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Cleveland-Cliffs Still Climbing
Rising prices and strong demand are pushing Cleveland-Cliffs, Inc.’s (CLF - Analyst Report) performance. Robust industrial growth in China and India has triggered demand for steel, resulting in higher demand for iron ore. The company’s portfolio of established and recent iron ore and metallurgical coal assets positions it to capitalize on global industry dynamics in 2008 and beyond.
Moreover, the merger with Alpha Natural Resources (ANR - Snapshot Report) will help Cliffs to meet the increasing global demand for coal, consolidate the supplier base, and generate substantial free cash flow. We also believe the strong commodity price regime should significantly boost revenues for Cliffs. As a result, we rate the shares a Buy with a target of $85, which is 11.5x our 2008 estimate.
Prices for iron pellets continue to move up in 2008. Cliffs’s managed iron ore pellet production in North America is expected to be 35.6 million tons in 2008. The company s share of this production is expected to be 24 million tons. Further, the company expects to increase this share to 33 million tons in 2009.
In 2008, North American iron-ore sales are estimated at 25 million tons as it sells down through some inventory, with revenue per ton of $90. For 2008, the Asia-Pacific Iron Ore segment’s expected production volume is 7.8 million tons and sales volume is 8 million tons. The company expects Asia-Pacific revenue per ton to be $102. This estimate assumes 80% and 97% increase in the 2008 international settlement price for fines and lump respectively.
Read the full analyst report on CLF
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| Market Summary | Jul 31, 2010 13:13 pm ET |
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