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These Factors Could Boost CLF’s Realized Prices

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Realized prices for mining and pelletizing

Cleveland-Cliffs’ (CLF) mining and pelletizing realized revenue is influenced by customer demand for iron ore pellets. Volumes and realized prices drive a company’s revenue.

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Realized revenue decline

In Q1 2019, Cleveland-Cliffs’ realized revenue fell 10.7% YoY (year-over-year) to $93.81 per ton. The company attributed this decline to an unfavorable customer mix in due to the heavy weighting of rail shipments and a hot-rolled coil revaluation adjustment. The company expects its realized revenue to improve during the year as larger samples represent its full customer mix more closely.

2019 realization outlook

Based on iron ore, steel, and pellet premiums this year and assuming these levels persist for the rest of the year, Cleveland-Cliffs expects price realizations of $108–$113 per ton this year. This expectation is $6 higher than the company’s expectation during its Q4 2018 results. The assumptions for its latest realized revenue expectations are iron ore at $85 per ton, steel at $691 per ton, and pellets at $67 per ton.

The company maintained that these revenue ranges are just its expectation based on this year’s averages and shouldn’t be construed as guidance. They don’t reflect its internal view on pricing. Higher prices could also benefit US (DIA) (SPY) steelmakers (SLX) such as Nucor (NUE), AK Steel (AKS), U.S. Steel Corporation (X), and ArcelorMittal (MT).

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