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The Slide in Cleveland-Cliffs Stock Is Opportunity Knocking at the Door

Cleveland-Cliffs (NYSE:CLF) is having a very good 2021. Investors should be a happy bunch as well. Up until early August, CLF stock was on a roll with…

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Cleveland-Cliffs (NYSE:CLF) is having a very good 2021. Investors should be a happy bunch as well. Up until early August, CLF stock was on a roll with an 80% gain since the start of the year. Since then, shares have given back some of those gains. The slide hasn’t been a big one — CLF dropped from a close of $26.02 on Aug. 10 to its current price of $22.76 — but that’s been enough to scare off some investors.

Source: IgorGolovniov / Shutterstock.com

With CLF dropping over 3% on Monday, is it time to take a pass on this stock, or does opportunity knock?

Recent developments have shaken the metals and mining sector lately. Specifically, there are reports that China’s faltering industrial output has led to a decline in global demand for iron ore. That, in turn, has led to a 40% decline in iron ore prices since mid-July.

However, in the case of Cleveland-Cliffs, I think the market over-reacted. In fact, at a roughly 14% discount from its early August high, CLF stock is currently a buying opportunity.

CLF Stock: Infrastructure Opportunity

Regardless of what’s going on in China, there is opportunity in America. As I wrote several weeks ago, the country is embarking on an infrastructure building boom. Everything from bridges to transit systems and railways requires steel as part of its construction. That’s a big opportunity for Cleveland-Cliffs, the country’s largest producer of flat-rolled steel — not to mention a slew of other steel products, including electrical steel, plate steel and tubular steel.

This infrastructure spending spree is not a short-term thing. It’s a project that is going to see building and repair go on for years. That bodes well for the long-term growth prospects of CLF stock.

Record Second Quarter Reflects Cleveland-Cliffs Momentum

When Cleveland-Cliffs reported its second-quarter earnings, the company set multiple records. Quarterly revenue of $5 billion was a record, quarterly net income of $795 million was a record and quarterly adjusted EBITDA of $1.4 billion also set a new record.

In 2020 — a terrible year with the pandemic playing spoiler — the company reported revenue of $1.5 billion in the first 6 months. In the first 6 months of 2021? Revenue has totaled $9.1 billion. That’s despite challenges in the auto sector, where the global chip shortage has affected vehicle production. Once that is addressed, auto makers are expected to be churning out new cars. CLF just so happens to be a major supplier of automotive-grade galvanized steel.

In other words, Cleveland-Cliffs has momentum.

Preventing Labor From Spoiling the Party

One factor that has the potential to derail the momentum of a company like Cleveland-Cliffs is labor strife. The steel industry is well-known for labor issues, and striking workers can cripple plants. That’s an issue that never seems to go away. In 2018, over 30,000 steel workers went on strike, impacting 25% of the country’s steel production.

Cleveland-Cliffs is working to make sure labor agreements are in place to avoid having production disrupted. In August, it signed a new 3-year contract with workers at its advanced Dearborn Works operations. That follows an April contract covering workers at its Mansfield Works plant. Other contracts were negotiated and signed in 2020.

As the demand for Cleveland-Cliff steel ramps up, the company will be able to focus on production. Having workers signed onto contracts that prevent labor disruption is also likely to be a competitive advantage for the company.

Analysts Are Still Onboard

One month ago, CLF stock was flying high. At the time, the Wall Street Journal was tracking 10 analysts with coverage of the stock. They rated CLF as “Overweight” with six of the analysts rating it as “Buy.” What has changed since then? Not much, regardless of concerns over issues like China’s softening demand for iron ore.

Despite an additional analyst being added and siding with the “Hold” crowd, at this point, that “Overweight” consensus remains. And with an average $29.59 price target, they’re expecting CLF stock to kick back into growth mode, continuing past August’s 2021 high close.

The Bottom Line on CLF Stock

Cleveland-Cliffs is well positioned to take advantage of big, long-lasting trends, including a massive U.S. infrastructure project. As a vertically integrated steelmaker, it’s insulated from the global ups-and-downs of iron ore prices. The company’s key production facilities are protected from labor action for 3 years or more. Its most recent quarter was a record-setter. 

Add in the fact that CLF stock earns an A-rating in Portfolio Grader, and there’s a strong case to be made for taking advantage of its current weakness. Now is a good time to add CLF shares to your portfolio.  

