The Rising Influence of Rising Affluence

[DewDiligence]

Re: Credit Suisse's analysis of CLF

With the recent equity raises and dividend cut, and the lack of any debt maturities during the next few years, CLF's balance sheet should be fine—unless iron-ore prices plummet. Moreover, the eventual increased supply in the US pellet market that Credit Suisse predicts is manageable insofar as CLF can shift some of its US ore into the seaborne market via the Great Lakes if the price differential warrants such action. (Of course, the freight cost for seaborne ore shipped via the Great Lakes will be higher than for ore shipped from Bloom Lake, but this is not necessarily a deal-breaker.)

In other words, CLF’s prospects can be distilled to the outlook for global iron-ore prices, which (as you said) are hard to project. Everything else is a second-order issue, IMO.

As stated in bottommost paragraph of #msg-86179834, I do not subscribe to the thesis that iron-ore prices are headed into the toilet because China’s demand will wither and will be overwhelmed by new supply. Rather, I think China’s demand for iron ore will be lumpy—causing price volatility±—but The Global Demographic Tailwind ensures a rising price trend for iron ore even in the face of new supply.

The comments in #msg-86280699 and #msg-86280731 are germane to this discussion.