'For Cleveland-Cliffs, the best is yet to come'

A planned acquisition of Canadian steelmaker Stelco and development of an electrical transformer manufacturing facility in West Virginia, are only the beginning of the future for Cleveland-Cliffs Inc., company officials say.

“Our investors can take confidence that Cleveland-Cliffs is by no means a finished product,” Lourenco Goncalves, Cleveland-Cliffs chairman, president and chief executive officer said in the company’s second quarter earnings conference call. “The seeds we have planted during the first half of 2024 are setting the stage for a much more efficient, diversified and competitive company in the near future.”

Cleveland-Cliffs on Monday announced development of the $150 million transformer facility.

Goncalves said the plant will produce transformers at a former Weirton, West Virginia tin plate plant.

Cliffs in April idled the plant after the International Trade Commission negatively ruled on the implementation of anti-dumping and countervailing duties on unfairly imported tin and chromium coated sheet steel products.

The re-purposed plant will create jobs for about 600 United Steelworkers who had worked at the tin plate facility, Goncalves said.

Announcement of the transformer plant came quickly in part because Goncalves didn’t want the former tin plate workers to move away from Weirton, resulting in the loss of a skilled and professional workforce, he said.

“The transformers we will produce in Weirton will be sold directly to end-users and other players in the electrical sector, supplying a market that desperately needs more transformers, even before AI takes off in the near future and demand for electricity in our country starts to grow exponentially,” Goncalves said in the company’s second quarter earnings news release.

A $50 million forgivable loan from the state of Virginia to Cleveland-Cliffs will help develop the plant, Cleveland-Cliffs said in the news release.

The transformer facility is expected to come on line in the first half of 2026, Goncalves said.

Goncalves said in the earnings call he also plans to contact U.S. Department of Energy (DOE) Secretary Jennifer Granholm to see if the DOE might be able to provide additional assistance in construction of the facility.

It’s the second big transaction for Cleveland-Cliffs in recent weeks.

On July 15, the company announced a planned $2.5 billion acquisition of Canadian steelmaker Stelco.

“We took action on several matters that will lead to further long-term success,” Goncalves said in the second quarter results news release. “We are excited about the acquisition of Stelco that we announced last week. We have long admired Stelco, and are eager to incorporate one of the lowest cost flat-rolled steelmaking assets in North American into our footprint. We have continued to engage with all key stakeholders associated with the transaction, including the USW and high level government officials. It is clear that they recognize the net benefit we will provide to Canada, Ontario, and the local communities where Stelco operates, particularly on the environmental and social fronts.”

Cleveland-Cliffs reported revenues of $5.1 billion in the second quarter of 2024.

That compares to $5.2 billion in revenues in the first quarter of 2024.

Net income was $9 million.

Adjusted net income was $50 million.

Cleveland-Cliffs shipped four million tons of steel during the quarter.

The company finished the quarter with $362 million in free cash flow.

“Our substantial free cash flow generation of $362 million in the second quarter clearly demonstrates Cliffs’ ability to perform through the cycle, even in times of adverse business conditions,” Goncalves said in the news release. “Despite a less than ideal steel demand and weak pricing throughout the quarter, Cliffs operated very well. We met our cost reduction target and shipped the tonnage we had planned for. With that, we were able to pay down over $200 million in debt and also return approximately $125 million to our shareholders via share buybacks.”

With some projects completed under budget, the company is lowering its expected capital expenditures for full-year 2024 to $650 to $700 million from its previous expectation of $675 million to $725 million, Celso Goncalves, Cleveland-Cliffs executive vice president and chief financial officer said.

Iron ore costs are expected to be lower in the third quarter, Celso Goncalves, executive VP and chief financial officer, said.

With its mergers and acquisitions, Cleveland-Cliffs is still in the early stages of the new Cleveland-Cliffs that was born in 2020 when it became a steel company, said Lourenco Goncalves.

Since 2020, Cleveland-Cliffs has transformed itself from an iron ore merchant into a major American steel producer with acquisitions of AK Steel and ArcelorMittal USA.

Lourenco Goncalves said on Aug. 7 he will mark 10 years as Cleveland-Cliffs’ chief executive officer.

“I am as energized as ever about our prospects as a company,’ Goncalves said. “For Cleveland-Cliffs, the best is yet to come.”