On the date of publication, Louis Navellier had a long position in CLF. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article. InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.

The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Louis Navellier, who has been called “one of the most important money managers of our time,” has broken the silence in this shocking “tell all” video… exposing one of the most shocking events in our country’s history… and the one move every American needs to make today.

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Articles

Can Deep-Sea Mining Solve The Battery Metals Supply Crisis?

Can Deep-Sea Mining Solve The Battery Metals Supply Crisis?

Authored by Tsvetana Paraskova via OilPrice.com,

The key metals necessary to…

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Can Deep-Sea Mining Solve The Battery Metals Supply Crisis?

Authored by Tsvetana Paraskova via OilPrice.com,

The key metals necessary to advance the global energy transition will likely drive the next commodity supercycle.

Soaring demand for lithium, copper, nickel, cobalt, and aluminum could lead to a battery metal supply crunch as early as this decade, while surging prices could reverse a decade of cost declines, analysts say.  In a world increasingly focused on sustainability and ethically-sourced raw materials, some players in the metal mining industry believe that deep seabed mining operations in remote ocean areas could have a lower impact and lower costs than the land mining of key battery minerals - minerals associated with child labor in the Democratic Republic of Congo, for example, the world’s top producer of cobalt.  

However, deep seabed mining is years away from commercial operations, at best, due to a lack of international regulations and concerns about the environmental impact of mineral extraction from the seabed in areas and ecosystems that are yet to be studied by marine biologists. 

Some companies are betting on starting deep-sea mining in a couple of years. The Metals Company, for example, which just began trading on the NASDAQ, said last week it is working to “move the world’s largest estimated source of battery metals into production.” 

“We believe we have a solution that is more scalable, secure, lower cost and lower impact than mining these minerals on land: We can produce battery metals from high-grade polymetallic nodules found on the seafloor in the international waters of the Clarion-Clipperton Zone,” Gerard Barron, Chairman and CEO of The Metals Company, said. 

Polymetallic nodules contain four essential battery metals—cobalt, nickel, copper, and manganese—in a single ore, and they have been formed over millions of years by absorbing metals from seawater. Those nodules lie unattached to the seafloor, and The Metals Company plans to use a robotic collector to gently dislodge the metal-containing rocks from the seabed with minimal disturbance to the ocean floor. 

TMC has exploration and commercial rights to three contract areas which host an estimated 1.6 billion tons (wet) of polymetallic nodules containing high-grade nickel, copper, cobalt, and manganese, in the Clarion Clipperton Zone of the Pacific Ocean—between Mexico and Hawaii—regulated by the International Seabed Authority.  

The company says its studies have estimated that the polymetallic nodules within its exploration areas are enough to electrify a quarter of the world’s passenger vehicle fleet, or would be enough for around 280 million EVs.

TMC says its proposed method of retrieving battery metals generates much less carbon dioxide than conventional mining and is more environmentally friendly. 

“It’s like picking up golf balls on a driving range,” CFO Craig Shesky told the IEEE Spectrum magazine edited by the Institute of Electrical and Electronics Engineers. 

With access to funding and the listing on the NASDAQ, TMC expects to be able to complete pilot nodule collection trials in 2022, complete environmental impact studies by 2023, and file to move from exploration phase to exploitation phase in the third quarter of 2023, CEO Barron said in the statement last week. 

Yet, TMC and other companies vying for deep-sea mining face strong opposition from environmental organizations that say disrupting the ocean would lead to losses of biodiversity and change the carbon cycle in the waters. 

Moreover, the International Seabed Authority (ISA) has not yet agreed upon regulations on how to manage and supervise the exploration and extraction of minerals from the ocean floor. 

The Clarion-Clipperton Zone (CCZ) is a “biodiversity hotspot,” Craig Smith, an oceanography professor at the University of Hawaii at Manoa, told IEEE.

Smith has led research expeditions to the CCZ, which have found species new to science. It’s not possible to mine polymetallic nodules without causing ecological damage “over tens of thousands of kilometers,” the oceanography professor says. 

“Deep-sea mining may irreparably harm ocean ecosystems before we even have a chance to fully study its impacts,” the Center for Biological Diversity says

Even some potential customers of metals extracted from the ocean supported earlier this year a call for a moratorium on deep seabed mining.  

