In its 4Q15 results, management for Cliffs Natural Resources (CLF) guided for US iron ore shipments of 17.5 million tons for 2016. However, on June 9, 2016, Cliffs announced that it will be reopening its United Taconite plant in northeastern Minnesota two months earlier than expected.
The early restart is due to a contract with U.S. Steel Canada. To reflect this, the company increased its production and sales guidance for 2016. Now the shipment guidance stands at 18 million tons.
US steel sentiment improving
In 2015, Cliffs idled two mines, United Taconite and Northshore, due to weaker order books and low capacity utilizations for steel companies. In March 2016, Cliffs announced that it was bringing its Northshore facility back online by May 2016.
It said the move was due to reviving steel order books as anti-dumping duties were starting to have an impact. United Taconite was the next one to benefit from existing customers’ strong demands and from new customers.
Upside to volumes
Anti-dumping duties have favorably impacted Cliffs’ customers. US steel imports fell to 8 million metric tons in 1Q16, a decline of 29% year-over-year. The downtrend in steel imports is favoring Cliffs’ customer order books.
Falling steel imports have been a main reason for the optimism in the US (VTI) steel industry. Falling imports benefit steelmakers such as United States Steel (X), AK Steel (AKS), Nucor (NUE), and ArcelorMittal (MT).
Cliffs has based its US shipments guidance of 17.5 million tons for 2016 on customer utilization rates in December and January. Falling US imports could lead to an upside. Any upward revision to the US volume guidance or any positive commentary related to that would be positive for Cliffs Natural Resources stock.