Cleveland-Cliffs (CLF) Q3 2025 Earnings Transcript

Core Insights - The third quarter results indicate a significant rebound in domestic steel demand, particularly driven by the automotive sector, with Cleveland-Cliffs achieving its best auto steel shipment quarter since Q1 2024 [1][17] - The company has secured multi-year agreements with major automotive OEMs, ensuring higher sales volumes and favorable pricing through 2027 or 2028 [1][4] - The U.S. government's tariffs on steel and automotive products are expected to remain, prompting automotive manufacturers to seek stability and reduce exposure to foreign supply chains [1][4] Financial Performance - Cleveland-Cliffs reported an adjusted EBITDA of $143 million for the quarter, a 52% increase from the previous quarter, driven by higher realized prices and improved product mix [17] - Steel shipment volumes were 4 million tons, reflecting a reduction due to seasonal slowdowns, but the mix shifted favorably towards automotive, increasing the average selling price to $10.32 per net ton, up $17 from the prior quarter [17][18] - The company anticipates annual savings of $300 million from operational efficiencies implemented earlier in the year [18] Strategic Initiatives - The company is focused on domestic steel sourcing, with nine automotive-grade galvanized steel plants operational, positioning Cleveland-Cliffs as a key partner for U.S. automotive manufacturers [4][6] - A memorandum of understanding with a major global steelmaker aims to facilitate the onboarding of their clients moving production to the U.S., highlighting Cleveland-Cliffs' integrated operations from mining to finished products [10][11] - The company is also exploring opportunities in rare earth elements, with geological surveys indicating potential mineralization in Minnesota and Michigan [15][16] Market Dynamics - The automotive sector is showing signs of recovery, with Cleveland-Cliffs positioned to benefit as manufacturers shift back to steel from aluminum due to supply chain vulnerabilities [7][8] - The company expects aluminum's market share in the automotive space to decline, further solidifying its position as a leading supplier of automotive steel [8][9] - The Canadian market remains challenging, with high levels of steel penetration from foreign imports, prompting calls for the Canadian government to implement tariffs similar to those in the U.S. [12][13] Future Outlook - The company is optimistic about continued demand growth in the automotive sector, with new contracts expected to kick in and contribute to revenue in the upcoming quarters [37][38] - Cleveland-Cliffs is preparing for a strong 2026, with operational improvements and strategic partnerships expected to enhance profitability and cash flow [22][23] - The expiration of an onerous slab contract is anticipated to further improve the company's cost structure and production capabilities [20][23]