User Generated >> Cliffs Natural Resources SWOT Analysis:
Market share leadership; largest iron ore producer in North America through Consolidated Thompson acquisition in Canada, with some better quality assets through Portman in Australia.
Sales are more focused on Asia for the future.
Supply chain is well developed and mature, directly with steel company users.
Weak management team; Bad communication; Joe Carrabba, CEO, isolated by his middle management from direct communication with major opportunities, espcially in Asia. Clifford Smith, Bsns Dev. VP is too arrogant to be effective. Best of the bunch is Laurie Brlas, CFO, with great financial engineering, doing ***est to keep the stock price up with great dividends to investors (e.g., limited share sale to raise funding for Consolidated Thompson purchase, conservative debt incurrence, doubling the dividend when price started to dive, etc....) Loss of Calfee to retirement is major loss to Cliffs.
Low R&D; Not innovative
Cliffs just shut down their latest generation iron ore reduction venture, a mistake which would have provided significant advantages in processing lower grade iron assets, of which Cliffs has much more. Instead Cliffs is competing directly with the majors in Australia and Brazil, and soon with West African direct ship ore.
The Freewest acquisition was done at twice the price it should have been done, if one agrees with acquiring half of the known North American chromite (with nickel and copper, et al.) in Ontario. Cliffs allowed their option to expire, then got into a takeover battle which effectively doubled the price.
Cost estimates for developing the Ring of Fire assets were "back of a napkin" estimates and too low. As such, this year (2012) Cliffs has spoken about a $1 Billion budget.
Also, more steel makers are realizing that it is cheaper to ship chromite for making ferrochrome near their steel making rather than remelt imported ferrochrome.
Acquisitions: Targets are difficult to isolate from aggressive Chinese pursuit but available.
Possible mergers with some West African DSO sources is possible, with possible eventual sale to a major mining company a few years from now.
Strategic Ventures: In order to protect themselves from major downturns in iron ore demand and pricing, rather than assume an adversarial stance with steel companies who cannot pay the long term pricing worked out in better times, do what Rio Tinto has done to make strategic ties with major trading companies who have greater financial strength to ensure ongoing consumption and payment. Cliffs has so far refused to consider this. They would rather sue their customers.
Financial markets (raise money through debt, etc) and Emerging markets and expansion abroad
It is possible to put together a major war chest to acquire some high quality iron ore sources around the world.
BHP and Rio Rinto and CVRD are still in control of major market decisions but their positions are weakening as China exerts ownership control over more assets. Cliffs will suffer more, and sooner, without responding to such threats.
Cheaper technology: Direct Reduction of Iron Ore is shut down precisely at the time when gas prices are dropping. Marcellus Range cheap gas is available to produce 99 % iron pellets from ancient Cliffs iron ore assets that can compete with DSO from other sources at precisely the time when iron ore pricing is dropping.
Economic slowdown: 40% of China's steel industry is consumed by real estate development, which is slowing. Other competitors are motivated by ongoing cash flow requirements for new development, and will go after Cliffs markets.
External changes (government, politics, taxes, etc)
Exchange rate fluctuations: not a great threat as long as the U. S. Dollar continues to fall against the RenMinBi.
Lower cost competitors or imports: The majors all produce at lower costs when reviewing Opex, but including Capex, Cliffs is competitive. In addition, the West Africans are new suppliers of very high quality ore, and while at the beginning of the depreciation curve, continue to be very competitive.
Maturing categories, products, or services. Iron ore is as much a commodity as possible. Nickel is, also. Chromite, while not technically a commodity, is primarily dependent on the stainless steel industry, itself quite small at a total worldwide production rate of around 40 million tonnes per year.
Price wars: CVRD continues to press its DSO into North America, and Cliffs continues to keep prices low enough to fend them off, not allowing Cliffs to command world market pricing.
History: Version 7 (Newest), Version 6, Version 5, Version 4, Version 3, Version 2, Version 1 (Oldest)
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