Oct 24 (Reuters) - Cliffs Natural Resources Inc the largest North American producer of iron ore pellets used in steelmaking, posted an 85 percent drop in profit on lower iron ore prices and higher costs.
Iron ore prices have been depressed in recent months due to the lack of a strong recovery in steel demand in China -- the world’s largest producer and consumer of steel -- along with a persistently oversupplied market.
The benchmark 62-percent grade iron ore index , fell 22 percent in the July to September period, with prices averaging $112.12 per tonne in the quarter - 36 percent lower than a year earlier.
The company now expects to sell 22 million long tons of U.S. iron ore in 2012, down from its prior forecast of 23 million long tons.
Cliffs also cut its full-year North American coal sales volume outlook to 6.4 million tons from 6.9 million tons.
Third-quarter profit at the Cleveland-based company fell to $85.1 million, or $0.59 per share, from $601.2 million, or $4.15 per share, a year earlier.
Revenue fell 26 percent to $1.5 billion.
Sales of U.S. iron ore pellets fell 16 percent to 6.6 million long tons in the third quarter.
Sales margins fell 76 percent to $198 million in the third quarter due to higher labor, mining, and maintenance expenses, Cliffs said in a statement.
Shares of Cliffs were down 7 percent at $39.77 after the bell. They closed at $42.69 on Wednesday on the New York Stock Exchange.