Cliffs has money losing Q3

Cleveland-Cliffs Inc. has reported a third quarter 2024 loss of $230 million, citing “weaker demand and pricing” for its steel products as a contributing factor in the loss.

The Cleveland-based firm, which operates iron mines, steel mills and a network of scrap yards, says its revenue of $4.6 billion in the third quarter was down from $5.1 billion in the prior quarter and down from $5.6 billion one year ago.

The company reports shipping 3.8 million net tons of steel in the recently completed quarter. Starting in the current financial quarter, that total is likely to grow thanks to its acquisition of Canada-based Stelco, which Cliffs says shipped more than 630,000 tons of steel in this year’s third quarter.

Regarding its loss figure for the third quarter, the company writes that it “recorded a generally accepted accounting principles (GAAP) net loss of 52 cents per diluted share to Cliffs shareholders and adjusted net loss of 33 cents per diluted share. Included in the GAAP results were discrete charges and losses totaling $145 million, primarily related to an arbitration decision and acquisition-related expenses.”

While the acquisition expenses tie into the Stelco purchase, the arbitration decision likely involves a $59.8 million payment Cliffs was instructed to make to the New York-based Mesabi Trust.

That trust represents landowners in the Minnesota Iron Range region, where Cliffs and its subsidiary Northshore Mining Co. operate. An early September announcement issued by the trust says the entity sought “an award of damages relating to Cliffs’ and Northshore’s underpayment of royalties in 2020, 2021 and the first four months of 2022.”

The panel of three arbitrators ruled in favor of the Mesabi Trust and imposed an early October deadline on Cliffs to reimburse the trust.

Cliffs’ board chair, president and CEO Lourenco Goncalves says of the July through September time frame, “In the third quarter, weaker demand and pricing drove tighter margins, and ultimately led us to temporarily idle our Cleveland No. 6 blast furnace.”

He continues, “We achieved our lowest unit cost since 2021, exceeding our already aggressive cost reduction targets, but that was not enough to offset the negative impact of two of our top four automotive clients who continue to underperform their own expectations. Due to our high exposure to the automotive sector, Cliffs was more affected than our competitors.”

Goncalves says Stelco’s operations will help further diversify the firm. “Stelco’s portfolio of business is very different from ours, with virtually no exposure to the automotive sector. Stelco’s low-cost, efficient assets will make us more resilient in times of underperformance from the automotive clients.”

Adds the CEO, “Stelco’s industry-best third-quarter adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) margin is direct proof of the cost advantages and strong business model Cliffs will benefit from. Unlike our previous acquisitions, which were underperforming companies needing significant capital investment, Stelco’s assets are well capitalized and are a major contributor to us on day one.”

Looking ahead, Goncalves says, “For 2025, we’ve set a much lower capital budget, even after including the strategic projects that are expected to boost annual EBITDA by over $600 million once completed. Additionally, lower coal costs will bring a $70 million benefit next year compared to 2024. We expect steel demand to rebound in early 2025, supported by a number of economic and political factors.”