Introduction:
Cleveland-Cliffs Inc. (NYSE: CLF), a leading player in the steel industry, has reported its full-year and fourth-quarter 2024 results, reflecting a difficult year shaped by the weakest steel demand environment since 2010. The company faced a significant revenue decrease and net losses due to factors such as weak domestic automotive production, an influx of imported steel, and low steel prices. Despite these setbacks, Cleveland-Cliffs is optimistic about 2025, citing early signs of a recovery and potential benefits from Stelco's acquisition.
Full-Year 2024 Results: A Mixed Picture
For the full-year 2024, Cleveland-Cliffs reported consolidated revenues of $19.2 billion, a significant drop from $22.0 billion in the previous year. The company incurred a GAAP net loss of $708 million, or $1.57 per diluted share, compared to a net income of $450 million in 2023. The adjusted net loss for 2024 stood at $351 million or $0.73 per diluted share, a sharp decline from the previous year’s adjusted net income of $545 million.
A key factor contributing to the loss was a reduction in steel index pricing, which led to a decrease in the Adjusted EBITDA from $1.9 billion in 2023 to $780 million in 2024. While the company managed to reduce operating costs, it was unable to offset the significant revenue decline.
Fourth-Quarter 2024 Results: Continued Struggles
For the fourth quarter of 2024, Cleveland-Cliffs experienced consolidated revenues of $4.3 billion, down from $5.1 billion in the same period in 2023. The company reported a GAAP net loss of $434 million, or $0.92 per diluted share, and an adjusted net loss of $332 million, or $0.68 per diluted share. This compared with a net loss of $139 million and an adjusted net loss of $25 million in Q4 2023.
In the fourth quarter, Adjusted EBITDA fell to a loss of $81 million, a stark contrast to $279 million in the prior-year quarter. The decrease in steel prices and continued weak demand in key sectors, particularly automotive, weighed heavily on the company’s results.
Factors Contributing to Decline
Lourenco Goncalves, Chairman, President, and CEO of Cleveland-Cliffs, attributed the disappointing results to several macroeconomic factors:
1. The weakest steel demand environment since 2010, largely due to reduced domestic automotive production.
2. Increased imported steel driving down prices, which impacted the profitability of domestic steel producers.
3. Cleveland-Cliffs' higher fixed cost structure, which made the company more vulnerable to market fluctuations.
Goncalves noted that while the company faced a tough 2024, inventory build-ups in Q4 2024 had positioned Cleveland-Cliffs well for a recovery in 2025, especially with early signs of improvement in automotive demand, steel prices, and order books.
Steelmaking Segment Results
In 2024, Cleveland-Cliffs reported steel product sales volume of 15.6 million net tons, with hot-rolled steel representing 36% of sales, followed by coated steel at 29% and cold-rolled steel at 16%. For the fourth quarter of 2024, the steel product sales volume stood at 3.8 million net tons, with 40% being hot-rolled, 26% coated, and 16% cold-rolled.
The company’s Steelmaking revenues for the full year were $18.5 billion, with 30% of sales going to direct automotive customers, 29% to distributors and converters, and 28% to the infrastructure and manufacturing markets. In Q4 2024, Steelmaking revenues amounted to $4.2 billion, with a more balanced distribution across key markets.
Looking Ahead: Optimism for 2025
Despite the challenges faced in 2024, Cleveland-Cliffs is anticipating a dramatic rebound in 2025. The company outlined several expectations for the year, including:
• Steel unit cost reductions of approximately $40 per net ton compared to 2024.
• Capital expenditures estimated at $700 million.
• Selling, general and administrative expenses of approximately $625 million.
• Depreciation, depletion, and amortization of $1.1 billion.
• Cash pension and OPEB payments estimated at $150 million.
The addition of Stelco to Cleveland-Cliffs' operations is expected to boost revenues from spot-price driven non-automotive sales, helping to reduce the company’s reliance on fixed-price contracts.
Key Takeaways:
• Cleveland-Cliffs reported a GAAP net loss of $708 million and an adjusted net loss of $351 million for the full year 2024.
• Fourth-quarter 2024 revenues were $4.3 billion, with a GAAP net loss of $434 million and an adjusted net loss of $332 million.
• The decline in steel demand and steel prices due to reduced domestic automotive production and increased imported steel negatively impacted the company’s performance.
• Inventory build-ups in Q4 2024 position Cleveland-Cliffs for a rebound in 2025.
• Steel product sales volume for 2024 was 15.6 million net tons, with hot-rolled steel comprising 36% of sales.
• For 2025, Cleveland-Cliffs expects steel unit cost reductions of approximately $40 per net ton and capital expenditures of $700 million.
• The acquisition of Stelco is expected to help Cleveland-Cliffs reduce reliance on fixed-price contracts and drive additional growth in the upcoming year.
