Cliffs Boasts of Higher Auto Contract Prices in '23 vs. '22

Cleveland-Cliffs said Thursday it would get higher annual fixed prices for steel in 2023 compared to 2022.

Cliffs logo2.2

“Specifically, with higher sales volumes and a similar mix of hot-rolled, cold-rolled and coated products, the company expects from its direct carbon steel automotive customers an average selling price of approximately $1,400 per net ton in 2023, compared to an expected full-year 2022 price of approximately $1,300 per net ton,” Cliffs said in a release.

Cliffs said it made the statement based on a large portion of its fixed-price contractual volumes already renewed in its most recent negotiation cycle.

The Cleveland-based steelmaker noted these improved annual fixed prices were independent of the company’s recently announced price increases on spot steel sales, adding that direct carbon automotive sales represent Cliffs’ largest end market, are performed entirely on a fixed-price basis, and are not influenced by spot prices.

In a leading move, Cliffs said Dec. 13 it was hiking spot market base prices for flat-rolled steel by at least $50 per ton ($2.50 per cwt). 

In a research note responding to Cliff’s announcement, Wolfe Research analyst Timna Tanners said steel mills typically don’t provide full-year pricing guidance.

“Announcing prices before finalizing negotiations seems odd, but consistent with management’s stance that it dominated the market and could price separate from weaker spot (prices),” Tanners said.

Cliffs is a major player in supplying the automotive market. 

Usually, higher contract prices follow higher spot prices. But 2022 spot steel prices were well off the record highs seen in 2021. 

Additionally, Cliffs said it has achieved significantly higher contractual fixed prices for its grain-oriented electrical steels for 2023 vs. 2022, as well as meaningful increases in fixed-base prices for its non-oriented electrical steel and stainless steel products, before surcharge impacts.

Fixed-price contracts are expected to represent 40-45% of the company’s steel volumes sold in 2023, and more than 50% of total steel revenue under the current futures curve for US HRC, Cliffs said.

Separately, as a result of lower input costs and normalized repair and maintenance expenses, Cliffs said it also expects significantly lower steelmaking unit costs in 2023 compared to 2022.

By Ethan Bernard,

Latest in Economy