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Cleveland Cliffs: Realized Price Expectations in 2019


Apr. 24 2019, Updated 8:57 a.m. ET

Realized revenues

In addition to volumes, realized revenues are among the most important components that drive a commodity company’s top line.

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Cleveland-Cliffs (CLF) achieved realized revenues of $99.4 per ton for the fourth quarter. The revenues implied an increase of 19% YoY (year-over-year) due to higher steel prices and pellet premiums, which were magnified by the company’s favorable contract structures.

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Expectations for 2019

Cleveland-Cliffs expects US (SPY) (IVV) realized prices to be $102.0–$107.0 per ton for 2019. The expectation is based on the assumption that the following variables remain at this level for the rest of the year. Below are the YTD averages used for these expectations:

  • $694.00 per ton for HRC
  • $76.00 per ton for the iron ore benchmark
  • $67.50 per ton for Atlantic pellet premium

The company maintained that these expected realized revenue ranges shouldn’t be construed as guidance since they don’t reflect its internal view on pricing. Investors should note that seaborne iron ore prices have risen 18% due to supply disruption from Vale’s (VALE) dam disaster and temporary disruptions from BHP Billiton (BHP) and Rio Tinto (RIO). Based on the YTD averages, there could be an upside to the company’s average realized price in the first quarter.

Peers’ average selling price

Among Cleveland-Cliffs’ US peers (DIA), Steel Dynamics’ (STLD) average selling price for the first quarter fell by $38 to $902 per ton. US spot steel prices started falling in the fourth quarter of 2018. The trend has continued in 2019. However, we’ve started to see some stability in US steel prices in the last month.

Due to Vale’s dam disaster and other factors, the pellet premiums are high, which could mean higher future realizations for Cleveland-Cliffs—a positive sign for US steelmakers (SLX) including AK Steel (AKS), Nucor (NUE), U.S. Steel Corporation (X), and ArcelorMittal (MT).


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