Be careful what you wish for.Shares of U.S. steelmaker Cleveland-Cliffs (CLF -16.90%) plunged 16.9% on Thursday, which was significantly worse than the 4.8% plunge experienced by the S&P 500 index.Some might be confused as to why Cleveland-Cliffs, a domestic steel supplier, would be down so much on last night's sweeping tariff announcements from the Trump administration. After all, Cleveland-Cliffs is one of the larger domestic steel producers in the United States. So aren't the administration's tariff poli ...

President Donald Trump's fresh round of 25% auto import tariffs is shaking up the metals market, and JPMorgan analyst Bill Peterson sees near-term headwinds for key players in steel, aluminum, and copper. While domestic production incentives should help Cleveland-Cliffs Inc. CLF and Constellium SE CSTM in the long run, rising costs and inflationary pressures could stifle demand. JPMorgan's U.S. Auto team expects vehicle prices to climb another 5%, with core PCE inflation now forecasted at 3.1% this year. Th ...

Cleveland-Cliffs Inc.'s (CLF) shares closed at $9.40 yesterday, close to their 52-week low of $8.50.The company’s shares have lost 26.3% in the past six months, underperforming the Zacks Mining – Miscellaneous industry’s decline of 12%. The bearishness is due to the underlying challenges in the U.S. steel industry, partly stemming from the weakness in steel prices, which have triggered a downward revision in CLF’s earnings estimates.Technical indicators show that CLF has been trading below the 200-day simpl ...

Company Overview - Cleveland-Cliffs Inc (NYSE:CLF) has seen its stock price decrease by 3.5% to $9.20 following the announcement of temporarily idling two facilities in Minnesota, leading to hundreds of job cuts due to reduced orders from auto manufacturers amid tariff policy uncertainties [1] Stock Performance - Year-to-date, CLF has a deficit of 2.2% and has declined by 57.1% over the past 12 months, approaching its worst weekly drop since mid-December, while trying to recover from a four-year low of $8.50 reached on March 11 [2] Short Interest - Short interest in CLF has increased by 28.6% over the last two reporting periods, with 54.24 million shares sold short, representing 11.2% of the stock's available float. It would take approximately three days for shorts to cover at the stock's average daily trading volume [3] Options Activity - The 10-day call/put volume ratio for Cleveland-Cliffs stock is 8.08, ranking in the 82nd percentile of annual readings, indicating that options traders have been significantly more bullish than usual over the past two weeks [4]

Group 1 - The article discusses the subscription service Beyond the Wall Investing, which offers access to high-quality equity research reports, potentially saving investors thousands of dollars annually [1] - Cleveland-Cliffs (CLF) is highlighted as a stock that has been underperforming the market despite the author's belief in its potential [1] - The investing group provides features such as a fundamentals-based portfolio, weekly analysis from institutional investors, and alerts for short-term trade ideas based on technical signals [1] Group 2 - The article emphasizes that past performance is not indicative of future results, and no specific investment recommendations are provided [2] - It notes that the views expressed may not reflect those of Seeking Alpha as a whole, and the analysts involved may not be licensed or certified [2]

Industry Overview - The U.S. steel industry is experiencing a pivotal moment due to the 25% tariff on all steel imports imposed by the Trump administration, aimed at revitalizing domestic production and reducing import dependency [1] - The tariffs have positively impacted U.S. steel prices, which had previously declined sharply due to increased imports and weaker demand [1][4] Company Impact - American steelmakers such as Nucor Corporation, Steel Dynamics, Cleveland-Cliffs, and United States Steel Corporation are expected to benefit from higher prices and reduced competition from cheaper imports [2] - Nucor and Steel Dynamics currently hold a Zacks Rank of 3 (Hold), while Cleveland-Cliffs has a Zacks Rank of 4 (Sell), and United States Steel Corporation holds a Zacks Rank of 5 (Strong Sell) [3] Price Trends - Benchmark hot-rolled coil (HRC) prices fell over 40% last year, dropping from $1,200 per short ton at the beginning of 2024 due to oversupply and reduced demand [4] - Recently, HRC prices have surged above $900 per short ton, reflecting a more than 30% increase this year, driven by expectations of reduced foreign supply and improved domestic demand [5] Long-term Benefits - The tariffs are expected to encourage reinvestment in U.S. manufacturing capabilities, leading to potential job creation and expansion of operations in key steel-producing regions [6] - This aligns with the broader goals of strengthening American manufacturing and reducing reliance on foreign production, particularly from China [6] Trade Concerns - Retaliatory tariffs from trading partners like Canada and the European Union pose risks to American exporters and could dampen the broader economic benefits of the steel tariffs [7] - The potential for a global trade war could disrupt trade flows and negatively impact overall economic growth, which may weaken long-term demand for steel [8] Future Outlook - The future trajectory of the U.S. steel industry will depend on global trade negotiations, domestic demand, and the ability of manufacturers to manage higher input costs [9] - If the tariffs lead to increased investment without significant economic fallout, it could signify a new era for American steel [9]

