Cliffs Natural Resources Inc. (NYSE: CLF), a major producer of iron ore from mines in North America, Brazil, and Australia, has idled some of its North American ore production and will delay completion of a mine expansion in Canada. A temporary mine closure in Michigan is expected to affect about 500 employees and the shutdown of two production lines at a concentrating plant will result in the layoff of another 125 workers.
Cliffs’ president of global operations said:
[W]e believe it is prudent and necessary to match our production volumes with market demand. We will remain operationally flexible to ramp up production volumes throughout the year if the demand increases.
The company did not change its forecast for North American production volumes from a previously announced level of 19 to 20 million tons in fiscal year 2013. The company has failed to meet the consensus estimate for EPS in each of the past four quarters, and the estimate for the December quarter has dropped from $1.70 three months ago to $0.71 currently.
U.S. steel production in October totaled 6.9 million metric tons, down 3.3% year-over-year, according to the World Steel Association. Global capacity utilization dropped to 76.5% in October, down 1.4% since October 2011.
Financial results from U.S. steelmakers like United States Steel Corp. (NYSE: X), Nucor Inc. (NYSE: NUE), AK Steel Holdings Corp. (NYSE: AKS), and others indicate that margins are shrinking and production is contracting. Demand for iron ore, a principal component in steel making, consequently falls, and that is what Cliffs is predicting for next year.
Cliffs’ shares are down 11.7% at $30.60 after the stock posted a new 52-week low of $30.12 earlier today. The prior range was $32.25 to $78.85.