Cliffs(US:CLF)2025-10-20 13:30Financial Data and Key Metrics Changes - The adjusted EBITDA for Q3 2025 improved to $143 million, representing a 52% increase over the prior quarter, driven by margin expansion from higher realized prices and improved mix [23] - Steel shipment volumes were 4 million tons in the quarter, a reduction from the prior quarter due to summer slowdowns and continued market discipline, but the average selling price increased to $10.32 per net ton, up $17 per net ton over the prior quarter [23][24] - The CapEx budget for 2025 is now $525 million, down from the original expectation of $700 million, reflecting reduced spending at Stelco and changes in the DOE project at Middletown [25] Business Line Data and Key Metrics Changes - Automotive shipments increased from 26% to 30% share, while coated volumes moved from 27% to 29% share, contributing to the improved average selling price [24] - The company locked in multi-year agreements with major automotive OEMs, covering higher sales volumes and favorable pricing through 2027 or 2028 [5][6] Market Data and Key Metrics Changes - The U.S. automotive sector is experiencing a significant rebound, with domestic steel demand increasing, particularly in the automotive sector [4][5] - The Canadian market continues to lag expectations, with only 9% of total sales coming from Stelco, attributed to the Canadian government's inaction against steel dumping [15][16] Company Strategy and Development Direction - The company is focused on capitalizing on the resurgence of the U.S. automotive sector and has positioned itself as a key supplier of domestic steel [11][12] - A memorandum of understanding was entered into with a major global steelmaker to leverage the company's U.S. footprint for onboarding their downstream industrial clients [13][14] - The company is exploring opportunities in rare earth elements within its mining portfolio, identifying two sites in Minnesota and Michigan for potential development [21][22] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery in the automotive sector and the effectiveness of cost actions taken, while cautioning that the company is not declaring victory yet [30] - The company expects continued demand growth from automotive contracts and anticipates that operational improvements will lead to amplified EBITDA and cash flow [29] Other Important Information - The company was awarded a five-year $400 million fixed-price contract by the U.S. Department of War for grain-oriented electrical steel, reinforcing its strategic importance to national security [19][20] - The company is proceeding with the Butler project on schedule and is working with the DOE on the Middletown project, which is critical for future operations [21] Q&A Session Summary Question: How quickly could the company produce products in the rare earth vertical? - The company is assessing two promising sites and is optimistic about developing mining capabilities, potentially in cooperation with Canada [33][34][39] Question: What is the status of the asset sale process? - The company has closed on a portion of the sale of FPT and is considering selling its direct reduction plant in Toledo, Ohio, while deprioritizing the asset sale process due to the MOU with the global steelmaker [44][46] Question: Did any new automotive contracts kick in during this quarter? - Some contracts began on October 1, and while Q4 may not see significant activity due to typical shutdowns, the company is excited about the upcoming contracts in 2026 [61][62] Question: What is the expected volume growth from new automotive agreements? - The new contracts are expected to generate more margin, and the company has significant capacity to meet the automotive industry's needs [72][75] Question: What is the nature of the electrical steel contract with the U.S. government? - The contract is a multiyear opportunity to build a strategic inventory of electrical steel for national security purposes [89][90]