Cleveland-Cliffs expects its quarterly steel shipment volumes to reach near or exceed 4 million st in the fourth quarter and subsequent quarters amid a rebound in steel demand from a recovering US automotive sector, CEO Lourenco Goncalves said Oct. 25.
“We were encouraged by the 100,000 st volume improvement from our automotive customers from [the second quarter] to [the third quarter] and, while they’re still not back to normalized levels, the worst impact of the chip shortage seems to be behind us,” Goncalves said during an earnings call with industry analysts.
“In our view, automotive is now in position to carry the market,” he added. “Unemployment is at a 50-year low, and that means people both need cars to go to work and can qualify to buy cars because they have jobs and paychecks.”
Semiconductor shortages, as well as other logistical issues, have roiled automotive production in the US and around the globe since 2021. Lower automotive production rates have subsequently cut demand for steel in the sector.
The automotive market represents Cliffs’ key end consumer. The steelmaker shipped 4.15 million st of steel in Q3 2021 across all of its end markets. However, as automobile manufacturer woes began impacting suppliers, Cliffs saw shipments drop to 3.38 million st in the fourth quarter of 2021.
Shipments from Cliffs improved modestly in 2022, hovering around 3.64 million st in each of the year’s first three quarters.
In a separate earnings statement, Cliffs said 31% of its steel sales revenue was attributable to direct sales into the automotive market.
Goncalves said Cliffs was prepared to take advantage of normalized automotive operational rates and described how closely the company’s business is aligned with vehicle production.
“We have to reserve our available capacity to align with their production forecast, and we hold their inventory if they have production issues,” he said. “We have a fully dedicated customer service group that manages this complicated just-in-time inventory system to the point that our customers don’t even have to think about steel. It’s there when they need it automatically.”
“They have a unique opportunity in 2023 as automotive may be the only sector with pent-up demand to take care of,” he added.
Cliffs reported a net income of $165 million on sales of $5.65 billion in Q3, compared with profits of about $1.28 billion on sales of $6 billion in the same quarter last year.
Goncalves said Cliffs does not plan to take outages at any of its steel mills in the quarter following the completion of maintenance work in Q3 on the No.5 blast furnace at its Cleveland Works facility in Ohio, which was down from March through August. The furnace has a capacity of nearly 1.5 million st.
“Due to the work we have done, our equipment is in great shape and it is prime time to meet the unique needs of our customers, particularly in automotive,” he said. “We will continue to export, maximize the utilization of the assets that we have and we are not going to take equipment down just to implement discipline in the market.”
Flat steel prices in Q3 largely declined from year-to-date highs in the second quarter and record levels in Q3 2021. Platts assessed the daily TSI US hot-rolled coil index at $740/st on an ex-works Indiana basis Oct. 24, according to data from S&P Global Commodity Insights. The assessment had fallen from $1,500/st in April and nearly $2,000/st in September 2021.
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- METALS
- 25 Oct 2022 | 20:04 UTC
Cliffs sees bullish steel demand from US auto sector in coming quarters
- AuthorNick Lazzaro
- EditorTom Balcerek
- CommodityMetals
- TagsFlat steel, United States
Cleveland Works mill receiving increased orders for auto
Cleveland-Cliffs expects its quarterly steel shipment volumes to reach near or exceed 4 million st in the fourth quarter and subsequent quarters amid a rebound in steel demand from a recovering US automotive sector, CEO Lourenco Goncalves said Oct. 25.
“We were encouraged by the 100,000 st volume improvement from our automotive customers from [the second quarter] to [the third quarter] and, while they’re still not back to normalized levels, the worst impact of the chip shortage seems to be behind us,” Goncalves said during an earnings call with industry analysts.
“In our view, automotive is now in position to carry the market,” he added. “Unemployment is at a 50-year low, and that means people both need cars to go to work and can qualify to buy cars because they have jobs and paychecks.”
Semiconductor shortages, as well as other logistical issues, have roiled automotive production in the US and around the globe since 2021. Lower automotive production rates have subsequently cut demand for steel in the sector.
The automotive market represents Cliffs’ key end consumer. The steelmaker shipped 4.15 million st of steel in Q3 2021 across all of its end markets. However, as automobile manufacturer woes began impacting suppliers, Cliffs saw shipments drop to 3.38 million st in the fourth quarter of 2021.
Shipments from Cliffs improved modestly in 2022, hovering around 3.64 million st in each of the year’s first three quarters.
In a separate earnings statement, Cliffs said 31% of its steel sales revenue was attributable to direct sales into the automotive market.
Goncalves said Cliffs was prepared to take advantage of normalized automotive operational rates and described how closely the company’s business is aligned with vehicle production.
“We have to reserve our available capacity to align with their production forecast, and we hold their inventory if they have production issues,” he said. “We have a fully dedicated customer service group that manages this complicated just-in-time inventory system to the point that our customers don’t even have to think about steel. It’s there when they need it automatically.”
“They have a unique opportunity in 2023 as automotive may be the only sector with pent-up demand to take care of,” he added.
Cliffs reported a net income of $165 million on sales of $5.65 billion in Q3, compared with profits of about $1.28 billion on sales of $6 billion in the same quarter last year.
Goncalves said Cliffs does not plan to take outages at any of its steel mills in the quarter following the completion of maintenance work in Q3 on the No.5 blast furnace at its Cleveland Works facility in Ohio, which was down from March through August. The furnace has a capacity of nearly 1.5 million st.
“Due to the work we have done, our equipment is in great shape and it is prime time to meet the unique needs of our customers, particularly in automotive,” he said. “We will continue to export, maximize the utilization of the assets that we have and we are not going to take equipment down just to implement discipline in the market.”
Flat steel prices in Q3 largely declined from year-to-date highs in the second quarter and record levels in Q3 2021. Platts assessed the daily TSI US hot-rolled coil index at $740/st on an ex-works Indiana basis Oct. 24, according to data from S&P Global Commodity Insights. The assessment had fallen from $1,500/st in April and nearly $2,000/st in September 2021.
“If others are completely undisciplined, and if others feel like the business model is predicated on destroying the marketplace just because they feel that they can put the scrap price at whatever they want, they might be right, but we just don’t agree with that type of approach,” Goncalves said. “But we run our assets to minimize our costs. As long as we can make money, we will run.”
Goncalves said Cleveland Works is the biggest producer of high-strength steel for the automotive sector in the US, and operations were brought back on at full capacity after maintenance in anticipation of the automotive industry’s recovery.
“We have a lot of confidence that automotive will pick up, and the orders that come to Cleveland Works will start to pile up,” he added. “We are seeing that as we speak. Others cannot do that. That’s why our capacity can come back because it’s serving markets that I believe in 2023 might be the only ones that will be exciting.”
In Q3, Pittsburgh-based integrated steelmaking competitor US Steel idled its 1.4 million st/year No. 3 blast furnace at its Mon Valley Works Edgar Thomson Plant in Braddock, Pennsylvania, and its 1.5 million st/year No. 8 blast furnace at its Gary Works in Indiana
Post time: Oct-27-2022