Cleveland-Cliffs enjoys Q1 profitability

Cleveland-Cliffs enjoys Q1 profitability

Steelmaker’s CEO boasts of company’s U.S. supply chain role as its income rises by more than 1,800 percent.

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April 25, 2022

Cleveland-Cliffs Inc. has reported first-quarter 2022 consolidated revenue of $6 billion, representing a 50 percent increase compared with 2021 first-quarter revenue of $4 billion.

The Cleveland-based steelmaking, mining and scrap processing firm says its net income was $801 million in the year’s first quarter. That represents a 1,853 percent increase compared with the $41 net income figure from the first quarter of 2021.

“The Russian aggression toward Ukraine has made it absolutely clear to everyone what we at Cleveland-Cliffs have been explaining to our clients for some time: overly extended supply chains are weak and prone to break down, particularly steel supply chains that are dependent on imported feedstock,” states Lourenco Goncalves, chair, president and CEO of Cleveland-Cliffs in comments accompanying the results.

Goncalves adds, “No steel company can produce highly specified flat-rolled steel without using pig iron or iron substitutes like HBI [hot briquetted iron] or DRI [direct-reduced iron], as feedstock.”

He continues, “Our first-quarter results are a clear indication of the success we have been able to achieve as we renewed our fixed-price contracts last year. Despite the decline in spot prices for steel from Q4 to Q1 and its lagged impact on our results, we were able to continue to deliver strong profitability. As this trend persists, we expect to set another free cash flow record in 2022.”

Goncalves adds, “Cleveland-Cliffs produces in-house all the pig iron and HBI we need, right here in Ohio, Michigan and Indiana, using iron ore pellets from Minnesota and Michigan. With that, we generate and support good-paying middle-class jobs right here in the United States. We do not import pig iron from Russia, and we do not import HBI, DRI or slabs.”

Current events have supported the company’s strategy, Goncalves says. “Over the past eight years, our strategy has been to protect and strengthen Cleveland-Cliffs against the consequences of deglobalization, which we have always seen as inevitable,” he comments. “The importance of American manufacturing and the reliability of a U.S.-centric, vertically integrated footprint have been validated by the Russian invasion of the raw materials rich and shale gas rich Donets Coal Basin (Donbas) area of Ukraine. While other flat-rolled steelmakers scramble and pay high prices for their needed feedstock, we stand out from the crowd due to our preparation for the current geopolitical climate."

Beyond the supply chain security aspects of the company’s approach, Goncalves says of Cleveland-Cliffs’ environmental, social and governance (ESG) status, “We are best in class under all aspects of ESG—the E, the S and the G.”

The company sees continued profitability resulting from its U.S.-centric approach. Cleveland-Cliffs says it is increasing its full-year 2022 average selling price expectation by $220 to $1,445 per net ton, compared with its previous guidance of $1,225 per net ton, “using the same methodology as provided in the prior quarter.”

The likely price increase, the firm says, “is driven by higher than expected prices on renewals of fixed-price contracts resetting April 1, 2022; higher expected spreads between hot-rolled and cold-rolled steel; and a higher futures curve that currently implies an average hot-rolled coil price of $1,300 per net ton for the full-year 2022.”

For generators and processors of ferrous scrap, a higher streel price in the remaining seven months of 2022 may well result in scrap prices staying at or above their current high levels.