The global spread of coronavirus led to lockdown in various cities across the globe, which affected industrial and economic activity. Lower demand from construction players and shedding of capacity by major steel companies, mainly in China, led to a drop in global iron ore prices in early 2020. Additionally, the lockdown affected the supply chain for companies like CLF, leading to a decline in production and shipments. This was evident in the recently announced results where pellet production dropped (y-o-y) 61% in Q2 2020 and 12% in Q3 2020, while shipments dropped 24% and 15%, respectively. Though total revenue increased due to the acquisition of AK Steel, the company’s traditional pellet business was hit significantly due to the pandemic. The company also reported a loss of $0.31/share and $0.02/share in Q2 2020 and Q3 2020, respectively, as against profits reported in the year ago period.
The lifting of lockdowns and easing of global supply bottlenecks is likely to help CLF, which is projected to lead to higher shipments post the crisis. Iron ore prices have rebounded sharply from $80/ton in April 2020 to over $165/ton in January 2021. Additionally, steel prices have also rallied over recent months, which is expected to benefit CLF after its foray into the steel space.