
Show Price Chart
- - 580.00 - - - 0 No Limit 16:45:00 CT
25 Apr 2017
NOV 2017 NOV 2017
Show Price Chart
- - 580.00 - - - 0 No Limit 16:45:00 CT
25 Apr 2017
DEC 2017 DEC 2017
Show Price Chart
- - 580.00 - - - 0 No Limit 16:45:00 CT
25 Apr 2017
NOte the nice jump in the May and June HRC pricing. This bodes very well for a strong 2Q.
APR 2017 APR 2017
Show Price Chart
- - 650.00 - - - 0 No Limit 16:45:00 CT
20 Apr 2017
MAY 2017 MAY 2017
Show Price Chart
- - 640.00 - - - 0 No Limit 16:45:00 CT
20 Apr 2017
JUN 2017 JUN 2017
Show Price Chart
- - 640.00 - - - 0 No Limit 16:45:00 CT
20 Apr 2017
JUL 2017 JUL 2017
Show Price Chart
- - 610.00 - - - 0 No Limit 16:45:00 CT
20 Apr 2017
AUG 2017 AUG 2017
Show Price Chart
- - 600.00 - - - 0 No Limit 16:45:00 CT
20 Apr 2017
SEP 2017 SEP 2017
Show Price Chart
- - 590.00 - - - 0 No Limit 16:45:00 CT
20 Apr 2017
OCT 2017 OCT 2017
Show Price Chart
- - 575.00 - - - 0 No Limit 16:45:00 CT
20 Apr 2017
NOV 2017 NOV 2017
Show Price Chart
- - 575.00 - - - 0 No Limit 16:45:00 CT
20 Apr 2017
DEC 2017 DEC 2017
Show Price Chart
- - 575.00 - - -
Good article.
His note about Australia being unable to produce the pellets is encouraging. That would drive prices way up if China requests only pellets. Effectively will make existing mines redundant and antiquated.
He is very smart.
Agreed.
The key will be how they justify the allocation of those funds. If he says that things are good and that they have hedged their IO pricing for 2017 (locked in EBITDA) then that would be awesome and the SP would really jump.
Herewith a very good news release about DNR and Mesabi.
DNR: Deny mineral leases, reject Essar restructuring plan
By RON BROCHU/BusinessNorth 16 hrs ago
The Minnesota Department of Natural Resources (DNR) has objected to the plan for Essar Steel Minnesota (now called Mesabi Metallics) to emerge from Chapter 11 bankruptcy protection. Arguing the plan isn’t feasible, the agency asks the U.S. Bankruptcy Court in Delaware to deny Essar the right to assume mineral leases owned by the state. Those leases comprise about 40 percent of the mineral formation to be mined.
In a Monday filing, the DNR calls the reorganization plan “speculative at best and visionary at worst.”
“Essar has no plant, no operations, no income, no customer for its ore, no prospect of income for at least two years, no meaningful funds on hand, no existing shareholder willing to contribute new funds, no binding commitment from its plan sponsor, and no exit financing. These conditions have existed, unresolved, for the last eighteen months.
"Simply put, Essar’s plan fails any test of feasibility that could be applied, and confirmation should be denied,” the agency says in its objection.
The DNR has legal standing in the bankruptcy because it controls the mineral rights. In 2004 and 2005, the DNR entered into 27 separate long term leases with Essar’s predecessor, Minnesota Steel Industries, LLC, that allow mineral mining at the former Butler pit near Nashwauk. In 2012, the DNR entered into five more mineral leases with Essar. Those leases required Essar to complete construction of its pelletizing plant by year-end 2010 and to mine at least 5 million tons of ore in 2012, according to the DNR. When the plant was not completed, the DNR and Essar negotiated two time extensions.
Through 2014 and 2015, construction on the taconite plant was intermittent, with contractors frequently abandoning the site due to Essar’s failure to pay them, the agency contends. In November 2015, construction stopped altogether, with contractors owed in excess of $60 million, according to the DNR. Minnesota officials and Essar executives had been in the process of renegotiating the mineral leases during the first half of 2016. On July 8, 2016, Gov. Mark Dayton indicated those negotiations had failed. He instructed the Minnesota Department of Natural Resources to terminate Essar Steel Minnesota’s lease agreements. Essar, however, filed for bankruptcy protection before Dayton issued the order, transferring jurisdiction over the leases to the court.