Core Insights - The article discusses the investment analysis approach of Michael Del Monte, highlighting his extensive experience in various industries and his macro-value-oriented investment strategy [1]. Group 1: Analyst Background - Michael Del Monte has over 5 years of experience as a buy-side equity analyst [1]. - Prior to his current role, he spent over a decade in professional services across multiple industries including Oil & Gas, Oilfield Services, Midstream, Industrials, Information Technology, EPC Services, and Consumer Discretionary [1]. - His investment analysis is characterized by a macro-value-oriented approach, focusing on cross-industry analysis to make investment recommendations [1].

Core Insights - Cleveland-Cliffs reported a revenue of $4.33 billion for the quarter ended December 2024, reflecting a 15.4% decrease year-over-year, with an EPS of -$0.68 compared to -$0.05 in the same quarter last year [1] - The revenue exceeded the Zacks Consensus Estimate of $4.31 billion by 0.27%, while the EPS fell short of the consensus estimate of -$0.65 by 4.62% [1] Financial Performance Metrics - External sales volumes for steel products were 3,827 tons, slightly above the estimated 3,819.69 tons [4] - The average net selling price per ton of steel products was $976, lower than the estimated $986.27 [4] - Steelmaking revenues totaled $4.17 billion, down 15.9% year-over-year, and below the average estimate of $4.23 billion [4] - Revenues from coated steel were $1.23 billion, a decline of 18.6% compared to the previous year, and below the estimated $1.38 billion [4] - Revenues from slab and other steel products were $249 million, representing a 20.7% decrease year-over-year, and slightly above the estimated $243.21 million [4] - Revenues from plate products were $232 million, down 30.1% year-over-year, and below the estimated $255.50 million [4] - Revenues from cold-rolled steel were $581 million, a 6.3% decrease year-over-year, and below the estimated $606.17 million [4] - Revenues from hot-rolled steel were $1.03 billion, a 7.8% decrease year-over-year, and above the estimated $910.07 million [4] Stock Performance - Cleveland-Cliffs shares returned +6.5% over the past month, outperforming the Zacks S&P 500 composite, which declined by -2.3% [3] - The stock currently holds a Zacks Rank 4 (Sell), indicating potential underperformance in the near term [3]

