Cliffs defers iron ore sale, extends plant closure

CLEVELAND - Mining company Cliffs Natural Resources Inc. said Thursday that at a customer's request, it expects to defer about one million tons of iron ore pellet sales to the first quarter of 2010.

The move brings the company's full-year contractual obligations to 17 million tons of iron ore pellets, down from 22.8 million tons in 2008.

The company also said the owners of a plant in which Cliffs has a 23 percent stake have decided to extend the plant's current shutdown through the first quarter of 2010 amid continued weak demand for iron ore pellets.

Iron ore pellets are used in steel production, but demand has been weak amid the recession for the hot-rolled sheet steel used in autos, office furniture and appliances which is considered the industry's benchmark product.

The Hibbing Taconite Joint Venture, which has a capacity of 8 million tons per year and employs 700 people at full capacity, was originally shut down in May, after the idling of two of Hibbing's three pelletizing furnaces in March.

The shutdown originally was supposed to last only 15 weeks.

Cliffs Natural also noted that fellow metals company Vale SA and a European steelmaker recently agreed to cut prices for iron ore pellets by 48 percent. If that decrease is adopted across the industry, the company expects average revenue per ton in its North American iron ore business segment to be approximately $75 in 2009.

Currently, that business segment is expected to produce 15 million tons in 2009 at a cost of $70 to $80 per ton, which would mean the company would barely break even on each ton.

"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," said Don Gallagher, president of Cliffs North American segment, in a statement.

Shares of the company fell 41 cents to close at $23.85.

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