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PrintCliffs Natural Resources Inc (CLF.N: Quote, Profile, Research, Stock Buzz), which produces iron ore pellets and coal for steel manufacturers, said on Monday it will cut production at its six North American iron ore mines and one of its coal mines because of "market uncertainties."
There will be a temporary idling of several pellet furnaces and "adjustments" of work forces at the iron ore mines, the Cleveland-based company said, without elaborating. Shares rose 17 percent in early trading.
"The decision to adjust production is being made to balance our operations with current industry demand and avoid unnecessarily investing cash into working capital," said Chairman, President and Chief Executive Officer Joseph Carrabba.
The action comes as global steel demand dropped dramatically during the economic downturn. Many steel makers, who use iron ore and coking coal to fire blast furnaces, have cut back production recently.
Cliffs said it is reducing production at its six North American iron ore mines to a current annualized rate of approximately 22 million tons -- down from its previous expected 2008 total production of 36 million tons.
For 2009, Cliffs said it has contractual obligations for approximately 75 percent of 2008 expected sales volumes of approximately 24 million tons.
But it said that "based on current market uncertainties and corresponding blast furnace capacity utilization in North America," it will continue to monitor the marketplace and adjust its production plans as needed.
Cliffs said that at the expected current annualized production rate, 2009 cost per-ton would be higher than the expected 2008 cost per-ton of $57.
The company said it has initiated operating plans to reduce production at the Pinnacle coal mine in West Virginia, with workforce adjustments at that mine.
However, Cliffs' Asia-Pacific iron ore business segment is maintaining current production rates. But the company has agreed to sell some shipments at current spot prices for lump and fines iron ore in order to maintain production levels "in the current challenging market environment."
Shares were up $3.46 to $23.26 in early trading on the New York Stock Exchange.(Source: Reuters)
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