Cleveland-Cliffs Q2 2025 Earnings Report

Key Financial Highlights and Strategic Developments

Cleveland-Cliffs Inc. (NYSE: CLF) has shown significant progress in its financial performance for the second quarter of 2025, driven by operational efficiencies, higher realized pricing, and improved shipment volumes. The company reported a $271 million increase in adjusted EBITDA compared to the previous quarter, primarily due to increased shipment volumes, better operational efficiency, and reduced production costs.

Total shipment volumes reached 4.3 million tons in Q2 2025, representing a 150,000-ton increase from the prior quarter. This growth was accompanied by a decline in unit costs by $15 per ton, outpacing initial guidance that had anticipated an increase. The average selling price rose to $1,015 per ton, up $35 quarter-over-quarter, mainly due to higher index pricing.

Despite a $67 million free cash flow outflow in Q2 2025, which was primarily due to inventory reductions, the company's liquidity position remains strong, with $2.7 billion in quarter-end liquidity. Cleveland-Cliffs also emphasized ongoing cost-cutting and footprint optimization efforts, with total savings of $50 million for the full year 2025.

Automotive Steel Trends and Market Positioning

The automotive steel market has seen a notable shift, with OEMs increasingly moving production to the United States. This trend is expected to result in higher volumes in the coming periods. Management highlighted that underutilized automotive steel capacity still exists, but this is anticipated to be addressed as production shifts back to the U.S.

Cleveland-Cliffs has also made strategic moves to enhance its competitive positioning. The completion and commissioning of a $150 million bright anneal line at Coshocton Works in Ohio underscores the company's commitment to producing high-value stainless products. Additionally, the company has achieved significant cost synergies through internal coke supply from Stelco, leading to the expiration of external coke contracts in June 2025 and another by the end of the year.

Outlook and Strategic Initiatives

Looking ahead, Cleveland-Cliffs expects further improvements in costs, with a projected $20 per ton decrease in Q3 2025 from Q2 levels. The company also anticipates a $125 million quarterly EBITDA benefit upon the expiry of the Arcelor slab agreement in December 2025, assuming current market conditions persist.

In terms of capital expenditures, the company has updated its guidance for the Middletown project, confirming no reline CAPEX until 2027. Discussions about potential non-core asset sales have also been initiated, with JPMorgan engaged to advise on the process. These sales are expected to generate billions of dollars in value, with proceeds earmarked for debt reduction.

Industry Context and Trade Policies

Section 232 tariffs have played a crucial role in supporting the domestic steel industry, contributing to multi-year lows in both steel and light vehicle imports as of April 2025. These tariffs have enhanced Cleveland-Cliffs' market environment and competitive stance. The company’s vertical integration, using domestic iron ore and resources, sets it apart from EAF-based peers, providing a competitive advantage.

Additionally, the planned 50% tariff on Brazilian pig iron starting August 1, 2025, is expected to further strengthen the domestic steel market. Cleveland-Cliffs does not rely on imported pig iron, leveraging its own hot-briquetted-iron facility in Toledo, Ohio.

Future Growth and Market Opportunities

Cleveland-Cliffs is well-positioned to capitalize on the resurgence of American vehicle production, with the capability to ramp up quickly and meet the demands of OEMs. The company's focus on cost reduction, operational efficiency, and strategic investments in high-value products positions it for continued growth.

As the second half of 2025 unfolds, the company is optimistic about its performance, with management stating that the second half is shaping up to be much better than the first. The combination of favorable market conditions, strategic initiatives, and proactive management is expected to drive further financial improvements and long-term value creation for shareholders.

Conclusion

Cleveland-Cliffs Inc. has demonstrated resilience and adaptability in navigating the challenges of the steel industry. With a strong balance sheet, strategic investments, and a clear focus on cost reduction and operational efficiency, the company is well-equipped to capitalize on emerging opportunities. As the domestic steel market continues to evolve, Cleveland-Cliffs is poised to maintain its leadership position and deliver sustained value to its stakeholders.