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Cleveland-Cliffs (CLF) delivered mixed 2Q25 results, easily surpassing EPS expectations, driven by a potent combination of higher qtr/qtr average net selling prices, improved shipment volumes, and significant steel unit cost reductions. Although CLF fell short of Q2 revenue estimates, the company's vastly improved profitability and its bullish outlook for Q3 and FY25 are more than offsetting the disappointment from the top-line miss. The company’s results reflect operational resilience amid a challenging steel demand environment, bolstered by the Trump Administration’s staunch support for domestic steel and automotive sectors.

• Recent tariff increases to 50% on steel imports from major countries have begun to shield domestic manufacturers from unfairly traded imports, creating a favorable tailwind for CLF and its peers. This policy-driven protection, coupled with improving automotive demand, is positioning CLF to capitalize on a strengthening manufacturing landscape. 
• The average net selling price per ton of steel products in Q2 was $1,015, down approximately 10% yr/yr from $1,128, reflecting broader market pricing pressures and a higher mix of non-automotive sales. However, the 3.5% qtr/qtr increase from $981 in Q1 signals a recovery driven by several factors: stronger domestic steel pricing supported by tariff protections, a favorable shift toward higher-value automotive-grade steel, and reduced exposure to low-priced slab contracts.
• External sales volumes also rose impressively by 7.5% yr/yr to 4.29 mln net tons, a record for the company, reflecting resurgent macroeconomic activity and manufacturing demand, particularly in the automotive sector, which remains a cornerstone of CLF’s business.
• CLF's footprint optimization initiatives, announced in early 2025, have swiftly begun to yield tangible benefits to both costs and revenues. These initiatives include the full idling of the Minorca mine and partial idling of the Hibbing Taconite mine in Minnesota to reduce excess pellet inventory, the idling of the blast furnace, BOF steel shop, and continuous casting facilities at Dearborn Works in Michigan, and the full idling of facilities at Riverdale, Conshohocken, and Steelton due to uncompetitive cost structures.
• These actions are projected to deliver over $300 mln in annual savings, with $145 mln specifically from flat-rolled optimization and $165 mln from exiting non-core assets like rail, high-carbon sheet, and specialty plate products.
• Steel unit cost reductions were a standout in Q2, with a $15 per net ton decrease compared to Q1, contributing significantly to margin improvement. Key drivers include the aforementioned footprint optimization, which reduced fixed costs through facility idling and operational consolidation, alongside lower raw material costs, particularly for coal, and easing supply chain constraints. The strategic shift away from unprofitable contracts, such as the slab supply agreement set to expire by year-end, further alleviated cost pressures.
• The combination of higher average net selling prices, footprint optimization, and steel unit cost reductions drove a $271 million qtr/qtr improvement in adjusted EBITDA, reaching $97 mln in Q2. Management projects further EBITDA growth in Q3, underpinned by an anticipated additional $20 per net ton cost reduction and sustained shipment volumes of approximately 4.3 mln metric tons, in line with Q2’s record performance. The termination of the unprofitable slab contract, expected to add $500 mln to annualized EBITDA starting in 2026, and the ongoing benefits from tariff protections and automotive volume recovery, further enhance the company’s outlook.

CLF's Q2 results highlight a remarkable turnaround in profitability, driven by operational efficiencies and favorable market dynamics. The company’s bullish outlook is well-supported by the Trump Administration’s tariff policies, an improving macroeconomic environment, and the prospect of lower interest rates.