Cleveland-Cliffs topped second-quarter estimates amid cost-cutting and record steel shipments, achieved with an assist from Trump tariffs that depressed imports. CLF stock surged in Monday stock market action, breaking above a key technical level, and has kept on climbing Tuesday.
Steel Dynamics, which rose modestly in Monday's regular session, fell solidly late on its own weak results. Nucor, which is set to release Q2 earnings next week, climbed slightly Monday.
Comments from CEO Lourenco Goncalves in Cleveland-Cliffs' earnings statement suggested it was putting up a "For Sale" sign: "Going forward, foreign competitors need to acquire steel capacity within the United States if they want to participate in this desirable market. As a publicly traded America-based company centered on automotive, electrical steels, stainless and plate, Cleveland-Cliffs' assets, business and footprint are uniquely positioned to benefit from this new reality."
Trump Tariffs On Steel
President Donald Trump's 25% across-the-board steel tariffs took effect on March 12. The rate didn't change from his first term, but broad-based exemptions from that rate were eliminated.
Trump doubled those tariffs to 50% on June 4 in a move timed to coincide with his backing of Nippon Steel's acquisition of U.S. Steel.
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Trump has threatened to raise tariffs on Brazil from 10% to 50% effective Aug. 1. That would apply to pig iron, a key import for electric arc furnace steelmakers in the U.S., but not for Cleveland-Cliffs, which produces its own pig iron.
On the investor call, Goncalves called for the Trump administration to enforce the steel tariffs with "no exceptions or exemptions." He sees "no indication" the tariffs "will be used as a bargaining chip" to strike trade agreements.
However, the U.S. has kept in place the 25% steel tariff rate for the U.K., as part of a preliminary trade agreement.
A Cleveland-Cliffs presentation showed that steel imports as a share of the finished steel market fell from 25% in January to 20% in April and May, even before tariffs were doubled.
Goncalves also highlighted Trump tariffs on autos that he expects to lead to a "resurgence of automotive production in the U.S." That would be big for the company, with autos currently 26% of end-market sales.
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Is Cleveland-Cliffs For Sale?
Comments from Goncalves leave some room for interpretation. He highlighted Nippon Steel's $29 billion investment in the U.S. steel sector, with a commitment to build a new mill on top of its U.S. Steel purchase.
He added that foreign companies looking for exposure to the attractive U.S. market provide new "optionality" for Cleveland-Cliffs in the wake of the Nippon Steel deal. He talked about foreign companies potentially making an "investment" in Cleveland-Cliffs. Would he entertain an investment that equates to an acquisition?
"We are an asset-rich company," Goncalves told analysts. "We believe that we are so undervalued at this point that the sum of the parts" is far greater than the market value.
He confirmed "active conversations" to sell noncore assets, but "everything else is possible."
KeyBanc analyst Philip Gibbs told Investor's Business Daily that Cleveland-Cliffs is "looking for ways to deleverage" and that selling unused assets would be a win. Some talks involve repurposing the steel company's idled facilities for data centers.
Gibbs upgraded CLF stock to overweight from sector weight on Monday in a note that highlighted potential for a boost from onshoring of auto production. Gibbs assigned a 14 price target.
Cleveland-Cliffs Earnings
Cleveland-Cliffs posted an adjusted loss of 50 cents a share vs. estimates of a 71-cent loss. Revenue of $4.93 billion narrowly topped estimates, falling 3% vs. a year earlier.
The company said steel shipments of 4.3 million net tons set a record. Adjusted earnings before interest, taxes, depreciation and amortization improved to +$97 million from -$174 billion in Q1.
Cleveland-Cliffs signaled further EBITDA improvements into Q3 and Q4 as improved cost performance is "further amplified."
CLF Stock
CLF jumped 12.45% Monday, then tacked on another 6% to 11.30 in Tuesday morning stock market action. Cleveland-Cliffs stock powered past its 200-day moving average, hitting a four-month high. CLF is up 48% this month, but still 29.5% below its 52-week high.
Nucor stock climbed 1.1% on Monday and added 0.8% on Tuesday. Shares reclaimed the 200-day line on July 1.
Steel Dynamics Earnings
Steel Dynamics late Monday reported Q2 earnings of $2.01 a share, down 26% vs. a year earlier and missing views for $2.24. Revenue fell 1% to $4.57 billion vs. consensus of $4.65 billion.
Steel Dynamics stock slipped 2.1, falling back to its 50-day moving average as it gave back the prior session's 2.2% advance. STLD has a 142.42 as a buy point.
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