LONDON Cliffs Natural Resources Inc. has entered into a revised commercial agreement with ArcelorMittal USA LLC to supply iron ore pellets for an additional two years, with a mutual option for a third year.
The companies also extended a joint partnership for the Empire Mine on the Marquette Iron Range in Michigan into 2016, the Cleveland-based company said.
Prior to amending the deal, which now runs through the end of January 2017, Cliffs announced an impending closure of the Empire Mine, which didnt have a customer for pellet output beyond 2014.
"This agreement was made possible by the close working relationships we have with ArcelorMittal, both at the commercial and operational level. Importantly, this extension builds upon the long-term customer and partner relationship we have with ArcelorMittal, particularly at the Empire Mine," Cliffs executive vice president P. Kelly Tompkins said in a statement Feb. 27.
Cliffs holds 79 percent of Empire and a subsidiary of Chicago-based ArcelorMittal USA holds the remaining 21 percent with limited rights and obligations.
"ArcelorMittal USA was 36 percent of iron ore product revenue and 45 percent of U.S. iron ore pellet sales in volume for Cliffs U.S. iron ore business in 2013. That implies that theyre getting preferred pricing. They paid $91 per tonne, while on average the rest of Cliffs customer base paid $131 per tonne. The value that (Arcelor)Mittal has in the Cliffs relationship is they have preferred pricing and close proximity to their U.S. mills in the Midwest," Philip Gibbs, an analyst at KeyBanc Capital Markets Inc., Cleveland, told AMM.
Cliffs is maintaining its 2014 full-year sales and production volume forecast of 22 million to 23 million tons from its U.S. iron ore business, the company said.