Dive Brief:
- Steelmaker Cleveland-Cliffs is looking to sell its idle mills and certain assets to potential buyers, including data center developers, in an effort to reduce its overall debt and rightsize operations, EVP and CFO Celso Goncalves said in an earnings call Monday.
- The company is in talks with advisor JPMorgan, exploring the potential sale of certain “non-core” operating assets worth billions of dollars, Goncalves said. It is also hearing from buyers interested in its recently idled mills in Riverdale, Illinois, as well as Steelton and Conshohocken, Pennsylvania.
- “These sites…are all uniquely positioned geographically and have what data center developers are looking for — access to power and water with the infrastructure already in place,” Goncalves said. If any of the sales are successful, he said the proceeds will go toward debt reduction.
Dive Insight:
Cleveland-Cliffs, one of the largest producers of flat-rolled steel, has been in downsizing mode in response to weak automotive production and rising prices. Between March and May, it fully or partially idled six facilities, resulting in layoffs affecting 2,000 workers across Michigan, Illinois, Minnesota and Pennsylvania.
The company is expecting these changes to result in annual cost savings of about $310 million, according to an investor presentation. It is not expecting these changes to hurt steel production output.
“We are laser-focused on cost-cutting and steel sales, and that’s the way we will continue to execute going forward,” President and CEO Lourenco Goncalves said on the earnings call.
In the second quarter, Cleveland-Cliffs reported revenue of $4.9 billion, driven by record-high steel shipments, higher pricing and lower costs. The results are up from Q1 and the same period last year.
The steelmaker also recorded a net loss of $470 million, which included a one-time cost of $323 million related to its recent plant idlings.
Looking ahead, Cleveland-Cliffs is expecting steel sales prices to remain favorable as slab prices decline. A third-party slab contract is set to expire in less than five months, which should allow the company to shift sales to higher-margin opportunities. The company is also expecting raw material costs to continue improving, citing a $15 per ton decrease in costs compared to Q1.
On the call, the CEO lauded the Trump administration’s Section 232 steel tariffs, which increased from 25% to 50% on June 4, and have played a key role in addressing issues with foreign competitors.
“They receive direct subsidies from their governments, and they do not have to comply with the stringent environmental standards and laws we have in place in the United States,” Goncalves said.
Additionally, he pressured Federal Reserve Chair Jerome Powell to lower interest rates to spur U.S. consumers to buy more cars, and for Canadian Prime Minister Mark Carney to bolster the country’s steel industry with stronger trade protections.
“The United States remains the most desirable market for steel,” Goncalves said.
