Cleveland-Cliffs CEO Lourenco Goncalves walks into the 80” Hot Strip Mill at Indiana Harbor Works in East Chicago in April.
Though steel prices have been sliding off the peak of record highs in recent years, Cleveland-Cliffs locked in higher prices on fixed-price contracts with its customers for 2023.
The Cleveland-based steelmaker, a major employer in the Calumet Region, has renewed a large portion of its fixed-price contractual volumes with steady customers like automakers, appliance manufacturers, service centers and others who need steel to build buildings, ships and countless other products. The company said the negotiating cycle resulted in higher annual fixed prices for steel for 2023 than customers paid in 2022.
Cleveland-Cliffs also independently raised prices on spot steel sales on the open market. Steelmakers have pulled in record profits in recent years due largely to higher steel prices buoyed by protective tariffs and pent-up demand from the coronavirus pandemic.
Direct carbon steel automotive customers will pay a price of about $1,400 per ton for a mix of hot-rolled, cold rolled and coated products in 2023. That's up from the full-year price of about $1,300 per ton in 2022.
"Direct carbon automotive sales represent Cliffs’ largest end market, are performed entirely on a fixed price basis, and are not influenced by spot prices," Cleveland-Cliffs said in a press release. "Similarly, the company has also achieved significantly higher contractual fixed prices for its grain-oriented electrical steels for 2023 compared to 2022, as well as meaningful increases in fixed base prices for its non-oriented electrical steel and stainless steel products, before surcharge impacts."
By far, automotive makes up the biggest bulk of Cleveland-Cliffs' business.
Cleveland-Cliffs said that fixed-price contracts are expected to account for 40% to 45% of its steel volumes sold next year. It said fixed contracts with huge customers like the Big Three Detroit automakers also will account for more than 50% of its total steel revenue.
The fully integrated steelmaker also is the largest mining company in Northwest Indiana. Cleveland-Cliffs operates mills in East Chicago, Burns Harbor, Gary, Riverdale and New Carlisle.
It expects its steelmaking unit costs will be significantly lower in 2023 as compared to this year as a result of lower input costs and normalized repair and maintenance expenses. The company made major investments, such as in local blast furnaces, after taking over ArcelorMittal USA's former mills in late 2020, catching up on years of deferred maintenance the previous owner did to cut costs.
Cleveland-Cliffs employs about 27,000 people in North America, including more than 7,500 in Northwest Indiana.
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