Wednesday July 25, 4:11 pm Eastern Time
Cleveland-Cliffs Reports Second Quarter 2001 Results
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Outlook
A sharp decline in steel demand caused North American steelmakers to operate at less than 80 percent of capacity in the first half of 2001. Conditions are expected to improve late this year, and into 2002, due to a decrease in imports and reduction of inventories, but the recovery will likely be restrained by the worst downturn in manufacturing since the Gulf War recession.
Brinzo said, ``We continue to have considerable uncertainty regarding the pellet requirements of certain customers, and our sales forecast for the full year 2001 has been reduced to approximately 10 million tons. This estimate assumes LTV Corporation will continue to operate two blast furnaces in Cleveland and two furnaces in Chicago.'' Separately, LTV continues to meet its obligations as a 25 percent partner in the Empire Mine, but has neither affirmed nor rejected its ownership in Empire.
Given the weak sales forecast for the second half of 2001, the high level of inventory at June 30 and the plan to significantly reduce inventory by the end of the year, full year production will be significantly below Cliffs' production capacity of 12.8 million tons. Production curtailments have been implemented in Minnesota and Michigan in the first half and additional curtailments are expected. With fixed costs representing approximately one- third of total production costs, Cliffs' financial results for the second half will continue to be adversely impacted by costs associated with the curtailments. A modest loss is expected in the second half.
Brinzo said, ``We are managing our iron ore business with the expectation that integrated steel and iron ore production capacity will shrink and foreign competition will remain intense. With most steel companies interested in exiting their iron ore ownership positions, there is a unique opportunity for Cliffs to be a bigger, more powerful force in a consolidating industry. Cliffs should be and will be the leader in remaking the iron ore business in the United States. We have been in the business for 154 years and we're good at what we do.
``Having said that, we also recognize that we must make major changes in how we operate and staff our mines if they are going to be world class competitive. We must be relentless in pursuing increased productivity and cost reduction. Cliffs' mines must deliver pellets to North American steel producers at a cost that encourages steelmakers to use their blast furnaces rather than import foreign made semi-finished steel slabs.
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Cleveland-Cliffs is the largest supplier of iron ore products to the North American steel industry and is developing a significant ferrous metallics business. Subsidiaries of the Company manage and hold equity interests in five iron ore mines in Michigan, Minnesota and Eastern Canada. Cliffs has a major iron ore reserve position in the United States and is a substantial iron ore merchant. References in this news release to ``Cliffs'' and ``Company'' include subsidiaries and affiliates as appropriate in the context. |