Now, the DNR argues, Essar Steel Minnesota has failed to meet new milestones set by the bankruptcy court.
“Essar has either pushed off or completely abandoned each of these milestones,” the DNR said in its filing. “Indeed, it appears that Essar has gotten only as far as obtaining preliminary support from various stakeholders concerning the distributions under a hypothetical plan of reorganization, and in desperation, filed the proposed distribution as its ‘plan’ of reorganization.”
The agency listed several components it says are still missing:
• Essar has not secured a new offtake agreement, and does not propose to do so until after plan confirmation.
• Essar has not finalized the terms of an equity commitment.
• Essar has not entered into negotiations with potential lenders to provide the $600 million in exit financing Essar needs, and does not propose to do so until after plan confirmation.
• Essar’s new equity investor is not required to make an equity commitment until after the exit financing is completed.
• Essar is not proposing a date for commencement of plant construction, and its plan does not require that construction ever occur.
• Essar is not proposing a date for commencement of mining operations, commissioning of plant facilities, or full operations.
• Essar is not proposing to pay anything to the DNR after the leases are assumed other than base rents.
• Essar proposes to cure its defaults on all mineral leases (DNR and private) by posting a $5 million letter of credit, with no explanation of how such a letter of credit would be applied as between the lessors or why $5 million will be sufficient to cure its defaults.
• Essar includes no disclosure on adequate assurances of future performance under the leases (DNR or private).
“Essar’s current proposal to assume the leases with no commitments going forward other than to pay the base annual rents of approximately $242,000 a year does not meet the substance of the economic benefit the DNR negotiated,” the DNR said.
Mineral lease revenue is important to the state because it benefits primary schools and the University of Minnesota.
“If Essar had met it obligations to commence mining operations, it would be paying millions of dollars a year in royalties to the DNR, along with tens of millions of dollars a year in production taxes to the state,” the DNR said. “The DNR would be receiving more than $8.5 million a year in royalties if Essar had not defaulted on its obligation to build the plant and commence operations” plus $16.64 million in taconite production taxes.
“The DNR has already lost 18 months as Essar has floundered in locating the financing and offtake agreements needed to the complete the project. The Court should not force the DNR to wait any longer. The Court should instead find that Essar’s plan is not feasible, and deem the DNR’s leases rejected,” the filing says.
A hearing on the reorganization plan is scheduled April 26.
Thanks for posting that.
I am really hoping that they did significant hedging for 2017. Although with most of their pellets going to one customer that might not have worked? At least for the USIO. Anyways I am keen and hopeful to hear that they did.......I sure as heck would have!
The dividend should be a no-brainer if they extra money from Wabash and from earnings.
And yes, the Mesabi property is looking more and more hopeful for CLF with these depressed IO prices. Any other company would be nuts to try this project.
What we really need is for Seaborne IO pricing to stabilize, even if it is in the low 60's.
STLD reports tomorrow. I will be listening for their thoughts on HRC for 2017 and on their guidance. This will give us some insight into what we can expect from CLF.
Paul
Suggestions:
Rather than doing the Nashwauk site on its own CLF should consider partnering with a steel major with the option of buying them out in the future. Yes, this might irritate some of the other majors but could work very well in CLF's favour in light of its depressed share price and the tough IO pricing right now.
Taking the threat of a 200 million share dilution away will help to stabilize the price. In addition I would add that 2% dividend to further bolster the SP. Obviously make it conditional on certain quarterly EBIDTA goals being met.
He is smart to offer only 75 million for Nashwauk. Anyone thinking they are going to just jump into the IO market now is crazy. Investing a billion dollars at this point in time is suicidal unless you are CLF with a steel partner that will buy that product from you.
Feedback welcome
Paul
Question:
Would it have been possible for CLF to hedge themselves against a drop in IO pricing by using the futures market?
In other words locking in pricing for the year 2017 when IO was in the 90's?
If they did do this then they should be in very very good shape.
Input welcomed here.
