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Cleveland-Cliffs’s Asia-Pacific Division Remained Weaker

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Nov. 20 2020, Updated 4:53 p.m. ET

CLF’s Asia-Pacific Iron Ore division

Cleveland-Cliffs (CLF) has direct exposure to the seaborne iron ore trade through its APIO (Asia-Pacific Iron Ore) unit. The company announced on April 6 that it expects to close its Australian operations by June 30, 2018. Cliffs’s CEO had noted time and again that due to the strategies followed by seaborne iron ore miners (PICK) such as BHP Billiton (BHP), Vale (VALE), Rio Tinto (RIO), Fortescue Metals Group (FSUGY), and Roy Hill, the iron ore market is in rough shape.

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APIO volumes

Cliffs’s APIO 1Q18 sales volumes came in at 1.6 million tons, reflecting a decline of 46% year-over-year (or YoY) and 19% sequentially. This decline is due to operational decisions reflecting the current market conditions and mine conditions. The company hasn’t provided guidance for APIO volumes for 2018, as it has decided to close the operations by June 30, 3018.

Realized prices and closure of APIO          

APIO’s realized revenue per ton was $31.1 in 1Q18, a decline of 43% YoY and 27% sequentially. While the seaborne iron ore prices were firm, China’s shift from low-grade material to high-grade has expanded the price differential between the two products. CLF’s APIO division produces sub benchmark ore, which attracts a discount. The company mentioned during the 4Q17 earnings call that over the past two years, its expected realized prices relative to the benchmark have declined by over 40%. The company reported EBITDA (earnings before interest, tax, depreciation, and amortization) of -$39.6 million in 1Q18 for APIO.

In the next part of this series, we’ll look at Cleveland-Cliffs’s progression on the cost front in both divisions.

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