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Cliffs Natural Resources: The largest US iron ore producer

Anuradha Garg

Must-know: Should you own Cliffs Natural Resources right now? (Part 1 of 10)

Company overview

Cliffs Natural Resources (CLF) is primarily an iron ore producer. A small percentage of its revenue comes from metallurgical coal sales. Both products are key raw materials for producing steel.

Cliffs accounts for close to 46% of North America’s iron ore pellet supply. Pellets are produced through agglomeration and thermal treatment, with grades ranging from 67% to 72% iron.

The company operates in the U.S., Eastern Canada, and Australia.

Iron ore accounts for the bulk of Cliffs’ production and earnings. In 2013, iron ore contributed to 86% of Cliffs’ total sales value. The rest was coal sales.

The company’s EBITDA (earnings before interest, tax, depreciation, and amortization) contribution from iron ore is still higher, at close to 90% of the total. Coal contributes the rest.

Out of Cliffs’ iron ore sub-divisions, U.S. iron ore production remains the key driver of the company’s EBITDA.

More than 50% of Cliffs’ sales link to the benchmark price of 62% of cost and freight (or CFR) in China. The remainder, however, is more stable, as it’s contributed by the U.S. iron ore segment, where long-term contracts make it much more predictable.


Cliffs’ segments are organized by product and geography. They’re mainly classified into:

  • U.S. iron ore
  • Eastern Canadian iron ore
  • Asia-Pacific iron ore
  • Northern American coal

We’ll discuss each of these segments in detail in the next part of this series.

Key driver

The key driver for Cliffs, as for any other iron ore and metallurgical coal company, is global demand for steelmaking raw materials in emerging and developed economies. China and the U.S. are the two key markets for the company.


In iron ore and coal markets, Cliffs’ main competitors are Rio Tinto (RIO), BHP Billiton (BHP), and Vale SA (VALE). Cliffs makes up 3.46% of the SPDR S&P Metals & Mining ETF (XME).

Continue to Part 2

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