Cleveland-Cliffs: Strategic Moves Support Future Fundamentals

Cleveland-Cliffs Strategy

Cleveland-Cliffs Inc (NYSE:CLF) shares move higher after beating the first quarter revenue estimate by $57 million and lifting full-year production guidance. CLF stock price rose 7% on Friday to$ 7.72 per share, up 16% in the last month alone. The Cleveland-Cliffs strategy will strengthen its future fundamentals and add to traders sentiments.

It recently announced to sell Asia Pacific Iron ore segment to improve its earnings potential.

Its first-quarter 2018 sales volume from Asia Pacific Iron Ore segment plunged 46% Y/Y to 1.7 million metric tons, while the net loss was standing around $71 million.

CLF management plans to focus on its U.S. operations that are offering better growth potential. It has the better market position in the United States while Donald Trump’s pro steel policies provide growth potential for iron ore producers.

The president has recently imposed higher tariffs on imported steel from Chinese and other markets to brace domestic producers. Higher tariffs on imported steel along with improving demand from energy and industrial markets support the U.S. domestic production.

Goldman Sachs turns bullish on mining stock after Trump’s policies. Though the firm sees strong overall fundamentals for mining stocks in North America, he suggested investors focus on stocks that have better market exposure and strong balance sheet.

Cleveland-Cliffs Strategy

Cleveland-Cliffs U.S. iron ore revenue rose 32 %Y/Y in the first quarter this year, driven by the considerable increase in domestic hot-rolled coil steel pricing.

“The strength in the domestic steel market we have seen so far this year is sustainable, and should support solid results for Cleveland-Cliffs in 2018,” says CEO Lourenco Goncalves.

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The Cleveland-Cliffs strategy has raised their US sales volume guidance for this year. The company expects its US sales volumes in the range of 20.5 million long tons – 500,000 long tons higher than a previous forecast. The iron ore producer also raised price expectation for iron ore pellet to $102-$107/ton for this year compared to earlier guidance of $97-$102/ton.

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