Cleveland-Cliffs Inc. has reported a $230 million loss for the third quarter of 2024, driven by weaker demand and pricing in the steel market. The company’s revenue dropped to $4.6 billion, down from $5.1 billion in the previous quarter and $5.6 billion during the same period in 2023. This marks a continued struggle for the Cleveland-based steelmaker, which has also been impacted by challenges within the automotive sector, its largest customer base.
Declining Steel Shipments and Financial Losses
Cleveland-Cliffs shipped 3.8 million net tons of steel in Q3, a decline compared to earlier periods. The company recorded a GAAP net loss of 52 cents per diluted share and an adjusted net loss of 33 cents per share. The results were further impacted by $145 million in charges, including arbitration-related expenses stemming from a dispute with the Mesabi Trust regarding royalty payments and costs tied to the acquisition of Stelco.
Despite these setbacks, Cliffs anticipates increased steel shipments starting in Q4, thanks to its acquisition of Stelco, a Canadian steelmaker. Stelco, which shipped over 630,000 tons of steel in Q3 2024, brings a more diversified business portfolio to Cliffs, with little exposure to the automotive sector. This acquisition is expected to help strengthen the company’s position, offering a more resilient foundation in the face of weaker automotive sector demand.
Impact of Automotive Sector Struggles
The decline in steel demand has been particularly pronounced within the automotive sector, where two of Cliffs’ top four clients failed to meet their expectations. This has led to tighter margins, with the company temporarily idling its Cleveland No. 6 blast furnace. The company’s high exposure to the automotive industry, which continues to underperform, has made it more vulnerable to market fluctuations compared to competitors.
Optimism for 2025: Strategic Projects and Cost Reductions
Despite the challenges, Cleveland-Cliffs is optimistic about a recovery in 2025. The company has set a lower capital budget for the coming year, even as it plans for strategic projects that are expected to increase its EBITDA by over $600 million annually once completed. Additionally, lower coal costs are expected to bring a $70 million benefit in 2025, and the company anticipates a rebound in steel demand due to various economic and political factors.
Stelco’s acquisition is seen as a key factor in helping the company weather these challenges, offering a business model that is less reliant on the automotive sector. Cliffs sees Stelco’s efficient and low-cost operations as a key advantage that will help improve its financial performance, especially during periods of underperformance in the automotive sector.
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