Expected growth in demand from key automotive clients will help Cleveland-Cliffs Inc. post “another phenomenal year” of profits, Chairman, President and CEO Lourenco Goncalves said Feb. 11 after the company posted fourth-quarter results.
Thanks to a round of contract renewals signed last fall, Goncalves and his team expect their average selling price per ton this year to increase to $1,225, a little more than 3% higher than 2021’s average. That number was $1,423 in the fourth quarter before prices swung lower on concerns that the industry has been adding too much capacity – the market is now thinking the average price per ton this year will be around $925 – but after Cleveland-Cliffs inked its important ’22 contracts.
Those deals have been paying off quickly: Cleveland-Cliffs generated adjusted EBITDA of $588 million in January alone, which was more than it did in the entire first quarter of last year.
Cleveland-Cliffs posted a fourth-quarter net profit of nearly $900 million on revenues of $5.3 billion; both numbers were up significantly from the same period of 2020. Adjusted EBITDA was nearly $1.5 billion for the quarter versus $286 million in late 2020 and $5.3 billion for all of 2021 compared to $353 million the year before. Those numbers could have been higher but the company’s unit costs rose after, seeing that auto demand was not growing quickly because of manufacturers’ semiconductor shortage issues, executives chose to pull forward from early 2022 several planned maintenance projects.
That relatively slow demand growth late last year left Cleveland-Cliffs with nearly $5.2 billion in inventories on its books, up from $3.8 billion a year earlier. Goncalves said a lot of those goods will “absolutely will be transformed into cash soon.”
Longer term, Goncalves told analysts and investors on a conference call that he sees longer-term tailwinds for Cleveland-Cliffs in supplying auto makers’ shift toward electric vehicles as well as utilities and other companies investing in clean-energy projects.
Shares of Cleveland-Cliffs (Ticker: CLF) were down more than 5% in late-morning trading Feb. 11. The stock, which quadrupled from mid-2020 to the summer of last year, has fallen about 20% over the past six months.