Financial Data and Key Metrics Changes - For Q4 2024, the company reported an adjusted EBITDA loss of $81 million, primarily due to weaker automotive demand and lagged pricing [33] - Total shipments in Q4 were 3.8 million tons, lower than Q3 due to the idling of the C6 furnace and seasonally weaker demand [37] - Q4 price realization was $976 per net ton, a decrease of $70 per net ton from the previous quarter, influenced by the inclusion of Stelco and its lower price mix [37] Business Line Data and Key Metrics Changes - Direct shipments to the automotive sector in Q4 were the lowest since the pandemic, reflecting a significant impact from weak demand [33] - The company expects to improve shipment levels above 4 million tons in Q1 2025 due to better demand and full utilization of Stelco [37] - The inclusion of Stelco is expected to reduce average costs by an additional $40 per net ton in 2025 [39] Market Data and Key Metrics Changes - The demand for steel in 2024 was the weakest since 2010, with significant declines in automotive and construction sectors [8] - The company noted a significant uptick in demand for automotive products as 2025 begins, indicating a recovery in market share [23] - The first quarter of 2025 is expected to see a price increase of at least $10 per ton compared to Q4 2024 due to increased automotive shipments [101] Company Strategy and Development Direction - The company is focused on leveraging tariffs to strengthen domestic production and reduce reliance on foreign steel imports [11][12] - The acquisition of Stelco is seen as a strategic move to enhance operational efficiency and cost structure [16][18] - The company aims to achieve $120 million in synergies from the Stelco acquisition by the end of 2025, with a strong focus on maximizing value from the combination [18][145] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for 2025, citing improvements in order books and rising steel prices as positive indicators [6][23] - The company is prepared for the implementation of tariffs, which are expected to bolster domestic demand and reduce competition from foreign producers [10][109] - Management emphasized a commitment to debt reduction and maintaining financial flexibility despite current leverage levels [41][132] Other Important Information - The company reported a total reportable incident rate of 0.9% for 2024, highlighting a strong safety record [26] - The company has $3 billion in liquidity and plans to use free cash flow for debt reduction [40][132] - Capital expenditures for 2025 are expected to be $700 million, down from $800 million in 2024 [46] Q&A Session Summary Question: Discussion on evolving tariff environment and implications for Stelco - Management stated that tariffs are necessary and will benefit the overall business, with minimal negative impact on Stelco due to its Canadian operations [54][55] Question: Clarification on reporting tariffs in adjusted EBITDA - Management confirmed that results will be reported as they are, without excluding tariffs from adjusted EBITDA [58][59] Question: Volume cadence and cost guidance for 2025 - Management indicated that only 30% to 35% of volumes will be under fixed pricing, with cost reductions expected to materialize more in the latter half of the year [76][78] Question: Update on capital expenditures and project timelines - Management outlined a clear CapEx plan for 2025, with specific allocations for legacy operations and ongoing projects [88][90] Question: Conditions for potential restart of C6 furnace - Management stated that the C6 furnace remains indefinitely idle with no current plans for a restart [141] Question: Synergies from Stelco acquisition - Management expressed confidence in achieving and potentially exceeding the $120 million synergy target from the Stelco acquisition [145] Question: Working capital expectations for Q1 - Management indicated that working capital build in Q4 was to prepare for improved demand in 2025, with benefits expected in subsequent quarters [114][115] Question: Possibility of equity issuance - Management confirmed there are no plans for equity issuance, focusing instead on debt reduction [128][132]

