Cliffs Natural Resources’ Q4 2016 Earnings Preview: Recovery In Iron Ore Prices And Success Of Cost Reduction Initiatives To Boost Results

by Trefis Team
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CLF
Cleveland-Cliffs Inc.
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Cliffs Natural Resources will announce its Q4 2016 earnings results and conduct a conference call with analysts on February 9. [1] We expect Cliffs to report a significant year-over-year improvement in its earnings, driven by a sharp recovery in iron ore prices and the success of the company’s cost reduction initiatives.

Iron ore prices recovered sharply towards the end of 2016, translating into higher average prices in 2016 after two consecutive years of decline. Iron ore prices declined over the course of 2014 and 2015 as a result of a global oversupply situation. However, production curtailments by high-cost producers in response to an extended downturn in prices have helped lower the extent of the oversupply, translating into a recovery in iron ore prices. In addition, the resilience of iron ore demand from China, the world’s largest iron ore importer, has helped prop up prices. Besides the improved iron ore pricing environment, the company’s successful cost rationalization efforts are also likely to benefit Cliffs’ Q4 earnings. The extent of Cliffs’ cost rationalization efforts in the first nine months of the year and our expectations from the company’s fourth quarter results are summarized in the tables shown below.

CLF Q4 2016 Earnings Preview

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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Cliffs Natural Resources

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Notes:
  1. Cliffs Natural Resources Inc. to Announce Fourth-Quarter and Full-Year 2016 Results on February 9, Cliffs Natural Resources Website []
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