They basically think CLF debt and likely lower IO pricing will hurt CLF going forward. What's new?
It's like they think Q1 and Q2 results were a fluke and not likely to continue. The only thing I firmly agree with is the debt issue for CLF.
This is what that Report said to me.......It said that prior qtr,,,,iron ore was at $120 and CLF made 82 cts a share,,,,inspite of the fact they wrote off 68 million.....NOW this qtr Iron Ore is at $140.....which means
CLF will make $1 per share plus 68 Million......that's a lot of money....Price per share will see $40 soon...
They tried to write a negative on CLF,,,,but if you read and analyize....they basically told me CLF will double.soon
What is the problem with their debt? Their profits are good after they pay their interest expense, plus they are paying down the principle on their debt each quarter. For every $100 million they pay down, their interest expense decreases by $2.5 million for the next quarter which will result in a 2% increase in profits.
As long as a company can pay its bills and make a solid profit, there is nothing wrong with debt, it is just a tool in doing business.
I know they knocked down debt by a bit, but their debt went from $500M in 2009 to over $3B today. That is a huge number and CLF benefited from higher IO prices than was forecasted, It does not take much of a decline in pricing to alter the course for CLF again. I am long the stock, but if there is the slightest drop in demand or pricing, you can bet this stock is going to find the lows again.
Surf, what number do you think CLF will be able to reduce their debt to this qtr? $3B or $2.9B? I think it will be in that range and wouldn't mind a cut in the dividend this qtr to secure a number below $3B.
Over the last 5 years they have suffered similar ups and downs as VALE and RIO. But, the overall trend has been lower than those two. It is all is a function of ppt at this point. If that does not hold, CLF will have a tough time and the credit suise report will come to pass.
What immediate effect would a war have on the ppt? Up?
Outside of relatively big wars, there isn't that much increase in steel use or procurement from conflicts these days. I would be surprised if you could even see it in the data for the Iraq War, where uparmored humvees used appreciable amounts of steel. Steel is used more for construction and transportation uses, and there might actually be some material changes that would result from the EU getting back to a more normal rate of car buying (which would add a few million more cars sold per year), or the Chinese infrastructure investment program announced a few months ago actually coming to fruition.