Financial Performance - Total revenues for 2024 were $19,185 million, a decrease of 12.8% from $21,996 million in 2023[446]. - Operating loss for 2024 was $756 million, compared to an operating income of $677 million in 2023[446]. - Net loss attributable to Cliffs shareholders for 2024 was $754 million, compared to a net income of $399 million in 2023[446]. - Cash and cash equivalents decreased to $54 million in 2024 from $198 million in 2023[445]. - Total assets increased to $20,947 million in 2024, up from $17,537 million in 2023[445]. - Long-term debt rose significantly to $7,065 million in 2024, compared to $3,137 million in 2023[445]. - Inventories increased to $5,094 million in 2024, up from $4,460 million in 2023[445]. - The company experienced a significant increase in goodwill, rising to $1,768 million in 2024 from $1,005 million in 2023[445]. - Net income for 2024 was a loss of $708 million, compared to a profit of $450 million in 2023 and $1,376 million in 2022[448]. - Comprehensive income attributable to Cliffs shareholders decreased to a loss of $874 million in 2024 from a profit of $226 million in 2023[448]. - Net cash provided by operating activities significantly dropped to $105 million in 2024 from $2,267 million in 2023[450]. Acquisition and Investments - The Stelco Acquisition was completed in Q4 2024, but it may be less accretive than expected, potentially impacting earnings per share and share price[206]. - The acquisition of Stelco was completed on November 1, 2024, with Stelco shareholders receiving CAD $60.00 in cash and 0.454 shares of Cliffs common stock per share[456]. - The Stelco Acquisition completed on November 1, 2024, involved total purchase consideration of $3,208 million, including $2,450 million in cash and $343 million in share exchange[511]. - The goodwill resulting from the Stelco Acquisition was $786 million, reflecting growth opportunities and potential synergies within the Steelmaking segment[513]. - The company incurred $63 million in transaction costs related to the Stelco Acquisition in 2024, impacting the pro forma net loss[515]. Operational Risks - The company faces potential disruptions in operations due to reliance on third-party suppliers for critical raw materials and production inputs, which could lead to increased costs[184]. - The company’s sales and competitive position depend on the ability to transport products to customers at competitive rates, with disruptions in transportation services potentially affecting operations[186]. - The company is exposed to fluctuations in energy and raw material costs, which can significantly impact production costs and profitability[185]. - The company’s operations are vulnerable to various risks, including natural disasters, equipment failures, and supply chain disruptions, which could adversely affect production and revenues[191]. - The company relies on IT systems for business operations, and disruptions or failures in these systems could negatively impact financial performance and operations[196]. - The company may face significant expenditures due to ongoing lawsuits and claims, which could adversely affect financial condition and liquidity[182]. - The company’s ability to implement capital projects on time and within budget is subject to various risks, including supply chain issues and labor-related factors[190]. - The company anticipates potential labor shortages in critical operational positions, which could adversely affect production[226]. - The company is subject to risks related to labor agreements, with several agreements expiring in 2025, creating uncertainty in labor costs[220]. - The company faces risks related to cybersecurity incidents that could disrupt business processes and adversely affect financial condition and cash flows[199]. - The company may not have adequate insurance coverage for certain business risks, which could lead to material adverse effects on financial condition and cash flows[208]. - The company is exposed to regulatory risks related to decarbonization initiatives, which could impose significant costs and impact competitiveness[210]. Environmental and Sustainability Initiatives - The company is engaged in major initiatives at its Butler and Middletown facilities to leverage DOE funding for capital projects aimed at increasing competitiveness and reducing GHG emissions[190]. - The company is investigating investments in renewable and clean energy initiatives, including projects funded by the DOE to reduce GHG emissions at its facilities[211]. - The company has expressed interest in utilizing clean hydrogen from nearby hydrogen hubs, with successful trials conducted at its Indiana Harbor facility[211]. Financial Liabilities and Debt Management - The company reported total long-term debt of $7,065 million as of December 31, 2024, an increase from $3,137 million in 2023[533]. - The total debt maturities as of December 31, 2024, amount to $7.148 billion, with significant maturities in 2027 ($1.560 billion) and 2028 ($1.268 billion)[568]. - The company issued an additional $600 million of 7.000% 2032 Senior Notes to finance part of the Stelco Acquisition[535]. - Cleveland-Cliffs Inc. issued $900 million aggregate principal amount of 6.875% 2029 Senior Notes, which were issued at par, to finance part of the Stelco Acquisition[541]. - The 6.875% 2029 Senior Notes bear interest at 6.875% per annum, payable semi-annually, and mature on November 1, 2029[542]. - Cleveland-Cliffs Inc. also issued $900 million aggregate principal amount of 7.375% 2033 Senior Notes, which were issued at par, for the Stelco Acquisition[546]. - The 7.375% 2033 Senior Notes bear interest at 7.375% per annum, payable semi-annually, and mature on May 1, 2033[547]. - The ABL Facility was amended to allow for the Stelco Acquisition, dividing $4.75 billion of aggregate lending commitments into a $4.25 billion tranche and a $500 million tranche[561]. Pension and Employee Benefits - The defined benefit pension plans' benefit obligations decreased from $4.571 billion in 2023 to $4.248 billion in 2024, while the OPEB plans' obligations increased from $1.036 billion to $1.147 billion[574]. - The company reported a net periodic benefit credit of $59 million for pension benefits and $152 million for OPEB plans in 2024[576]. - The actuarial loss on pension benefits was $165 million in 2024, compared to an actuarial gain of $116 million in 2023[577]. - The funded status of the defined benefit pension plans showed a deficit of $11 million in 2024, improving from a deficit of $289 million in 2023[574]. - The company expects pension benefit payments of $472 million and OPEB payments of $116 million in 2025[580]. - The discount rate for pension benefits increased from 5.12% in 2023 to 5.55% in 2024, while the OPEB discount rate rose from 5.15% to 5.59%[582]. - The expected return on plan assets for pension benefits is 7.85% in 2024, up from 7.66% in 2023[584]. - The health care cost trend rate for the next year is assumed to be 11.43%, significantly higher than the 5.49% in 2023[584]. - The asset allocation for pension assets in 2024 includes 32.7% in equity securities and 38.9% in fixed income[587]. - The total fair value of pension assets increased from $4,282 million in 2023 to $4,237 million in 2024[591]. - The ending balance of pension assets decreased to $692 million in 2024 from $770 million in 2023, reflecting sales and actual returns on plan assets[592]. - The actual return on pension assets relating to assets still held at the reporting date was $18 million in 2024, compared to a loss of $16 million in 2023[592].