Cliffs Natural Resources on Tuesday may have agreed to buy Canada's Consolidated Thompson Iron Mines for $4.1 billion, making it one of the largest iron ore producers in the world, but Cliffs CEO Joseph A. Carrabba said Wednesday the cycle for commodities has only just begun.
"We think in the iron ore business and particularly when we look at steel build out still in China and in the emerging markets, we're at the very early stages of this cycle," Carrabba said. "We think there's still quite a supply deficit to go with it. We got a lot of runway in this commodity."
The 58-year-old executive said commodities are going into a "very different pricing regime," adding he's "very bullish" on iron ore pricing and doesn't expect prices to come down any time soon. China, he explained, is still rapidly growing and that means continued demand for iron ore. Carrabba thinks prices will hold through 2012.
What's the Trade?
Steve Cortes, founder of Veracruz, isn't sure that demand from emerging markets will continue to drive iron ore prices higher. He does, however, think this deal shows there's a demand for "all things Canadian." That's because the U.S. dollar is trading well below the Canadian dollar, he explained.
For those looking for a derivative trade off this deal, options trader Jon Najarian still likes the rails. After all, the iron ore mined in northern Minnesota, for example, needs to be shipped to the West Coast before it can be sent to China. Najarian didn't specify what rail name he likes, but has recently recommended CSX .
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Trader disclosure: On Jan. 12, 2011, following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Jon Najarian owns (C), is short (C) calls; Jon Najarian owns (JOE), is short (JOE) calls; Jon Najarian owns (NFLX), is short (NFLX) calls; Jon Najarian owns (BBY), is short (BBY) calls; Jon Najarian owns (BP), is short (BP) calls; Jon Najarian owns (CHK), is short (CHK) calls; Jon Najarian owns (PBR), is short (PBR) calls; Jon Najarian owns (GM), is short (GM) calls; Jon Najarian owns (F), is short (F) calls; Jon Najarian owns (AXP), is short (AXP) calls; Jon Najarian owns (AAPL), is short (AAPL) calls; Jon Najarian owns (QCOM), is short (QCOM) calls; Jon Najarian owns (STI), is short (STI) calls; Jon Najarian owns (ARUN), is short (ARUN) calls; Jon Najarian owns (EXPE), is short (EXPE) calls; Cortes is short (LVS); Cortes is short (XRT) vs. S&P; Cortes is short (XHB) vs. S&P; Cortes owns (EXC); Cortes owns (TSN); Cortes owns (SVU); Cortes is short Gold; Cortes owns U.S. Treasuries
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