Automakers BMW and Volvo, as well as Google and Samsung SDI, vowed not to buy metals produced from deep-sea mining until the environmental risks of the activity are “comprehensively understood.” 

Tyler Durden Sun, 09/19/2021 - 08:10
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Energy & Critical Metals

The Rise And Fall Of 9MM Ammo Prices During COVID; What’s Next?

The Rise And Fall Of 9MM Ammo Prices During COVID; What’s Next?

Op-Ed via The Machine Gun Nest (TMGN).

The Machine Gun Nest has been open…

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The Rise And Fall Of 9MM Ammo Prices During COVID; What's Next?

Op-Ed via The Machine Gun Nest (TMGN).

The Machine Gun Nest has been open since 2015, but we've been in the firearms industry since 2013. Earlier than that, Rob (one of the owners) has been collecting guns since the early 2000s. We've seen panic buys, ammo prices fluctuate, and firearms banned and unbanned.

March of 2020. The COVID19 pandemic hits the United States. Many people (like myself) were aware of the situation in China and had time to prepare for the worst adequately. Many people were caught completely off guard.

Many things led to the recent panic buy, but most of it is related to COVID. Many people thought that the world was going to end. So many people "woke up" to the idea that they may have to fend for themselves and that no one was coming to save them. This change of mentality led to an explosion in firearms and ammo sales.

Weirdly enough, the price of ammo didn't have an immediate rise at the beginning of the pandemic. It was summertime before we started to see a real spike in price. Prices averaged $0.20 a round for 9mm until July. Then we began to see prices rise to an average of about $0.30/per round.

The price rise could be attributed to the BLM protests, counter and subsequent riots that followed, which were viewed widely across the internet and traditional media. There were depictions of innocent people getting hurt or worse, swarmed by protestors, with no police anywhere to help.

This led to a panic buy on top of a panic buy. Whereas previously, shelves had been scarce, they became empty. People started to hoard ammunition like they had been hoarding toilet paper. Since manufacturing companies were set up to meet the average demand of the "Trump Slump" of the previous years, where gun and ammo sales had been low, there started to be bottlenecks in ammunition production. Ammo manufacturers were not prepared for the sharp increase in buying.

In August 2020, we started to see prices increase even more as ammo became harder to come by. 9mm saw an average of $0.50/ per round. Major manufacturing companies started to report that they had accumulated millions of dollars in backorders. We tried to place a substantial order for ammo and were straight up told that there was no way that we'd get it within the year or next.  

Speaking to some of our friends, we gathered that there was a shortage of primers. Primers are the component within ammunition that ignites the gunpowder to expel the projectile from the bullet & firearm when struck by the firing pin. For those that don't know, primers are incredibly dangerous to produce. The manufacturing process sometimes results in death. Primers are typically the bottleneck in the production process for ammunition. A shortage of primers caused by high demand and supply chain disruption continued to help drive up the cost of ammo.

We luckily found an importer who had bought 1M rounds of Turkish 9mm. We were able to work with him to import the ammo, and that saw us through the worst of the shortages. Unfortunately, we were victims of circumstance (like everyone else) and had to pay a high cost per round to acquire the ammo.

After the 2020 election, we saw prices rise again to an average of $0.60 per round. To give you an idea of what that means- a box of ammo is 50 rounds typically. That's about 3-5 magazines, depending on how many bullets you load. 9mm is meant to be an inexpensive round. It's relatively cheap to produce, and its popularity has a lot to do with that fact. When you have people paying $30 ($0.60 per round) for a box of 9mm, as opposed to $12 (0.24 per round) eight months prior, shooting starts to get expensive, especially since the average range trip equates to about 2-300 rounds per caliber.

Consider this as well; statistics show that in 2020 alone, 23 million firearms were sold, with 6 million of those guns being bought by first-time gun owners. Suppose each of those new gun owners wants to buy enough ammo for an average range trip, 200 rounds. In that case, those people would need 1,200,000,000 rounds of ammo to satisfy the demand, and that's not even including the 32% of Americans that own guns (According to Gallup polling.) That would be about 104,960,000 people if you were wondering.

So, to satisfy that market, if each of those 104.9 Million people wanted only 200 rounds of ammo for one firearm, the amount of ammo needed would be serious. (and we know that people, in reality, want thousands of rounds per firearm). That's not including law enforcement contracts and military contracts, which usually take precedence over the civilian market.

