Factors That Could Impact CLF’s US Volumes in 1Q17
US volumes in 2016
Cliffs Natural Resources’s (CLF) US volumes totaled 6.9 million long tons in 4Q16, which represented impressive growth of 53% YoY (year-over-year) as well as a 30% rise quarter-over-quarter. The improved performance in 4Q16 was driven by overall improved steel market conditions and new customer arrangements by the company. This brought the company’s total volumes for 2016 to 18.3 million tons.
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Cliffs Natural Resources (CLF) is expecting to operate at full capacity of 19 million tons on production and sales in 2017. However, given the usual seasonality of the business, the company expects the volumes to be back-end weighted.
The company is only expecting 2 million tons of volumes in 1Q17. Investors should note that the Great Lakes area freezes during the winter, leading to transportation issues and lower volumes in the first quarter.
Factors impacting volumes
Because Cliffs Natural Resources’s USIO (US iron ore) segment mainly sells iron ore to integrated steel companies in the United States (SPY) (SPX), their orderbooks impact CLF’s volumes. Customers’ orderbooks, in turn, are impacted by US steel demand, steel imports, and product strategies.
The downtrend in steel imports has favored CLF customers’ orderbooks in 2016. While the imports are trending higher year-to-date, it might not be a significantly negative factor for steel companies such as U.S. Steel (X), ArcelorMittal (MT), AK Steel (AKS), and Nucor (NUE).