Business Overview and History Cleveland-Cliffs Inc. (CLF) is a leading North America-based steel producer with a focus on value-added sheet products, particularly for the automotive industry. The company's vertically integrated business model, spanning from mining iron ore to downstream processing and manufacturing, has made it a formidable player in the domestic steel market.
Cleveland-Cliffs' roots can be traced back to 1847 when it was founded as the Cleveland Iron Mining Company. The company began mining iron ore in Michigan's Upper Peninsula and over the decades expanded its mining operations to include facilities in Minnesota and other locations. In the early 2000s, the company underwent a significant transformation, changing its name to Cliffs Natural Resources and shifting its focus to producing iron ore pellets and metallics for the global steel industry. This transition period was marked by challenges as the company navigated volatile commodity markets and intense competition.
The year 2020 marked a pivotal moment in Cleveland-Cliffs' history, as the company made a bold move to transform itself into an integrated steel producer. This strategic shift involved the acquisition of both AK Steel and the former ArcelorMittal USA operations, allowing Cliffs to capture more of the value chain and better serve its customer base. The integration of these acquired assets required significant investments to upgrade and optimize the facilities, further solidifying Cleveland-Cliffs' position in the North American steel industry.
Throughout its long history, Cleveland-Cliffs has maintained a strong focus on safety, environmental stewardship, and supporting the communities where it operates. The company has demonstrated remarkable resilience, weathering numerous industry cycles and adapting its business model as needed to remain competitive. This perseverance and commitment to its core mission have allowed Cleveland-Cliffs to endure as a major player in the North American steel and mining landscape.
Today, Cleveland-Cliffs operates eight blast furnaces and five electric arc furnaces, with a configured annual raw steel production capacity of approximately 23 million net tons. The company's footprint spans across the key steel-producing regions of the United States and Canada, with a particular focus on the automotive, infrastructure, and manufacturing sectors. Cleveland-Cliffs employs approximately 30,000 people, with over 90% represented by unions including the USW, UAW, and IAM.
Financial Performance and Liquidity Cleveland-Cliffs' financial performance has been marked by both periods of strength and challenges, reflecting the cyclical nature of the steel industry. In 2024, the company reported revenue of $19.18 billion, down from $22.00 billion in the previous year, as demand weakened across its key end markets. Net income for the year stood at a loss of $754 million, compared to a profit of $399 million in 2023. The company's annual operating cash flow for 2024 was $105 million, while free cash flow was negative $590 million.
In the fourth quarter of 2024, Cleveland-Cliffs reported revenue of $4.33 billion, representing a year-over-year decrease of 15.4%. This decline was primarily attributed to a decrease in average steel product selling price of $90 per net ton and a decrease of 0.8 million net tons of steel shipments. The quarter also saw a net loss of $447 million.
Geographically, Cleveland-Cliffs generates the majority of its revenue in North America. In 2024, approximately 90% of revenue was generated in the United States, 6% in Canada, and 4% in other countries.
The company's liquidity position remains robust, with $54 million in cash and cash equivalents as of December 31, 2024. Cleveland-Cliffs also has a $4.75 billion asset-based revolving credit facility, of which $2.54 billion was available as of December 31, 2024, after outstanding letters of credit. The company's debt-to-equity ratio stands at 1.06, while its current ratio is 2.08 and quick ratio is 0.55.
Cleveland-Cliffs has demonstrated a track record of prudent capital allocation, leveraging its financial flexibility to pursue strategic acquisitions and quickly deleverage its balance sheet post-transactions. The company is targeting to maintain its net debt-to-EBITDA leverage ratio at around 2.5x and plans to use 100% of its free cash flow going forward towards debt reduction until that target is reached.
Navigating the Challenging Domestic Steel Landscape Cleveland-Cliffs' performance in 2024 was marred by a confluence of factors, including weaker-than-expected automotive demand, elevated steel imports, and persistent inflationary pressures. The company's automotive shipments in the fourth quarter of 2024 were the lowest since the COVID-19 pandemic, as service center customers grappled with high interest rates and reduced purchasing power. Cleveland-Cliffs reported that demand for steel in 2024 was the weakest they have seen since 2010, excluding the temporary collapse caused by COVID-19 in early 2020. The second half of 2024 was especially challenging, with slow demand from the automotive, construction, and industrial sectors.