Finally, in Jan. of 2021, we seem to reach the peak. With the Jan. 6th protests and Biden's inauguration, gun and ammo buying hit new highs. 9mm prices on average hit $0.71 per round. During this time, we regularly heard from customers that other spots were selling 9mm at $1/round.

At the time of writing this (September 2021), we're just now starting to see a drop in ammo prices and gun sales slowing down. 9mm is sitting at $0.31 per round for steel case and $0.34 per round for brass on the low end. Any well-known brand names are sitting at around $0.39 per round. Even with Biden's new "Russian Ammo Ban," prices seem to have steadily fallen, at least on 9mm.

The real question is, will the prices keep dropping? It's anyone's guess.

There's a ton of factors affecting the market right now, from unrest around the world. For example, earlier this month, a coup in Guinea sent Aluminum prices to a ten-year high. If you're unfamiliar, Guinea holds a quarter of the world's bauxite supply, a raw material that can be refined into alumina, which can then be smelted into aluminum.  

This price change can affect the cost of firearms, as manufacturers will have to pay a higher price to acquire raw materials.

Shipping and transporting are another problem now, with sea containers fetching record-high prices because of a shortage and supply chains still seeing significant disruptions.

Since the panic buy for firearms has at least subsided a little bit, people have stopped hoarding ammo and are choosier. We're seeing this in gun sales right now where customers aren't coming in and just buying anything on the wall. People are starting to do their research and are becoming pickier about their buying. I think this is the same for ammo as well. The demand has subsided a bit. If supply continues to meet demand, I think we'll continue to see a drop in prices. Barring some mutation in covid that gives the virus a 50% CFR, more supply chain disruptions, or the Biden administration passing some severe gun control legislation, I think we will continue to see the price of ammo dropping slowly.

Tyler Durden Sat, 09/18/2021 - 21:30
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Economics

Supply Chain Shipping Hell: “Just Get Me A Box” Says Logistics Manager

Supply Chain Shipping Hell: "Just Get Me A Box" Says Logistics Manager

Authored by Mike Shedlock via MishTalk.com,

Two years ago, the cost…

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Supply Chain Shipping Hell: "Just Get Me A Box" Says Logistics Manager

Authored by Mike Shedlock via MishTalk.com,

Two years ago, the cost for a 40-foot container to transport goods from Asia to the U.S was under $2,000. Today it's as much as $25,000.

When I saw this Bloomberg headline I thought it was about cardboard boxes. Instead, 'Just Get Me a Box' is about shipping containers. 

It’s mid-August, and logistics manager RoxAnne Thomas’s phone won’t stop pinging. Her faucets, sinks, and toilets are waylaid near Shanghai, snagged in Vancouver, and buried under a pile of shipping containers in a rail yard outside Chicago. 

“Every step of the process, there’s still backlog,” said Thomas, 41, in one of several interviews from late July through August. “The beginning of the supply chain in China—I don’t think that’s going to get better for a year.” And the outlook more broadly? “A year and a half before things are truly back to normal.”

Although the pandemic has shuttered factories and shaken supplies of raw materials, Thomas’s chief challenge is freight, and it starts with what used to be cheap, plentiful commodities: shipping containers.

Two years ago, a 40-foot container cost less than $2,000 to transport goods from Asia to the U.S. Today the service fetches as much as $25,000 if an importer pays a premium for on-time delivery, which is a luxury

The fear is we’re ordering all this stuff for demand, and the demand is going to fizzle out before the product gets here,” Thomas says. With summer winding down, the big test of the global trading system’s resilience might still be ahead.

Commodity Shipping Rates Post Biggest Daily Gain in a Decade

Bloomberg also reports Commodity Shipping Rates Post Biggest Daily Gain in a Decade

Average rates for giant Capesize bulk carriers -- which can carry products like coal, iron ore and grains -- jumped by $6,700 a day on Monday, the most since 2010, as owners continue to benefit from strong demand for raw materials. The rally extended Tuesday, pushing the daily rate to almost $53,700, the highest level in 11 years, Baltic Exchange data show.

Parabolic Rise in Shipping Rates

Also consider this September 16 report: Ship Owner Genco Says Commodity Freight Rates Set to Spike.

