Cliffs aims to increase quarterly steel production

Integrated steelmaker Cleveland-Cliffs is expecting its steel production to increase between 8-11pc in coming quarters.

The Cleveland-based company is pushing to increase its production to 3.9mn-4mn short tons (st) a quarter, the company's chief executive Lourenco Goncalves said. That volume would be up from the roughly 3.6mn st it has been at for each of the last three quarters.

The increased volume is expected to meet rising demand from the automotive industry, which has been hampered since January 2021 by shortages of semiconductor chips that have cost the North American industry the production of more than 3mn automobiles over nearly two years, according to AutoForecast Solutions estimates.

"As for demand, we were encouraged by the [100,000st] volume improvement from our automotive customers from [the second quarter to the third quarter,] and while they are still not back to normalized levels, the worst impact of the chip shortage seems to be behind us," Goncalves said in a quarterly earnings call today. "In our view, automotive is now in a position to carry the market."

Chief financial officer Celso Goncalves said increased automotive demand helped offset declines from service centers and distributors, who have continued to hold off on purchasing as prices have continued to fall.

Many in the US flat-rolled steel market say it is fundamentally oversupplied, with even more coming on line next year as three flat steel mills ramp up production. Goncalves argued that the increased production from his company is meeting a growing need.

"That's why our capacity can come back. It can come back because it's serving markets that, I believe in 2023, will be the only ones that will be exciting, automotive being the biggest one," Goncalves said.

The Argus US Midwest hot-rolled coil (HRC) ex-works assessment was at $827/st in the third quarter, a 37pc decline from the second quarter and down by 57pc compared with a year earlier. Prices have declined as buyers remained cautious and continue to work down inventories.

The steelmaker expects to reduce its operating costs by at least $80/st in the fourth quarter as it reduces energy, raw material, and repair costs and increases its production volumes.

Cliffs sold 3.64mn st of steel products to external customers in the third quarter, down by 12pc from a year earlier. Of those sales, one-third were hot-dipped galvanized (HDG) coil, while HRC accounted for 29pc and CRC took 15pc. Plate sales were responsible for 6pc of total sales with 12pc headed to other steel types like slabs and rail and 5pc to stainless and electrical.

The volumes were basically flat from the prior quarter.

The company received an average selling price of $1,360/st in the latest quarter, up by 2pc from a year earlier. Prices were down by 8.5pc from the prior quarter.

Cliffs expects to receive an average selling price of $1,370/st for all of 2022.

The steelmaker's inventories fell to $5.54bn in the third quarter, off by roughly 4pc from both a year prior and the previous quarter.

For the third quarter, Cliffs earned a profit of $152mn, down by 88pc compared to the prior year.

By Rye Druzin