The Rising Influence of Rising Affluence

[DewDiligence]

CLF—I’m halfway through the 4-hour Investor Day webcast (#msg-64700730) and it’s already evident that this is one of the best presentations I’ve heard from any company.

Although CLF is considered an iron-ore company, I’m impressed by the compelling case CLF’s executives are making for the company’s coking-coal and ferrochrome businesses.

High-quality coking coal is in short supply and you can’t make steel without it (except by recycling scrap), which is why the price per ton has exploded (#msg-64738025). CLF’s executives absolutely reject the bearish viewpoint espoused in #msg-58066494 and expect the price of high-quality coking coal to remain high for many years. Thanks to some recent dealmaking, including the 2010 acquisition of INR Energy (#msg-52067706), CLF has a lot of the high-quality stuff steelmakers want. (Unfortunately, CLF’s 2011 coal volume will be down year-over-year due to tornado damage in Alabama and a CO leak in WV, both of which were previously disclosed.)

Ferrochrome is a necessary component of stainless steel, and there is currently no supply source in North America. CLF hopes to be producing ferrochrome for North American steelmakers—as well as chromite ore for Asian customers—in about 4-5 years based on the development timeline for the Ontario mines CLF acquired in 2009 and 2010 (#msg-43909449, #msg-50547871). I didn’t like these deals when they were announced, but I do now.