Cliffs being selective with auto clients on strength in sector

“Our automotive business carried the day for us once again as the automotive sector in the US continues to improve, growing for the fourth consecutive year.”

Lourenco Goncalves, Cleveland-Cliffs’ chairman, president, and CEO

A ‘buyers strike’ at service centers in January and February created “a very complicated period” for Cliffs, president, chairman, and CEO Lourenco Goncalves said on an earnings call on Tuesday. This resulted in a higher concentration of shipments in automotive. He expects a “much more normal mix” between automotive and service centers/distribution in the current quarter.

“Now that the distributors and service centers have come off the sidelines and steel pricing is on an upward trend, we expect to again exceed the 4-million-ton shipment level in the second quarter,” CFO Celso Goncalves noted on the call.

Lourenco said the automotive industry is doing very well, particularly since automakers backed off a bit on all-electric vehicles as internal combustion engine (ICE) and hybrids are selling better. Additionally, light-vehicle production in North America this year is projected to reach its highest level since 2019.

He said Cliffs is going to be much more selective about its automotive customers and doesn’t “have a problem picking winners and losers among the car manufacturers.”

For example, he recently announced that the company will no longer sell steel to Volkswagen in Mexico just so the company can pay lower wages there and then export its vehicles back to the US. “I’m not going to support that, particularly now that UAW was able to unionize the [Volkswagen] plant in Chattanooga, Tenn.,” he noted.

He also said Stellantis is no longer a top priority for Cliffs. “They are now treated here as second-class citizens, and we are going to continue to do that for the ones that are price-driven like Stellantis,” he said.

He stressed that Cliffs’ customers need the steelmaker for quality, performance, customer service, and technical expertise.

“Buying steel [from] other suppliers is just a price-driven decision … but not all car manufacturers are willing to bet their performance on less competent suppliers just to save a few bucks per ton. Some are willing to do so, and these ones will be treated by Cleveland-Cliffs accordingly. Message delivered,” he stated.