Cliffs swings to $242M loss in Q3, expects early 2025 demand rebound

Cleveland-Cliffs swung to a steep loss in the third quarter. However, it touted the recent closing of its acquisition of Stelco in its quarterly earnings report released on Monday and said steel demand should bounce back early next year.

The Cleveland-based steelmaker posted a Q3’24 loss of $242 million vs. $264 million of net income attributable to Cliffs’ shareholders a year earlier. Revenue declined nearly 19% to $4.57 billion in the same comparison.

“In Q3, weaker demand and pricing drove tighter margins, and ultimately led us to temporarily idle our Cleveland #6 blast furnace,” Cliffs’ Chairman, President, and CEO Lourenco Goncalves said in a statement on Monday.

SMU reported in September that the C-6 blast furnace at Cliffs’ Cleveland Works in Ohio would be placed on hot idle in October. There have been no subsequent updates.

Goncalves noted that Cliffs achieved its lowest unit cost since 2021. However, “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,” he added.

The company shipped 3.8 million short tons (st) of steel in Q3, down 7.3% from 4.1 million st in the year-ago quarter. Q3 shipments comprised 36% hot rolled, 28% coated, 17% cold rolled, 4% plate, 4% stainless and electrical, and 11% other, including slabs and rail.

Stelco acquisition

On Friday, Nov. 1, Cliffs closed on its acquisition of Stelco Holdings. The $2.5-billion deal to buy the Hamilton, Ontario-based steelmaker was first announced in July.

“We are thrilled to have closed on the acquisition of Stelco last week. Stelco’s portfolio of business is very different from ours, with virtually no exposure to the automotive sector,” Goncalves commented.

He added, “Stelco’s low-cost, efficient assets will make us more resilient in times of underperformance from the automotive clients.”

Cliffs said its Q3’24 results do not include Stelco’s Q3 adjusted EBITDA of US$64 million and adjusted EBITDA margin of 13%.

Capex outlook for 2024-25

Cliffs has lowered its full-year 2024 expected capital expenditures range to $600 million to $650 million vs. previous expectations of $650 million to $700 million.

For 2025, Cliffs anticipates standalone capex (excluding Stelco) to be ~$600 million.

“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,” Goncalves said.

He commented that lower coal costs will bring a $70-million benefit next year.

Looking to demand, Goncalves said Cliffs expects steel demand to rebound in early 2025, “supported by a number of economic and political factors.”

“With Stelco’s assets and our cost reductions, we’re well-positioned to capitalize on this upswing and will be able to reduce acquisition debt quickly with healthy free cash flow,” he concluded.