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Cliffs Natural Resources: What Will Drive Performance after 2Q17?

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Part 3
Cliffs Natural Resources: What Will Drive Performance after 2Q17? PART 3 OF 11

Could Delay to Section 232 Probe Impact Cliffs Natural Resources?

Cliffs Natural Resources and US steel imports

Most of Cliffs Natural Resources’ (CLF) revenues come from its US (SPY) (SPX-INDEX) Iron Ore segment. The segment’s major clients are US steelmakers such as AK Steel (AKS) and ArcelorMittal (MT). Large steel imports into the United States have negatively impacted these steelmakers.

Could Delay to Section 232 Probe Impact Cliffs Natural Resources?

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So it’s important to track the progression of US steel imports in order to understand Cliffs Natural Resources’ future volumes and pricing.

Imports rose in June

Based on preliminary data released by the AISI (American Iron and Steel Institute), the United States imported 3.9 million tons of steel in June 2017. That included 2.9 million tons of finished steel, which was a rise of 12.8% month-over-month. In the first half of 2017, imports of finished steel reached 15.0 million tons, a rise of 17.2% compared to the same period last year. Steel imports have been rising despite the imposition of excessive duties.

The estimated market share of imports in the US steel market was 30.0% in June compared to 27.0% in May. Year-to-date, the market share estimate is closer to 27.0%. Most market participants believe that a level closer to 20.0% and a domestic production penetration of 80.0% is healthy for the sector.

Section 232 probe result delayed

US steelmakers are banking on the Trump administration’s Section 232 probe into US steel imports to get further pricing power and increase their market shares in the US market. However, the latest blow came in the form of an announcement from U.S. Secretary of Commerce Wilbur Ross that the decision will take much longer than the original timeline of the end of June.

Earlier, Cliffs Natural Resources and US steelmakers such as Nucor (NUE), AK Steel (AKS), U.S. Steel (X), and ArcelorMittal (MT) praised President Trump’s call for this probe.

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