Shares of Cliffs Natural Resources (CLF) have gained 3.6% to $22.15 this morning after the iron miner signed a contract with AK Steel (AKS). Crain’s Cleveland Business has the details:
Bloomberg Cliffs Natural Resources Inc. said it has entered into a new agreement with AK Steel to supply the steelmaker with iron ore pellets from 2014 through 2023.
Cliffs did not disclose the potential value of the new agreement, which includes minimum and maximum volume iron ore pellet purchases. The Cleveland-based iron ore producer said it will continue to supply AK Steel with iron ore pellets for the rest of 2013 and 2014 under the previous agreement between the two companies.
Credit Suisse analysts Nathan Littlewood and Hubert Dagbo provide their typically bearish outlook on Cliffs although, this time, tinged with hope:
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We remain cautious on CLF due to the expectation that margins in its core Great Lakes market will normalise to long term levels of around $15/t (from 2013e $50/t) over the coming years, which we view as insufficient to support current financial leverage ($3.1bn net debt). That said, we are encouraged to see CLF continuing to make progress on contract renewals with customers, and it appears increasingly likely that CLF’s response to new entrants in this core Great Lakes market will be price and not volume related, which is positive.
Cliff’s gain puts it atop the S&P 500 today. Rio Tinto (RIO) has gained 1.3% to $46.48, BHP Billiton (BHP) has risen 1% to $63.44 and U.S. Steel (X) is up 1.4% to $18.32.
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