Cliffs Walks Away Richer at ArcelorMittal's Expense

 |  Includes: AMSIY, CLF
by: Trefis

Cliffs Natural Resources (NYSE:CLF) and ArcelorMittal (OTCPK:AMSIY) settled their year-long dispute regarding the pricing of iron ore pellets supplied in 2009 and 2010. Cliffs is set to receive between $250 million and $270 million from ArcelorMittal. [1] Cliffs, the largest producer of iron ore pellets in North America, also stands to gain from the agreement that iron ore pellets will be priced based on prevalent market prices, given increasing iron ore prices.

The revenue from the settlement would effectively increase the revenue earned by Cliffs’ North American iron ore division by almost $8 per ton of iron ore pellets sold.

(Chart created by using Trefis' app)

The additional $8 would push our 2011 estimate for North American iron ore revenue per ton to around $130. This would add an additional $260 million in revenues and imply slight upside to our $103 price estimate for Cliffs Natural Resources stock. Our price estimate currently stands about 5% ahead of market price.


  1. Cliffs Natural to Get Up to $270 Million in ArcelorMittal Pact, Bloomberg, April 9 2011

Disclosure: No position