UPDATE 2-Cliffs Natural idles production due to weak iron ore prices
* Says will delay portion of a mine expansion in Quebec
* Will idle some output at Northshore Mining in Minnesota and Empire Mine in Michigan
* Idling in the United States to affect about 625 employees
* Expects 2013 capex of $700 million to $800 million
By Swetha Gopinath
Nov 19 (Reuters) - Cliffs Natural Resources Inc, the largest North American producer of iron ore pellets used in steel making, said it will delay a planned mine expansion in Quebec and idle some production at two U.S. iron ore operations due to weak prices.
Shares of the company rose as much as 4 percent on the New York Stock Exchange in early trading on Monday.
"This is a step in the right direction, showing that the company is pulling levers to maintain its dividend," said CRT Capital Group analyst Kuni Chen.
Cliffs, which has reported a drop in profit for three straight quarters due to weak prices, declared a quarterly cash dividend of 62.5 cents per share last week.
"There has been some concern by investors that if iron ore prices remain weak the company will have to cut dividend at some point," Chen said.
Weak demand for steel from China, the world's largest producer and consumer of steel, along with a persistently oversupplied market has sent iron ore prices down in recent months.
The benchmark 62-percent grade iron ore index , which fell 22 percent in the July to September period, has recovered since and touched a 4-month high last week. Still, prices have only risen by over $2 since late October.
Cliffs estimated its 2013 capital expenditure to be in the range of $700 million to $800 million, lower than its 2012 capital budget of $1 billion.
Cliffs will delay portions of its Bloom Lake Mine Phase II expansion in Quebec and idle some production at two of its U.S. iron ore operations, Northshore Mining in Minnesota and Empire Mine in Michigan.
The company said the idling in the United States will affect about 625 employees.
"These production decreases are driven by increased iron ore pricing volatility and lower North American steelmaking utilization rates," the company said in a statement.
US steel mill capability utilization fell 3.5 percentage points to 70.7 percent in the week ending Nov. 10, according to data released by the American Iron and Steel Institute.
"More production cuts are possible depending on where steel utilization rates end up next year," said analyst Chen.
Cliffs, which expects to complete the planned construction in Quebec in early 2014, said the delay will decrease its Eastern Canadian iron ore sales volumes to between 9 million and 10 million tons in 2013, lower than its previous estimate of between 13 million and 14 million tons.
Cliffs said it will idle two of four production lines at Northshore Mining in Minnesota effective Jan. 5, while production at the Empire Mine in Michigan will be idled beginning the second quarter of 2013.
Shares of the company, which has a market value of about $5.03 billion, were up about 1.5 percent at $35.85 on Monday morning.
- Search for Malaysian plane may extend to Indian Ocean: U.S. |
- Search for Malaysian plane may extend to Indian Ocean - U.S |
- Russia blocks internet sites of Putin critics
- Tire blows out on passenger jet taking off at Philadelphia airport
- Russia holds war games near Ukraine; Merkel warns of catastrophe |