Cleveland Cliffs (NYSE:CLF)
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5 Years : From Apr 2012 to Apr 2017
The iron-ore derivatives market will continue to grow, but miners of the steel component don't see a need to hedge at current prices, the chief financial officer of Cliffs Natural Resources (CLF) said Thursday.
Laurie Brlas said while the company was watching developments in the market for iron-ore derivatives, Cliffs wasn't interested in participating. The Cleveland company is the largest North American iron-ore producer.
"We're not in the business of speculating in the market," Brlas told Dow Jones Newswires on the sidelines of a Dahlman Rose & Co. conference, adding she was satisfied with Cliffs' exposure to cash prices, which is growing as Cliffs' long-term pricing agreements expire and are replaced with contracts that move more in line with market prices.
In some metals and other commodities markets, producers use derivatives contracts to lock in sales prices on a portion of their production and guarantee some of their cash flow. Iron-ore miners and steelmakers have generally been reluctant to use such hedges.
Other market participants have stepped in, and trading activity in iron-ore swaps cleared by Singapore Exchange Ltd. (S68.SG) reached record highs in October.
Iron-ore trading "will evolve into a real marketplace," Brlas said, but she said mining companies have yet to see the benefit of jumping into the market.
Brlas said she expects prices in the coming years to remain at levels that maintain a healthy profit margin, underpinned by rapid growth in emerging-market steel demand and the high cost of iron-ore mining in top producer China.
Thursday, the benchmark spot price of iron ore delivered into China rose 0.3% to settle at $147.60 a metric ton, according to The Steel Index.
-By Matt Day, Dow Jones Newswires; 212-416-4986; email@example.com