In response to these headwinds, Cleveland-Cliffs has taken proactive measures to optimize its operations and strengthen its competitive position. The company has implemented aggressive cost-cutting initiatives, reducing its SG&A expenses by 16% year-over-year in 2024. Additionally, the integration of its recent Stelco acquisition has yielded synergies, enabling the company to achieve a $40 per ton reduction in its average cost structure for 2025.
Looking Ahead: Optimism Amidst Challenges As Cleveland-Cliffs navigates the evolving domestic steel landscape, the company is cautiously optimistic about its prospects for 2025. The order book has shown a substantial improvement in recent months, with lead times for hot-rolled steel extending to seven weeks as of the beginning of 2025, up from just three weeks at the end of 2024.
For 2025, Cleveland-Cliffs expects a significantly improved performance compared to 2024. The company anticipates that its Q1 2025 steel shipments will improve back above the 4 million ton mark due to improved demand and better utilizations at their US mills, as well as having Stelco for a full quarter. With the inclusion of Stelco, Cleveland-Cliffs stated that for every $100 increase in the HRC price on an annual basis, their yearly revenue would increase by roughly $1 billion, which would largely flow down to EBITDA.
Moreover, the company stands to benefit from the Trump administration's renewed focus on trade policies, including the imposition of 25% tariffs on all steel imports, effective March 2025. These measures are expected to level the playing field for domestic steel producers like Cleveland-Cliffs, who have long struggled with the impact of unfairly traded foreign steel.
The company's diversified product portfolio, with a growing presence in high-value segments like electrical steel and advanced high-strength steel, also positions it well to capitalize on emerging trends in the automotive and infrastructure industries. Additionally, Cleveland-Cliffs' strategic investments in decarbonization initiatives, such as the planned conversion of its Middletown Works facility to a hydrogen-ready direct reduced iron plant, underscore its commitment to sustainability and long-term competitiveness.
Segment Performance Cleveland-Cliffs' primary operating segment is Steelmaking, which accounted for the majority of its overall revenues and operating income in 2024. This segment generated $18.53 billion in revenues, down 13% compared to 2023. The decline was primarily driven by a 25% decrease in revenues from the direct automotive market, which is the largest end market for the company's steel products. Despite the revenue decline, the Steelmaking segment remained highly profitable, generating $722 million in Adjusted EBITDA in 2024.
The company also operates three smaller segments: Tubular, Tooling and Stamping, and European Operations. In 2024, these segments combined generated $656 million in revenues, down slightly from $665 million in 2023. These segments produced $53 million in Adjusted EBITDA in 2024, up from $43 million the prior year.
Risks and Challenges Despite the optimism, Cleveland-Cliffs faces several risks and challenges that could impact its future performance. The cyclical nature of the steel industry, marked by volatile commodity prices and fluctuating demand, remains a persistent concern. The company is also exposed to the risk of supply chain disruptions, labor shortages, and the potential for further trade policy changes or geopolitical tensions.
Additionally, Cleveland-Cliffs' heavy reliance on the automotive sector, which accounted for over 30% of its revenue in 2024, makes it vulnerable to any downturn in that industry. The company's ability to navigate these challenges and capitalize on emerging opportunities will be crucial in determining its long-term success.
Conclusion Cleveland-Cliffs' journey from a pure-play iron ore miner to a fully integrated steel producer has been marked by strategic vision, operational excellence, and a relentless focus on adapting to the evolving domestic steel landscape. While the company faced significant headwinds in 2024, its robust liquidity position, cost-cutting initiatives, and diversified product portfolio position it well to navigate the challenges ahead.
As the steel industry grapples with the impact of trade policies, shifting demand patterns, and the imperative of sustainability, Cleveland-Cliffs is poised to leverage its unique strengths and capitalize on the opportunities that arise. The company's vertically integrated business model, automotive industry leadership, and strategic investments in innovation and sustainability are expected to be key drivers of future performance. Investors will closely monitor Cleveland-Cliffs' ability to execute its strategic priorities, optimize its operations, and deliver long-term value in the years to come.