Calling financing costs “the most relevant issue to be attacked and resolved” for the automotive sector that’s vital to his business, Cleveland-Cliffs Inc. Chairman, President and CEO Lourenco Goncalves has called for the Federal Reserve to push through steep cuts to interest rates.
Car and truck manufacturers accounted for about a third of Cleveland-Cliffs’ sales in 2024 and Goncalves said this spring that various cuts he was making across the company—nearly 1,000 workers are losing their jobs—would “sharpen our focus on our core strength: supplying steel to the automotive industry.” Speaking on July 21 after Cliffs reported second-quarter results, he echoed recent comments by President Donald Trump and others in his administration that Federal Reserve Chair Jerome Powell should be replaced because he isn’t lowering rates.
“After making home buying unattractive with very expensive mortgages, the Fed’s inaction on cutting interest rates is now an impediment to car buyers,” Goncalves said. “Once Chairman Jerome Powell is gone—and that’s a matter of when, not if—and as soon as interest rates come down by 50 or 75 basis points, the automotive sector will take off again. Demand is there.”
Upcoming earnings reports and comments from Goncalves’ peers at General Motors Corp., Tesla Inc., Ford Motor Co. and other OEM might corroborate that demand assertion. (Leaders of 3M Co. last week said they expect their automotive business to be “flattish” during the second half of this year, slightly better than it’s been so far in 2025.) But during Cliffs’ second quarter—when total revenues rose to $4.9 billion from $4.6 billion in the first quarter—sales to auto clients were 26% of the company’s roughly $4.9 billion total, down from 29% in Q1 and 32% in 2024.
Several auto analysts don’t see great things ahead in the near term. Speaking on the Moody’s Inside Economics podcast last week, Jonathan Smoke of Cox Automotive said his team sees sales averaging about 15 million on an annual rate for the next six to nine months—a drop of about 5% from 2024’s pace. For their part, analysts at Moody’s have shaved 1 million units off their previous 2025 forecast.
Cliffs posted a net loss of $470 million during the three months that ended June 30, versus a small profit in the same period of last year, because of higher input costs and interest expense. Through the first six months of the year, the company lost $978 million on sales of nearly $9.6 billion.
Goncalves pointed to several auto OEMs making moves of late to increase production in the United States and predicted that the effects of those decisions will quickly make their way onto Cliffs’ income statement.
“As we move into the second half, things will be more visible,” he said. “Next year will be even more visible. It takes time but it’s already happening and the numbers will start to show.”
Among other items discussed on the Cliffs conference call:
- Executives have hired JPMorgan investment bankers to exploring selling some assets no longer considered central to the company’s future. In early May, Goncalves said they had received some unsolicited inquiries from companies looking to bulk up. CFO Celso Goncalves said the idled plants “are all uniquely positioned geographically and have what data center developers are looking for: access to power and water with the infrastructure already in place.”
- Lourenco Goncalves teased the possibility of a larger transaction now that the U.S. steel landscape has changed with Nippon Steel Corp. succeeding with its bid for U.S. Steel Corp.: “Everything else is possible and including carve-outs in our footprint, and then I’m talking about core assets.”
- The company shipped 4.3 million tons during the quarter, an increase of 150,000 tons from Q1. That, Celso Goncalves said, helped lower the company’s unit costs and helped ampliy the slightly higher average selling price Cliffs was able to secure during the quarter.
- Buying Canada’s Stelco late last year has proven to be a boon to part of Cliffs’ supply chain. The company has been able to divert excess coke from Stelco’s operations to other plants, a development that Celso Goncalves said has allowed his team to let one third-party supply contract expire on June 30 and let it plan to do the same with another supplier at the end of this year.
- In addition to targeting Powell, Lourenco Goncalves also took aim at Canadian Prime Minister Mark Carney, who he said needs to put in place “significant trade protections” so that the country’s steel sector can grow stronger.
Shares of Cliffs (Ticker: CLF) jumped more than 12% to $10.66 on the earnings report and conference call. That took the shares back into positive territory over the past six months and grew its market capitalization to about $5.3 billion.
