US-based mining company Cliffs Natural Resources has announced that it has signed a long-term commercial agreement with global steel producer ArcelorMittal’s US-based subsidiary ArcelorMittal USA LLC to supply tailor-made iron ore pellets for the next ten years through 2026.
The new agreement will replace two existing agreements expiring in December 2016 and January 2017 and fill the entirety of ArcelorMittal's pellet purchase requirements from the previous contracts. The new commercial agreement includes ArcelorMittal's total purchases of iron ore pellets from Cliffs up to 10.16 million mt and preserves Cliffs' current position as ArcelorMittal USA's sole outside supplier of pellets. In addition, the contract also establishes a minimum tonnage of pellets of 7.11 million mt, which is higher than the current minimum level from the two previous contracts combined.
Meanwhile, pricing for the pellets under the agreement will be adjusted in line with the price of steel in the US domestic market, and also in line with iron ore market prices and general inflation indices. Based on current market levels, Cliffs anticipates an improvement in overall US iron ore realized revenues per metric ton in 2017, when compared to the company's current guidance for 2016.