Spot rates for container ships to move manufactured products have surged for 20 straight weeks and now stand 731% above their seasonal average over the prior five years, according to Drewry Shipping. John Wobensmith, the president and chief executive officer of Genco Shipping & Trading Ltd., said that prices to move commodities -- which have already rallied sharply this year -- may follow a similar cycle in the coming years with not enough ships being built to meet demand.

You do get to a point, and you’ve seen this in containers, where you hit a certain utilization rate and you start to go parabolic on rates,” he said in an interview. “I think we’re getting close to that period.

Beige Book Comments

  • San Francisco Fed: Prices rose substantially over the reporting period. Although lumber prices have dropped significantly, prices for other building materials, such as metals, cement, and wallboard have continued to climb. Other price increases were noted for energy, information technology, textiles, airline tickets, and agricultural products, such as fruits, meats, and seafood. The reported biggest drivers of these price hikes included higher shipping and logistical costs, continued supply chain disruptions, and rising labor costs

  • Atlanta Fed: District contacts continued to cite increasing nonlabor costs, especially for steel and freight, with multiple contacts referencing record increases in shipping container rates. The price of lumber stabilized but remained elevated relative to pre-pandemic levels, while mentions of increased food product costs became more widespread. Contacts cited the ability to pass through price increases with greater frequency, and with minimal resistance

  • Richmond Fed: Demand for cars continued to exceed supply while inventories were low, leading to lower carrying costs and increased margins for auto dealers. Clothing sales rose, and demand for furniture and home goods remained strong. Retailers noted shortages of and increased lead times for merchandise, particularly on foreign-made goods. One contact reported refunding several bridal parties because dresses did not arrive on time for weddings. Many retailers were able to maintain margins despite increases in costs of products and shipping.

  • National Comments: The other sectors of the economy where growth slowed or activity declined were those constrained by supply disruptions and labor shortages, as opposed to softening demand. In particular, weakness in auto sales was widely ascribed to low inventories amidst the ongoing microchip shortage, and restrained home sales activity was attributed to low supply.

The Beige Book is a summary of economic activity in each of the Fed's 12 regions. It was released on September 8 and come out approximately 2 weeks before the Fed meets to set interest rate policy.

The Fed's FOMC rate-setting committee meets again on September 21-22 with the announcement on the 22nd.

What About Cardboard Boxes? 

  1. August 6 Fortune: Online Retailers Get Boxed in by Higher Cardboard Prices

  2. April 6 Supply Chain Dive: Cardboard Prices Reach Record High Amid e-Commerce Demand

  3. July 9 DC Velocity: Strong Demand, Rising Costs Affect Packaging Strategies

DC Velocity

The price of corrugated products was rising through the spring, with some of the country’s largest producers of containerboard—the material used to make corrugated boxes—announcing increases of $50 to $70 per ton. The cost of packaging supplies in general was rising too, increasing by double-digits in many cases, according to government data and industry groups that track packaging demand. John Blake, senior director analyst with consulting and research firm Gartner, says changes in demand for packaging throughout the pandemic, combined with volatile supply chain activity last year, are driving the increases and shining a spotlight on the need for shippers to better manage sourcing strategies and packaging processes.

Shipping Rates Peaked?

In contrast to John Wobensmith's call for shipping rates to go parabolic, Hapag-LLoyd AG  says Spot Rates Have Peaked.

One of the world’s biggest shipping lines has decided to stop increasing spot freight rates on routes out of Asia to Europe and the U.S. as it sees an end to the rally that has seen prices hit records. 

Hapag-LLoyd AG thinks spot rates have peaked and further increases are “not necessary,” according to Nils Haupt, the Hamburg-based company’s head of corporate communications. The move comes after French rival CMA CGM SA last week froze rates, saying it was prioritizing long-term relationships following a rally that has seen some spot rates jump more than sixfold in the past year.

While many shipping lines have taken advantage of rising spot prices, the rally is expected to “come to an end at some point,” said Jim Bureau, chief executive officer of logistics digital platform provider JAGGAER.

“The supply chain is extremely fragile right now,” he said. “How much more cost can carriers practically take on without increasing financial risk on both buyer and supplier?”

Prices Already Went Parabolic

This setup reminds me of the spike in lumber. 

Prices have already gone parabolic. The question at hand is when and how fast prices crash. 

But even if shipping costs fall in half, they will remain very elevated June 2020.

*  *  *

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Tyler Durden Sat, 09/18/2021 - 12:30
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