Month Options Charts Last Change Prior Settle Open High Low Volume Hi / Low Limit Updated
Legend:
Options
Price Chart
About This Report
APR 2017 APR 2017
Show Price Chart
- - 650.00 - - - 0 No Limit 16:45:00 CT
18 Apr 2017
MAY 2017 MAY 2017
Show Price Chart
- - 630.00 - - - 0 No Limit 16:45:00 CT
18 Apr 2017
JUN 2017 JUN 2017
Show Price Chart
- - 610.00 - - - 0 No Limit 16:45:00 CT
18 Apr 2017
JUL 2017 JUL 2017
Show Price Chart
- - 610.00 - - - 0 No Limit 16:45:00 CT
18 Apr 2017
AUG 2017 AUG 2017
Show Price Chart
- - 605.00 - - - 0 No Limit 16:45:00 CT
18 Apr 2017
SEP 2017 SEP 2017
Show Price Chart
- - 600.00 - - - 0 No Limit 16:45:00 CT
18 Apr 2017
OCT 2017 OCT 2017
Show Price Chart
- - 580.00 - - - 0 No Limit 16:45:00 CT
18 Apr 2017
NOV 2017 NOV 2017
Show Price Chart
- - 580.00 - - - 0 No Limit 16:45:00 CT
18 Apr 2017
DEC 2017 DEC 2017
Show Price Chart
- - 580.00 - - - 0 No Limit 16:45:00 CT
18 Apr 2017
At a total area of 305 square miles, New York City is quite the sight to behold. So imagine the opulence of Xiongan New Area, a newly proposed city in China that would measure 772 square miles when completed.
On April 1, the Chinese government announced its plans to build the sprawling city across three existing counties. The effort is meant to ramp up local economies and provide residents with a cleaner, less-congested metropolis outside of smoggy Beijing.
Xiongan New Area also reflects China's ongoing mission to grow its collection of megacities — massive urban bundles whose populations exceed 10 million. Xiongan will eventually live inside the Jing-Jin-Ji region, which also encompasses Beijing and other major cities.
In its burgeoning megacities, China has built some of the longest bridges in the world and invested billions of dollars in other forms of infrastructure, such as highways, schools, hospitals, and office parks.
china megacityChina's growing megacities will someday be home to great economic might, the country has stated.Reuters
Xiongan New Area is already exceeding expectations from a business perspective, the New York Times reports. Soon after the announcement, real-estate investors flocked to buy up local properties, many of which currently sit bare.
"Prices have gone up every day," one local real estate agent told the Times.
Over the long run, China hopes the new economic zone will allow citizens living on Beijing's outskirts to enjoy more cosmopolitan lifestyles. Instead of relying on cars to make long commutes, residents will be able to walk or ride bikes.
xiongan countyA construction site, which has been stopped by local government, is pictured in Anxin county, one part of the new special economic zone Xiongan New Area.Jason Lee/Reuters
That's good news for China's ongoing pollution problem.
Lately, Chinese residents have taken to calling the pollution concern an "airpocalypse," and the country has even had to shut down schools and ban car travel to minimize health concerns. Just in 2017, more than 60 cities have issued health alerts.
Xiongan won't likely clear up China's smog troubles on its own, but the government is betting the region will shift millions of motorists to cleaner forms of transportation.
Government officials also hope the zone will offset some of the overcrowding seen in Beijing and nearby cities. Despite Beijing's size — it covers more than 6,000 square miles — offering some breathing room in the form of a popular new zone could solve other problems, such as housing shortages or traffic delays.
China hasn't yet put a timeline on Xiongan New Area. However, it has labeled it a "1,000-year project," signaling the country's commitment to becoming an economic powerhouse, no matter how long it takes.
US sheet market buyers have seen hot-rolled coil prices edge down in the last few weeks, but market sources said Monday that low inventories at service centers could keep prices from falling much more.
Market sources were anticipating the public release of the Metals Service Center Institute data, which will be released Tuesday. In January, US service centers carried about two months of sheet supply on hand, and in February, they stocked 2.2 months of supply. Both of these figures show tightness in the US supply chain. In January and February 2016, US service centers carried 2.5 and 2.4 months of supply on hand, respectively.
One service center source said he saw flat-rolled inventories falling in March.
