Cliffs Natural Resources' Prospects after the New HBI Plant

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Cliffs Natural Resources' Prospects after the New HBI Plant PART 1 OF 5

What’s Causing Cliffs Stock to Slide?

Cliffs’ stock slide

After seeing a tremendous gain of 404% in 2016, Cliffs Natural Resources (CLF) stock has been on a downhill slide in 2017 YTD (year-to-date). The sentiment surrounding the US steel industry has deteriorated after doubts were cast over President Donald Trump’s ability to push through his pro-growth reforms.

At the same time, the seaborne iron ore price slide that started after 1Q17 has been negatively affecting Cliffs’ earnings from its Asia-Pacific division—not to mention the overall sentiment toward Cliffs. The company’s 1Q17 results miss did not help the matter.

What&#8217;s Causing Cliffs Stock to Slide?

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Due to the weaker US steel and seaborne prices, Cliffs downgraded its EBITDA (earnings before interest, tax, depreciation, and amortization) guidance for 2017 in its 1Q17 results. This disappointed investors even further.

Cliffs’ peers

The outlook isn’t wonderful for Cliffs’ US steel peers (SLX) either. U.S. Steel (X) and AK Steel (AKS) are trading with YTD (year-to-date) losses of 33% and 42%, respectively. ArcelorMittal (MT), Nucor (NUE), and Steel Dynamics (STLD) have all seen comparatively lower losses.

On the seaborne iron ore side, Cliffs has underperformed peers, including BHP Billiton (BHP), Rio Tinto (RIO), and Vale SA (VALE).

Cliffs HBI plant announcement

Amid this turmoil came an announcement from Cliffs on June 15, 2017, that stated that the company has selected a site for the development of its first HBI (hot briquetted iron) production plant. The site will be in Toledo, Ohio.

In this series, we’ll discuss this latest news in detail. We’ll also see how are the factors impacting Cliffs and its peers are progressing.


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