VALUATION HIGHLIGHTS

1. Steelmaking constitutes 98% of the Trefis price estimate for Cleveland-Cliffs Inc.'s stock.

WHAT HAS CHANGED?

1. Q4 2023 Earnings
   • Cleveland-Cliffs posted a mixed set of Q4 results. While revenues missed estimates, coming in at $5.11 billion, rising 1.5% year-over-year, loss attributable to shareholders narrowed to $155 million. The company's Q4 steel product volume rose by 5.2% year-over-year to 4.04 million net tons, although average net selling prices fell 5.4% to $1,093 per ton.

2. Cleaveland-Cliffs Push Into Steel Making
   • In 2020, Cleveland-Cliffs acquired ArcelorMittal USA and AK Steel and transformed itself from an iron ore mining company to a vertically integrated steel producer. The company reported $20.4 billion in revenues and 16 million tons of steel shipments in 2021. With a product portfolio including hot-rolled steel, cold-rolled steel, coated steel, stainless steel, and plates, the company caters to a wide customer base in the U.S. The vertical integration is expected to create significant opportunities to capitalize on market trends across the entire steel value chain and enable more consistent, predictable performance through normal market cycles.

3. Automotive demand could recover
   • Being the largest producer of flat-rolled steel products in North America, Cleaveland-Cliffs has considerable exposure to the automotive market (~ 45% of the company's sales in 2020). In recent quarters, the automotive sector has faced considerable supply chain issues, hurting delivery volumes and steel demand. However, there are signs that the component supply is picking up, and this could help drive automotive production higher, helping steel makers such as Cleveland-Cliffs.

4. Potential impact of the federal government's infrastructure plan
   • The U.S. government has planned a ten-year $1.5 trillion overhaul of domestic infrastructure, focusing on transportation infrastructure. Once Congress has passed this infrastructure plan, it is expected to sharply boost the demand for steel and, consequently, iron ore in the U.S.

POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE

Below are key drivers of Cliffs' value that present opportunities for upside or downside to the current Trefis price estimate for Cleveland-Cliffs Inc.:

Steel Shipments (Tons)

• Total Steel Shipments: Steel Shipments rose from around 3.8 million tons in 2020 to 15 million tons in 2022 as the company closed its deals to buy ArcelorMittal USA and AK Steel through 2020. Trefis expects the metric to grow to about 16 million tons in 2023 and we expect the number to grow to about 17.5 million by the end of our review period. However, if shipments grow to about 20 million tons, there could be an upside of about 10% to our price estimate. On the other side, if shipments remain flat at about 14.5 million tons at the end of our review period, there could be a downside of about 10% to our price estimate.
  

For additional details, select a driver above or select a division from the interactive Trefis split for Cleveland-Cliffs Inc. at the top of the page.

BUSINESS SUMMARY

Cleveland-Cliffs is the largest flat-rolled steel producer and the largest manufacturer of iron ore pellets in North America. The company's operations are vertically integrated - spanning from mined raw materials, direct reduced iron, and ferrous scrap to primary steelmaking and downstream finishing. Cliffs is now North America's largest steel supplier to the automotive industry.

SOURCES OF VALUE

The North American Iron Ore division is the company's only reported segment currently and is the most valuable segment for the following two reasons:

Majority of Cliffs' revenue generation

The company gets its revenues from vertically integrated iron ore and steel manufacturing operations. CLF's major customers are steel companies and industrial customers - mainly automobile players. Long-term contracts with these customers ensure the sale of a substantial portion of the firm's mineral production.