Cliffs Natural Resources Inc. said it reached a 10-year agreement to supply steel giant ArcelorMittal with iron-ore pellets.

The Cleveland mining company's shares rose 33% to $4.10 in early trading. ArcelorMittal's American depositary shares increased 3.4% to $4.88.

Cliffs Chairman and Chief Executive Lourenco Goncalves said in prepared remarks that the agreement also "removes any remaining uncertainty about Cliffs."

Cliffs has been hurt by weak demand from steelmakers, which have been grappling with low prices amid a glut of supply and a high level of less expensive imports. The company, one of the country's biggest mining companies, has continued to streamline its operations with the hope that iron-ore prices will recover in time to stave off bankruptcy.

In its news release Tuesday, Cliffs said the new agreement replaces two existing contracts that expire in December of 2016 and 2017. The new pact also preserves Cliff's position as the Luxembourg-based steelmaker's sole external supplier of iron-ore pellets and raises the minimum tonnage of pellets to a higher level than previous agreements.

Pricing under the new agreement will be tied to U.S. steel prices, as well as iron-ore based and general inflation indices.

Cliffs said it expects an improvement in overall U.S. iron ore prices next year compared with its current guidance for 2016 prices.

ArcelorMittal, the world's largest steel producer by output, earlier this month said U.S. and European markets are stabilizing after record Chinese steel exports last year caused prices to plummet around the globe.

Write to Tess Stynes at tess.stynes@wsj.com

 

(END) Dow Jones Newswires

May 31, 2016 10:25 ET (14:25 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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