Cliffs sees no flood of iron ore in Great Lakes

Wed Jun 19, 2013 5:21pm EDT
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NEW YORK, June 19 (Reuters) - Cliffs Natural Resources Inc does not expect a flood of new supply in the Great Lakes iron ore pellet market over the next few years, the company's chief executive said on Wednesday, playing down concerns expressed by some analysts.

Credit Suisse and Morgan Stanley both warned earlier this year that a looming pellet surplus in the Great Lakes region could hit Cliffs' earnings, sending the miner's shares down sharply.

But Cliffs' CEO Joseph Carrabba told Reuters on Wednesday that the extension of its supply contract with Essar Steel Algoma announced last week suggests that Essar's greenfield iron ore project in Minnesota could be delayed.

"We see a real tightening," said Carrabba, of the isolated Great Lakes market. "Clearly, Essar's project is not coming in the time frame they said."

The first phase of the Essar project is set to start up in the second quarter of next year, and ramp up to full capacity by the end of the year, according to the company's website.

A spokeswoman for Essar Steel Algoma, a subsidiary of India's Essar Group, was not immediately available for comment. In the release that announced the contract extension, the company said Cliffs' iron ore would supplement material from the Minnesota project.

Both AK Steel and US Steel are working on smaller iron ore projects in the region.

Shares of Cliffs closed down 0.75 percent at $18.45 in New York on Wednesday.