According to The World Steel Association, Chinese steel production failed to grow in October, down ~0.3% YoY. YTD, the market is growing 2.1%, which is a big deceleration from the 9% growth recognized in 2013 and 2012…

We estimate incremental iron ore supply outpacing incremental steel production 3:1 over the next several years, which should weigh on pricing. Iron ore pricing is currently at 5½ year lows near $70/MT and down ~50% YTD and 10% QTD, though in theory could fall further as new supply is coming online at <$50/MT.

In addition to deteriorating iron ore prices, other negative catalysts for Cliffs Natural Resources shares include US iron ore contract resets in 2015 (Cliffs’ seaborne spot index linkage for US will be $4-5/ton for each $10 move in the index vs $2-3 in 2014), potentially lower US coal contract pricing in 2015 (though a small percent of mix), and the potential for strained cash flows which in our view put the dividend at risk.

Those concerns, however, will have to wait for another day. Shares of Cliffs Natural Resources have surged 7.4% to $9.41 at 9:34 a.m., while iron miner Rio Tinto (RIO) has gained 4.9% to $47.53 and BHP Billiton (BHP) has risen 4.1% to $57.39.