Cleveland-Cliffs raises iron ore sales outlook

July 9, 2008

July 9th (Reuters) – Cleveland-Cliffs Inc (CLF.N: Quote, Profile, Research) raised its outlook for iron ore revenue from its Asia-Pacific segment to $102 per tonne and its North American segment to $85 per short ton for 2008, it said Tuesday in a press release.

The mining company also increased its forecasts for 2009 revenues from the North American segment to about $107 a ton.

 

With 80 percent increases in recent iron ore pricing settlements for fines and 97 percent increases for lump in Australia, Cliffs said it now expects average revenue per tonne of about $102 for its Asia-Pacific iron ore segment for 2008, based on its anticipated product mix.

 

The new projection is 87 percent higher than the previous year, and up from its previous guidance of $89 per tonne, the international mining company said.

 

It also said it expects per tonne costs of about $55 for Asia-Pacific iron ore, up from previous estimates cof $53.

 

The company said the increase is due primarily to higher royalty payments related to larger year-over-year price increases than anticipated, along with rising energy costs.

 

The iron ore producer said its sees output volume of 7.8 million tonnes and sales volume of 8.0 million tonnes for the Asia-Pacific segment.

 

Cleveland-Cliffs also pushed up to $85 a ton its estimated revenue for its 2008 North American iron ore supply agreements, compared with previous guidance of $81 per ton.

 

To determine prices for the North American agreements, the the Cleveland, Ohio-based company said it needed to raise its steel pricing assumptions.

Using an annual average hot band steel price of $750 per ton at certain customer’s steelmaking facilities, it now expects a 34 percent increase in factors related to steel pricing, up from previous assumptions of $700 per ton and 25 percent, respectively.

 

The company said each $10 change from $750 per ton in the average hot rolled steel price will change the average realization price by $0.24 per ton, at certain steelmakers.

 

Cliffs said it expects 2008 North American iron ore costs to rise to about $56 a ton, up about 16 percent from 2007.

 

The increase over the iron ore producer’s previous expectation of $53 per ton is again primarily due to rising energy costs and higher-than-projected royalty payments.

 

Cliffs said it sees 2008 equity production of about 23 million tons and sales volume of 24 million tons as it sells through its inventory.

 

For 2009, it said it revised its outlook for its North American Iron Ore segment, which sells virtually all of its production under long-term supply agreements, up to an average realized price of about $107 per ton.

 

The 2009 price assumes no change in world pellet prices and no change in producer price indexes or steel pricing, it said.

 

The 26 percent increase over the average price expected for 2008 is based on contractual base-price adjustments, lag-year adjustments, and price caps contained in the company’s current supply agreements, it said.

 

Cleveland-Cliffs is the largest North American producer of iron ore pellets and a major supplier of metallurgical coal to the global steelmaking industry.

 

Its stock price firmed in after hours trade to 93.78 per share, up from 91.94 at Tuesday’s close.

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