Cliffs announces cutbacks in iron ore and coal production

U.S. iron ore miner Cliffs Natural Resource is deferring some production while leaving its Hibbing Taconite iron ore facility in Minnesota closed until next year.

RENO, NV - 

Cleveland-based Cliffs Natural Resources said it expects to defer one million tons of purchase obligations for iron ore pellets from customers to the first quarter of next year.

In an update published Thursday, Cliffs said the 48% price settlement decrease agreed upon by Vale and a European steelmaker could eventually impact Cliffs' bottom line.

"Assuming this settlement price is adopted by Eastern Canada and other iron ore pellet producers, and combined with the impact of the amendments referenced above, the company expects average revenue per ton in the North American Iron Ore Business segment to be approximately $75 in 2009," Cliffs said. Currently, the North American Iron Ore business segment is expected to produce 15 million tons this year at a cost range of $70 to $80 per ton.

Cliffs also noted that the owners of the Hibbing Taconite Joint Venture (ArcelorMittal, Cliffs, and U.S Steel Canada) in Minnesota have made the decision to extend the plant's current shutdown through the first quarter of 2010 "as a result of continuing soft demand for iron ore pellets."

The JV was originally closed in May after an idling of two of Hibbing's three pellet furnaces in March. The initial shutdown had been expected to only last 15 weeks. Hibbing Taconite has the capacity of 8 million tons per year and employs 700 persons when operating at full capacity.

Cliffs also revised its forecast for its North American Coal business segment to 1.5 million short tons of coal at average revenue of $100 per ton.

In a statement, Don Gallagher, president of Cliffs' North American Business Unit said, "While we have begun to see preliminary signs of stabilization in the North American steelmaking industry, we will continue to ensure our production and inventory are balanced with customer demand."

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