Friday July 3, 02:49 AM
UPDATE 3-Cliffs to defer some iron ore sales to 2010
NEW YORK, July 2 (Reuters) - Cliffs Natural Resources Inc , operating its iron ore mines at half capacity because of weak demand from steelmakers, said it expects to defer about one million tons of customer purchase obligations to the first quarter of 2010.
The move reduces the company's contractual obligations for 2009 to 17 million tons of iron ore pellets, Cliffs said. Last year its sales volume was 22.7 million tons.
A Cliffs spokeswoman said the deferral was the result of a customer request, as steelmakers try to align inventories of iron ore with their own orders.
The one million tons deferred this year will 'most likely' be delivered next year, at which time it will appear as revenue on Cliffs' books, she said.
Cliffs, which produces iron ore pellets and coal for steelmakers, has cut production at its six North American iron ore mines and one of its coal mines because the global economic downturn has cut demand.
In April, it said its iron ore mines were operating at an annualized capacity rate of 50 percent.
'While we have begun to see preliminary signs of stabilization in the North American steelmaking industry, we will continue to ensure our production and inventory are balanced with customer demand,' Don Gallagher, president of Cliffs North American Business Unit, said on Thursday.
Cliffs said its North American iron ore business is expected to produce 15 million tons this year at a cost of $70 to $80 per ton. Last year its North American output was 35.2 million tons at an average cost of $57.12 per ton.
The company noted a recent global iron ore price settlement decrease of about 48 percent. If that settlement price is adopted by other iron ore pellet producers, Cliffs expects its average revenue per ton in North America to be about $75 this year.
The company also said the Hibbing Taconite joint venture in Minnesota will remain shut down through the first quarter of 2010 as a result of continuing soft demand for iron ore pellets.
The facility -- owned jointly by ArcelorMittal (Amsterdam: NSCNL0001MT7.AS - news) (62.3 percent), Cliffs (23 percent) and U.S. Steel Canada (14.7 percent) -- was shut down in May following the idling of two of Hibbings three pelletizing furnaces in March. Hibbing Taconite has a capacity of 8.0 million tons per year and employs around 700 people when operating at full capacity.
Cliffs stock was down 30 cents at $23.96 in midday trading on the New York Stock Exchange.
(Reporting by Steve James; editing by John Wallace)
|
|
|
Send Article by Email
Send Article by IM
Blog This with Y! 360
Printable View
