Cleveland-Cliffs returns to profitability

Steel producer and iron mining firm Cleveland-Cliffs Inc., which also owns a network of scrap yards, has reported net income of $356 million for the second quarter of 2023, a rebound from the company’s $42 million loss in the prior quarter but down about 40 percent from a net income of $601 in last year’s second quarter.

In its most recently completed quarter, the Cleveland-based company recorded revenue of $6 billion on steel shipments of 4.2 million net tons.

The revenue figure is a 13.2 percent increase from the $5.3 billion garnered in the previous quarter but is down from $6.3 billion of revenue in the second quarter of 2022.

Its most recently reported results include charges totaling $11 million related to acquisition costs, asset disposals, severance and accelerated depreciation of certain assets.

“Our total steel shipments of more than 4.2 million net tons in the second quarter were a direct result of another record in automotive shipments,” Cleveland-Cliffs President and CEO Lourenco Goncalves says.

“This shift to a higher automotive mix led to even higher realized prices than we were expecting, ultimately driving our industry-leading quarter-over-quarter earnings before interest, taxes, depreciation and amortization (EBITDA) expansion."

The steelmaker also was able to reduce its debt by more than $550 million during the quarter. “Differently from several of our competitors, our capex needs—both now and in the next few years—are well-known and low,” he says.

“Looking forward, we are on pace for our best shipment year since becoming a steel company,” Goncalves concludes. “Service center inventories are significantly lower than historical levels, creating support for a healthy second half of the year. And finally, while the performance of our automotive clients continues to improve, the sector has not returned to pre-COVID levels yet, indicating that Cleveland-Cliffs still has plenty of value to be unlocked in the near future.”

Hot-rolled steel comprised more than one-third of the steel shipped by Cleveland-Cliffs in the second quarter (35 percent), followed by coated steel (30 percent) cold-rolled (15 percent), plate (6 percent), stainless and electrical steels (4 percent) and an “other” category that includes slabs and rail (10 percent).

Looking ahead, the steelmaker also sees continued downward pressure on ferrous scrap and other metal units used as furnace feedstock. “Cliffs currently expects another $40 per net ton reduction in steel unit costs from the second quarter to the third quarter of 2023, with an additional $10 per ton reduction from the third to the fourth quarter of 2023,” the firm says.