Cleveland-Cliffs reports revenue boost

Cleveland-Cliffs Inc. has reported second-quarter 2022 consolidated revenue of $6.3 billion, representing a 26 percent increase compared with 2021 second-quarter revenue of $5 billion.

The company’s second-quarter net income of $601 million included deductions for one-time charges for debt extinguishment, accelerated depreciation related to idling a coking facility in Middletown, Ohio, and some severance costs. Thus, the firm’s income fell 24.4 percent from $795 million one year ago.

Lourenco Goncalves, Cleveland-Cliffs board, president and CEO says, “We were able to achieve our largest quarterly debt reduction since our transformation began a couple years ago while delivering substantial capital returns via share repurchases. As we move into the second half of the year, we expect this healthy level of free cash flow to continue, as a result of declining capex needs, the accelerating release of working capital, and the heavy use of fixed-price sales contracts. In addition, we expect to see further significant increases in the average selling prices for these fixed contracts resetting on Oct. 1.”

Goncalves adds, “Our industry-leading exposure to the automotive sector separates us from all other steel companies in the United States. With automotive demand outpacing production for more than two years now, the consumer backlog for cars, SUVs and trucks has become enormous. As supply chain problems continue to be resolved by our automotive clients, pent-up demand for electric vehicles continues to increase, and light vehicle manufacturing catches up with demand, Cleveland-Cliffs will be the primary beneficiary among all steel companies in the U.S. This important distinction of our business relative to other steel producers should become clear as we progress through the remainder of this year and into next year.”

In a conference call with steel sector analysts held late last week, Goncalves also noted, “We are seeing a lot less competition for prime scrap. At the beginning, we had to really fight to get the deals done. But now, apparently, the competition is not really looking for a prime scrap. They should have their reasons. To be honest with you, I don’t care. For us, prime scrap is important. We prefer to use prime scrap. Prime scrap allows me to use less cook and using less coke to generate less CO₂, and that's a good thing. And prime scrap that I use coming from automotive to go back to automotive in the steel that I produce is great to create a closed loop solution with our clients, and there’s a value on that.”

Last year, Cleveland-Cliffs cited access to prime scrap as a key reason for its acquisition of Detroit-based Ferrous Processing & Trading (FPT).

Although in a previous earnings call Goncalves had hinted at possible additional electric arc furnace (EAF) melting capacity, last week he said, “There’s no EAF coming at Middletown. We are good with the footprint that we have. We are probably the most environmentally friendly blast furnace operator in the entire world.”