"It seems that steady demand combined with buyers unwilling to take positions at these numbers is just shredding inventory levels," which "should support pricing, at least keep it from falling very far," the source said.
Article continues below...
Request a free trial of: Platts Daily Briefing
Make smarter investment decisions using the latest breaking industry steel news in Platts Daily Briefing. Independent reporting by Platts’ editors and analysts covers all aspects of the steel industry, including in-depth news and analysis by region - delivered to your inbox every morning.
Request a free trial More Information
Another service center source said he saw the sheet market as "stable" given current service center inventories. He saw HRC prices at $640/st ex-works, though he has not purchased any spot recently.
If service centers let flat-rolled inventories fall below two months of supply, the second service center source said he believed buyers will have to come back to buy -- and more heavily than they have been.
Multiple mill sources have said that even though order entry has been steady, buyers have been booking fewer tons than normal because they feared prices would fall.
For buyers who would normally purchase 400 st at a time, inquiries now are for 170 st or 240 st, a mill source said. Low service center inventories are generally a positive for US mills, but service centers these days largely don't need to stock as much.
"The mills are better at delivery than they used to be," the mill source said. However, it just takes one mill to have a problem for the market to get tight, the mill source said.
The mill source said conversations for spot HRC start at $660/st, but $640-$650/st is more realistic for 400 st or 500 st.
The Platts daily HRC and cold-rolled coil price assessments remained flat at $650-$660/st and $850-$870/st, respectively, on Monday. Both assessments are normalized to an ex-works Midwest (Indiana) basis.
HRC Index is 655 for April, 630 for May and 620 for June. It then settle at 600 for the next few months. By then things should be picking up with infrastructure plans etc etc.
An article was just published on the PLATT's website stating that 650 to 66o is where HRC is at right now and that inventory levels at the mills is dropping. This will keep strong support for the pricing.
Port inventories of Iron Ore in China are dropping now and with the planned development of the new city east of Beijing (three times the size of New York) infrastructure will pick back up in China.
There is no way the big three miners are going to sell their high quality ore for 40 dollars.
I do not think they are right.
1) Are they referring to high grade ore?
2) Do they differentiate between low and high grade stock piles at Chinese ports?
3)Do they factor in AUD, rainy weather in Australia, China emphasis on high grade ore, SD11 as a replacement mine and now a new source of ore etc etc etc
4)Do they factor in the increasing growth in world and uptick in demand for steel?
5)Do they address increasing HRC and CRC pricing?
Agree with everything you say.
P
Regarding the APIO I agree that they should not just give it away. The fact that it is cash-flow positive makes it all the more valuable. My point is that it then would extinguish any allusion by the very biased sell side analysts to seaborne IO pricing as the determining factor for CLF's SP. Of course the revenue from that sale, as I mentioned earlier, would really allow them to tidy up the finances and institute that dividend.
On another matter, does anyone really think that CLF is a takeover candidate? I was thinking RIO. And I dont know if the DOJ would block such a move.
Does anyone believe that any of the steel companies would be interested?
Very long time holder of CLF
I really believe that they need to address any future debt reduction with cash flow. Issuing more shares is not the way to go right now. Maybe same time next year but the SP is suffering and I don't think there is a panic to further reduce the debt.
Use cash flow to reduce debt and re-institute a very very small dividend. This will make it more costly for the shorts to stay in the game and will reward those of use who have hung in there with CLF.
Personally I would not be surprised if CLF becomes a takeover target. What better way to lock up the Nashwauk site (access to much more capital) and really put a strangle hold on the NA IO market.
I would love to hear everyone's thoughts on this.
ps: the interest savings (or a portion thereof) will easily cover a small dividend.
Of course everything is predicated on CRC and HRC pricing in the USA and to a lesser extent Dalian IO pricing (even though it should'nt be).
Another thought I have is that CLF should sell its APIO division while pricing is good. Use those monies to tidy up the debt and put some extra cash in the bank for Nashwauk. Again I welcome input!
Paul
I really hope that the Nashwauk event gets resolved in CLF's favour. Couple that with HRS pricing, SBIO pricing and increased volumes and we should have the makings of a very solid turn-around and persistently elevated share price.
I hope so since I own 19,000 shares.