Cliffs inks long-term supply agreement with ArcelorMittal USA

JOHANNESBURG (miningweekly.com) – NYSE-listed iron-ore producer Cliffs Natural has entered into a new long-term commercial agreement with ArcelorMittal USA to supply the steel giant with tailor-made iron-ore pellets for the next ten years.

The new commercial agreement, signed on Tuesday, would replace two existing agreements expiring in December and January and would fill the entirety of ArcelorMittal's pellet purchase requirements from the previous contracts. The agreement also included ArcelorMittal's total purchase of iron-ore pellets from Cliffs of up to 10-million long tons, preserving Cliffs' current position as ArcelorMittal USA's sole outside supplier of pellets.

Accordingly, Cliffs would continue to be the sole pellet supplier of ArcelorMittal's Indiana Harbor West and Cleveland Works steelmaking facilities, while maintaining the current level of pellet supply to ArcelorMittal's Indiana Harbor East facility. The new contract also established a  minimum tonnage of pellets of 7-million long tons, which was higher than the current minimum level of the two previous contracts combined.

Cliffs, the largest iron-ore producer in the US, considers the agreement “a major accomplishment” that aligned with the group’s overall strategy.

Cliffs chairperson and CEO Lourenco Goncalves added that both Cliffs and ArcelorMittal recognised the importance of bringing sustainable value to their respective businesses.

“The signing of the new supply agreement confirms what we have always stated regarding the strength of the business relationship between Cliffs and ArcelorMittal USA. The new agreement also removes any remaining uncertainty about Cliffs, and supports our conviction in the bright future of our company, its employees, its shareholders, and all other stakeholders, including the communities in which we operate," said Goncalves.

Pricing for the pellets under the agreement would be adjusted by the price of steel in the US domestic market, as well as iron-ore market-based and general inflation indices.

Based on current market levels, Cliffs expected an improvement in overall US iron-ore realized revenues per ton in 2017, compared with the company's current guidance for 2016.