Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

Cleveland-Cliffs recorded a loss of $52mn attributable to shareholders in Q1 2020, however, the company’s low fixed cost position and critical actions taken, guided it through the worst aspects of the pandemic. 


Better H2 2020

Lourenco Goncalves, chairman, president, and CEO of Cleveland-Cliffs said the company’s 2020 adjusted EBITDA and capital needs will depend on the recovery of end markets, especially the auto industry. Moreover, as auto makers resume production, operations will improve through Q2 with a stronger second half of 2020.


Cliffs also plans to restart the construction of its HBI plant soon, in line with the easing of stay-at-home orders across the US. 


COVID-19 impacts AK Steel plans

The company completed the acquisition of AK Steel on March 13, 2020 and since that time, revenues have been negatively impacted by a fall in sales resulting from COVID-19. Also, within cost of goods sold, the company recorded an amortization on the fair value inventory step up of $23mn associated with the acquisition.


Production and sales volumes increase

Cliffs’ mining and pelletizing segment produced 4.8mn gt (4.9mn mt) in Q1 2020 a 9.8pc increase compared to 4.4mn gt in the same period last year. The company’s sales volumes increased by 38pc to 2.1mn gt last quarter from 1.6mn gt in Q1 2019 because of increased intercompany sales.


The company’s steel and manufacturing segment shipped 199,000nt (180,530mt) of flat rolled steel from March 13 through the end of Q1 2020, with no prior year data to compare as it precedes the AK merger, Cliffs indicated while reporting its earnings for the quarter.


Net loss in Q1

The company reported total revenues of $359mn in Q1 2020, compared to $157mn in the same period last year, while its operating cost of goods sold increased to $356mn in Q1 2020 from $126mn in Q1 of 2019. 


Cliffs’ net loss jumped by 54pc to $48.6mn from $22mn in Q1 2019. The last quarter’s net loss included $66mn in acquisition costs, severance, and inventory step-up amortization.  


For the first quarter of 2020, the company reported total adjusted EBITDA of $22.7mn compared to an adjusted EBITDA of $21.2mn in Q1 2019. 

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