These Factors Could Impact CLF’s US Volumes in 3Q17 and Beyond

In 2Q17, Cleveland-Cliffs (CLF) achieved 4% growth year-over-year (or YoY) in US volumes to 4.3 million tons. This growth beat the company’s expectations, which had guided for ~3.5 million tons of volumes in 2Q17.

Its customers’ increased appetite for pellets led to the volumes outperforming the company’s and the market’s expectations. Cleveland-Cliffs had also achieved improved YoY volumes in 1Q17 due to an improved steel market and increased customer demand.

Cleveland-Cliffs (CLF) has kept its guidance for fiscal 2017 unchanged at 19 million tons. This is also the company’s production strength while operating at full capacity, excluding its recently acquired interest in the Tilden mine.

Cleveland-Cliffs’ guidance implies ~11.5 million tons of volumes for 2H17. Its CFO, Timothy Flanagan, noted during the company’s 2Q17 earnings call that the volumes are likely to be weighted toward the fourth quarter.

Cleveland-Cliffs’ US Iron Ore (or USIO) segment’s major customers are the integrated steelmakers in the US (SPY) (SPX). Therefore, these companies’ orderbooks impact CLF’s volumes. In turn, the orderbooks are determined by US steel demand and steel imports into the country.

The US steel imports have been inching higher in recent months, which is detrimental to CLF’s customers’ orderbooks and in turn, to its own volumes.

The pending Section 232 investigation into steel imports could be a positive catalyst for companies such as AK Steel (AKS), U.S. Steel Corporation (X), Nucor (NUE), and ArcelorMittal (MT).