Cleveland-Cliffs (CLF, Financial) delivered mixed results for the second quarter of 2025, surpassing EPS expectations due to increased net selling prices, improved shipment volumes, and reduced steel unit costs. Although it missed Q2 revenue estimates, the company's improved profitability and optimistic outlook for Q3 and FY25 offset the revenue shortfall. The results demonstrate operational resilience amid challenging steel demand, supported by the Trump Administration’s backing of domestic steel and automotive sectors.
- Tariffs on steel imports were increased to 50%, providing domestic manufacturers protection from unfair imports, benefiting CLF and its peers. This, along with rising automotive demand, positions CLF well in a strengthening manufacturing landscape.
- The average net selling price per ton of steel products in Q2 was $1,015, down 10% year-over-year from $1,128, due to market pricing pressures and a higher mix of non-automotive sales. However, a 3.5% quarter-over-quarter increase from $981 in Q1 indicates recovery, driven by stronger domestic steel pricing and a shift toward higher-value automotive-grade steel.
- External sales volumes rose 7.5% year-over-year to 4.29 million net tons, a company record, reflecting increased macroeconomic activity and manufacturing demand, especially in the automotive sector.
- CLF's footprint optimization initiatives, announced in early 2025, are yielding benefits in costs and revenues. These include idling the Minorca and partial idling of the Hibbing Taconite mines in Minnesota, and idling facilities at Dearborn Works, Riverdale, Conshohocken, and Steelton to reduce excess inventory and uncompetitive costs.
- These actions are expected to save over $300 million annually, with $145 million from flat-rolled optimization and $165 million from exiting non-core assets such as rail and specialty plate products.
- Steel unit cost reductions were notable in Q2, with a $15 per net ton decrease from Q1, significantly improving margins. This was driven by facility idling, operational consolidation, lower raw material costs, and easing supply chain constraints.
- Higher net selling prices, footprint optimization, and cost reductions led to a $271 million quarter-over-quarter improvement in adjusted EBITDA, reaching $97 million in Q2. Management anticipates further EBITDA growth in Q3, with an additional $20 per net ton cost reduction and sustained shipment volumes of about 4.3 million metric tons.
CLF's Q2 results highlight a significant profitability turnaround, propelled by operational efficiencies and favorable market conditions. The company’s positive outlook is bolstered by tariff policies, an improving macroeconomic environment, and potential lower interest rates.
