The North American iron ore division produces iron ore pellets for use in blast furnaces as part of the steelmaking process, and currently has a rated annual production capacity of 27 million tons of iron ore.

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If things go well for U.S. Steel, the long equity position likely offsets whatever loss you would take on the CDS. U.S. Steel is far from immune to the price impact of Chinese demand, he says, and as a vertically integrated steelmaker it has exposure all along the process from iron ore to finished products.

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