Cliffs Natural in Deal to Supply ArcelorMittal
May 31 2016 - 10:27AM
Dow Jones News
By Tess Stynes
Cliffs Natural Resources Inc. said it reached a 10-year
agreement to supply steel giant ArcelorMittal with iron-ore
pellets.
The Cleveland mining company's shares rose 33% to $4.10 in early
trading. ArcelorMittal's American depositary shares increased 3.4%
to $4.88.
Cliffs Chairman and Chief Executive Lourenco Goncalves said in
prepared remarks that the agreement also "removes any remaining
uncertainty about Cliffs."
Cliffs has been hurt by weak demand from steelmakers, which have
been grappling with low prices amid a glut of supply and a high
level of less expensive imports. The company, one of the country's
biggest mining companies, has continued to streamline its
operations with the hope that iron-ore prices will recover in time
to stave off bankruptcy.
In its news release Tuesday, Cliffs said the new agreement
replaces two existing contracts that expire in December of 2016 and
2017. The new pact also preserves Cliff's position as the
Luxembourg-based steelmaker's sole external supplier of iron-ore
pellets and raises the minimum tonnage of pellets to a higher level
than previous agreements.
Pricing under the new agreement will be tied to U.S. steel
prices, as well as iron-ore based and general inflation
indices.
Cliffs said it expects an improvement in overall U.S. iron ore
prices next year compared with its current guidance for 2016
prices.
ArcelorMittal, the world's largest steel producer by output,
earlier this month said U.S. and European markets are stabilizing
after record Chinese steel exports last year caused prices to
plummet around the globe.
Write to Tess Stynes at tess.stynes@wsj.com
(END) Dow Jones Newswires
May 31, 2016 10:12 ET (14:12 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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