Cleveland Makes It, the World Takes It

I’ve traveled the New Jersey Turnpike more times than I care to remember, and the funniest landmark I’ve seen was a billboard at the entrance to an urban industrial landscape: Trenton Makes It; The World Takes It.

The way the global demand for steel has heated up, Cleveland might be able to claim the same mantra. I refer, of course, to the iron ore and coking coal sensation Cleveland-Cliffs (NYSE: CLF  ) . Shares of Cleveland-Cliffs have nearly doubled since January, and yet still sport a cozy forward P/E of just over 10.

This type of growth is uncommon for the 160-year-old company, so what’s behind its newfound success? Exhibiting the same knack for market timing that made Agnico-Eagle (NYSE: AEM  ) a leader in the gold space, Cleveland-Cliffs executed a program to diversify its product base and geographical reach at a most opportune time.

Under the direction of CEO Joseph Carraba, who spent 22 years with Rio Tinto (NYSE: RTP  ) , Cleveland-Cliffs has transformed itself from a North American iron ore producer into a global force for iron ore and coking coal. The company crushes the competition for domestic market share in iron ore, taking 45% of the pie. Vertically integrated steel producers U.S. Steel (NYSE: X  ) and ArcelorMittal (NYSE: MT  ) scrap over most of the rest.

However, because of its concentration around the Great Lakes, North American iron ore is not well-suited to feed global demand. With that in mind, Cleveland has branched out into Australia and Brazil, adding significant size and geographic diversification in the process.

Supply shortfalls for coking coal are even more acute than they are for iron ore at present. Cleveland-Cliffs made two key acquisitions in the U.S. last summer, and began production at the Sonoma Mine in Australia last quarter. Cleveland now has 9% of the U.S. metallurgical coal market share, compared with 21% for big dog Alpha Natural Resources (NYSE: ANR  ) and 18% for Massey Energy (NYSE: MEE  ) .

Unlike its steelmaking customers, Cleveland-Cliffs is plain loving it as prices balloon for iron ore and coking coal. With supply shortfalls expected to last several years, Cleveland-Cliffs could be in the right place at the right time.

Further core Foolishness:

Fool contributor Christopher Barker captains yachts and writes about stocks. He can also be found acting foolishly within the CAPS community under the username TMFSinchiruna. He owns shares of Agnico-Eagle Mines and Massey Energy. The Motley Fool has an ironclad disclosure policy.

Read/Post Comments (1) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 19, 2008, at 6:44 AM, slick322 wrote:

    I'm from New Jersey and FYI the rest of that phrase, "What Trenton Makes The World Takes" (sic) is "What The World Refuses, Trenton Uses!"

Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 663896, ~/Articles/ArticleHandler.aspx, 10/26/2016 11:15:52 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 1 hour ago Sponsored by:
DOW 18,199.33 30.06 0.17%
S&P 500 2,139.43 -3.73 -0.17%
NASD 5,250.27 -33.13 -0.63%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/26/2016 4:00 PM
CLF $6.20 Down -0.06 -0.96%
Cliffs Natural Res… CAPS Rating: ***
AEM $48.40 Down -1.19 -2.40%
Agnico-Eagle Mines CAPS Rating: **
ANRZQ $0.00 Down +0.00 +0.00%
Alpha Natural Reso… CAPS Rating: **
MEE.DL $0.00 Down +0.00 +0.00%
Massey Energy Comp… CAPS Rating: ***
MT $6.73 Up +0.01 +0.15%
ArcelorMittal CAPS Rating: ***
RTP.DL $0.00 Down +0.00 +0.00%
Rio Tinto plc (ADR… CAPS Rating: ****
X $20.09 Up +0.62 +3.18%
United States Stee… CAPS Rating: **