Cliffs Stock Outperformed Peers in 2016: What about 2017?



Iron ore prices

The benchmark seaborne iron ore prices, which represent 62.0% iron ore content, cost, and freight, rose 81.0% in 2016. The rise came despite most market participants believing to the contrary.

The stimulus provided by the Chinese government gave impetus to iron ore prices at the start of 2016. Speculative activities in iron ore futures trading and higher coking coal prices also led to the price rally.

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Iron ore stock price performance

With stronger iron ore prices in 2016, iron ore miners have recuperated some of their losses. Cliffs Natural Resources (CLF) has outperformed, with a huge rise of 404.0% in 2016. Its APIO (Asia Pacific Iron Ore) division is directly exposed to seaborne iron ore prices. CLF’s pricing for long-term contracts in its US division is also slightly tied to benchmark iron ore prices.

Stronger seaborne iron ore prices have also helped other miners (XME). Vale (VALE) has risen 141.0%. Rio Tinto (RIO) and BHP Billiton (BHP) (BBL) have risen 35.0% and 40.0%, respectively.

Performances for US steel peers

At the beginning of 2016, trade cases against cheaper, illegal steel imports helped Cliffs and its US steel peers. Donald Trump’s win in the US presidential election provided more positive momentum.

Steelmakers (SLX) such as United States Steel (X), Nucor (NUE), ArcelorMittal (MT), and AK Steel (AKS) are enjoying higher stock prices since Trump’s win. Trump has promised higher protectionism and infrastructure demand. Cliffs Natural Resources stock outperformed its peers in the US steel space in 2016.


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