Description of Cleveland Cliffs Inc's Business Segments
North American Iron Ore
We are the largest producer of iron ore pellets in North America and primarily
sell our production to integrated steel companies in the United States and Canada.
We manage and operate six North American iron ore mines located in Michigan,
Minnesota and Eastern Canada.
We produce 13 grades of iron ore pellets, including standard, fluxed and high
manganese, for use in our customers’ blast furnaces as part of the steelmaking
process. The variation in grades results from the specific chemical and metallurgical
properties of the ores at each mine and whether or not fluxstone is added in
the process. Although the grade or grades of pellets currently delivered to
each customer are based on that customer’s preferences, which depend in
part on the characteristics of the customer’s blast furnace operation,
in many cases our iron ore pellets can be used interchangeably. Industry demand
for the various grades of iron ore pellets depends on each customer’s
preferences and changes from time to time. In the event that a given mine is
operating at full capacity, the terms of most of our pellet supply agreements
allow some flexibility to provide our customers iron ore pellets from different
mines.
Standard pellets require less processing, are generally the least costly pellets
to produce and are called “standard” because no ground fluxstone,
such as limestone or dolomite, is added to the iron ore concentrate before turning
the concentrates into pellets. In the case of fluxed pellets, fluxstone is added
to the concentrate, which produces pellets that can perform at higher productivity
levels in the customer’s specific blast furnace and will minimize the
amount of fluxstone the customer may be required to add to the blast furnace.
“High manganese” pellets are the pellets produced at our Canadian
Wabush operation where there is more natural manganese in the crude ore than
is found at our other operations. The manganese contained in the iron ore mined
at Wabush cannot be entirely removed during the concentrating process. Wabush
produces pellets with two levels of manganese, both in standard and fluxed grades.
Our North American Iron Ore revenues are primarily derived from sales of iron
ore pellets to the North American integrated steel industry, consisting of eight
major customers. Generally, we have multi-year supply agreements with our customers.
Sales volume under these agreements is largely dependent on customer requirements,
and in many cases, we are the sole supplier of iron ore pellets to the customer.
Each agreement has a base price that is adjusted annually using one or more
adjustment factors. Factors that can adjust price include international pellet
prices, measures of general industrial inflation and steel prices. One of our
supply agreements has a provision that limits the amount of price increase or
decrease in any given year.
North American Coal
We are a supplier of metallurgical coal in North America. We own and operate
two North American coking coal mining complexes located in West Virginia and
Alabama.
North American Coal’s production is sold to global integrated steel and
coke producers in Europe, South America and North America.
Asia Pacific Iron Ore
Our Asia Pacific Iron Ore segment is comprised of Portman, an Australian iron
ore mining company.
Our Asia Pacific Iron Ore operations are located in Western Australia and include
our 100 percent owned Koolyanobbing complex and our 50 percent equity interest
in Cockatoo Island. We serve the Asian iron ore markets with direct-shipping
fines and lump ore
These two operations supply a total of four direct-shipping export products
to Asia via the global seaborne trade market. Koolyanobbing produces a standard
lump and fines product as well as a low grade fines product.
Cockatoo Island produces and exports a single premium fines product. Portman
lump products are directly charged to the blast furnace, while the fines products
are used as sinter feed. The variation in Portman’s four export product
grades reflects the inherent chemical and physical characteristics of the ore
bodies mined as well as the supply requirements of the customers.
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