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Cliffs Natural Resources: Takeaways from Goldman Sachs Conference

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Nov. 28 2016, Updated 11:04 a.m. ET

Goldman Sachs Metals & Mining Conference

Cliffs Natural Resources’ (CLF) CEO (chief executive officer) Laurenco Goncalves presented at the Goldman Sachs (GS) Global Metals & Mining Conference in New York on November 16, 2016.

On global seaborne iron ore prices, Goncalves maintained that major iron ore companies such as Rio Tinto (RIO) and Vale SA (VALE) were dictating lower prices, and not China. Rio has now changed its strategy, and the direction of prices has also changed.

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Trade cases and the steel sector

Regarding trade cases in the United States (QQQ), Goncalves said they have led to high tariffs and weeding out of foreign products. But he maintained that the percentage of domestic steel in the market is still close to 70.0%. The goal, he said, should be in the 80.0% range.

This should come about in time since the market is seeing price increases. Goncalves added, “We were able to put a lot more discipline in the marketplace and my clients, the steel mills, were able to bring prices back to where they belong.”

The Trump effect

Goncalves was quite optimistic about trade cases and the impact they’re having on the US steel sector. He believes that president-elect Donald Trump should have little direct impact on the iron ore market. He also projected a domestic iron ore price of $60 per ton in 2017 for a domestic demand of around 120.0 million tons. However, he maintained that if the Trump administration comes through on campaign talks of infrastructure investment, he’ll have to adjust his 120.0 million tons of consumption projection.

Investors should note that Cliffs is planning to put up a direct reduced iron facility. The company is eyeing the Essar Steel Minnesota site in Nashwauk as it goes through bankruptcy proceedings. During the Goldman Sachs conference, Goncalves mentioned that the judge did exactly what he wanted him to do. He said that Cliffs has a deal with the state to obtain the mineral leases as soon as the court releases them back to Minnesota. The facility could set the company up for the next leg of growth.

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