Cleveland-Cliffs Inc (NYSE:CLF) Biggest Risk Is Not Cliffs


Cleveland-Cliffs Inc (NYSE:CLF) recently added almost 50% after performing poorly in the last quarter which saw the company losing 15% in the first week of September. The shareholders who bought the company shares after September 11th have either sunk in the water or break-even. One core driver behind the Cliff’s poor results on the market is the strong performance of iron ore in the recent past.

In the fourth quarter of 2016, there was slight growth acceleration after the post election rally for the US president. Most leading companies such as Cleveland Cliffs got completely crushed during the period between 2011 and 2016. In the first quarter of this year, the market reached the mid-term growth peak.

Generally, there is growth acceleration in the US, Euro Area, and China markets and business companies in the industry are starting to experience some environmental pressure especially in China where enterprises are required to comply with the regulations to eliminate the ‘illegal’ steel production and cut down on the entire smog.

The biggest problem facing Cleveland Cliff in terms of performance is basically not the cliffs; it has to do with China and Australia. China is the world’s leading country in steel production and great consumer altogether, while Australia is the greatest iron ore exporter in the entire world. Unfortunately, China is making little effort to promote environmental stabilization.

China is currently putting pressure on the steel producers and has revoked several licenses of the ‘illegal’ steel producers and they are also going after the iron ore miners. Previous reports reveal that more than 1,000 licenses have been revoked from the operators that do not comply with environmental regulations on mining.

Other measures putting too much pressure on the steel industry is that the producers must search for high quality iron ore since the currently available materials are highly polluted. Australia has also increased the iron ore delivery to China.

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