Is It a Race to the Bottom for Cliffs Natural Resources stock?
Cliffs Natural Resources stock price has dropped ~35% year-to-date. Iron ore prices need to find a bottom before Cliffs can start rerating.
Cliffs North American coal segment owns two metallurgical coal operations in Alabama and West Virginia. The annual rated capacity is 6.5 million tons.
Cliffs Asia Pacific iron ore operations are located in Western Australia at the Koolyanobbing complex. The remaining mine life there is only five years.
Cliffs’ US iron ore segment produces various grades of iron ore pellets. Customers use the pellets in blast furnaces as part of their steelmaking process.
U.S. Steel’s closures could be potentially negative for Cliffs Natural Resources (CLF). US steelmakers are Cliffs’ major customers.
Most of Cliffs Natural Resources’ (CLF) revenues and earnings are tied to the US steel industry. Steel prices are a component of Cliffs’ pricing formula.
Cliffs was a guarantor on the Bloom Lake loan for equipment in Quebec. Cliffs’ stock slipped 7.5% after news broke that Cliffs has to pay the loan.
On February 26, 2015, Cliffs Natural Resources (CLF) announced exchange offers for four of its five series of senior unsecured notes outstanding as of 4Q14.
As for market sentiment, Cliffs (CLF) seems to be on the receiving end. Most of it is due to the worsening current and future outlook for iron ore prices.
Cliffs’ (CLF) stock prices fell to a fresh 52-week low of $4.24 on March 19, mostly due to an iron ore supply glut coupled with slowing Chinese demand.
Cliffs Natural Resources’ (CLF) key driver is global demand for the raw materials used to make steel.
Lower aluminum premiums will likely have a positive impact on Constellium’s 2015 earnings. The Wise Metals acquisition will likely drive its 2015 earnings.
In 4Q14, Constellium’s operating cash flow came down 10% compared to 4Q13. However, its operating cash flows showed a YoY increase of ~15%.
Constellium N.V. (CSTM) intends to have lower working capital. In the fourth quarter, its working capital came down by 17 million euros on a YoY basis.
Constellium is investing to expand its fabrication and extrusion capacity. In Michigan, its expanded plant produces automotive structures and extrusion products.
Last year, 16% of Constellium’s total shipments were to automotive companies .Automobile demand has been strong in Europe and the US.
Constellium completed the expansion of its automotive operations in Singen. It’s also working to expand its automobile capacity in France.
Constellium made higher shipments to automobile companies in the fourth quarter. In 2014, its automotive shipments increased 37% on a YoY basis.
Higher metal premiums had a negative impact on Constellium’s fourth quarter earnings. Higher aluminum premiums benefit primary producers.
In the third quarter, Constellium warned that its Aerospace and Transportation, or A&T, segment’s profits could come down.
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