Trump’s tariffs aim to boost steelmakers. One of the biggest is shrinking instead.
Summary
Cleveland-Cliffs closes plants and slows expansion but is still counting on tariffs to increase demand from automakers.
President Trump’s tariffs on imported steel aim to boost demand for American steel. So far, they haven’t stopped one of the country’s biggest steelmakers from closing plants and retreating from its strategy to dominate the industry.
Cleveland-Cliffs, the top supplier of sheet steel to automakers in the U.S., has in recent months idled plants and iron-ore mines. This summer, the company plans to close three specialty steel plants in Pennsylvania and Illinois. It is shelving expansion projects, and executives said Thursday it could sell some assets.
The Cleveland-based company’s retrenchment shines a spotlight on an increasingly difficult steel market. The U.S. manufacturing sector—led by the auto industry—weakened in the past year, causing steel buyers to cut back on purchases and pushing prices lower. For many steel companies, 2024 was the worst year in nearly a decade.
Steel prices climbed as buyers gobbled up steel to get ahead of Trump’s duties on imported metal. That rally has stalled, though, with steel customers sitting on the steel they have and holding off on placing big orders in an uncertain U.S. economy.
“We know that in the long run this will be good for the American steel industry and for Cleveland-Cliffs," Chief Executive Lourenco Goncalves told analysts on a conference call Thursday about Trump’s tariff plan. “However, in the short term, we need to do everything we can to make sure that we remain cost competitive."
Shares of Cliffs, the second-largest steelmaker in the U.S. by volume, have lost more than a third of their value in the past six months, a bigger decline than its rivals. The company this week reported a first-quarter net loss of $483 million, its third consecutive quarterly loss.
The production cuts and changes in operations are expected to affect about 2,000 jobs and save Cliffs $300 million a year. Goncalves said the moves will sharpen Cliffs’s focus on its primary business of supplying steel to the automotive industry.
Goncalves is still counting on tariffs on imported vehicles to bring more automobile assembly to the U.S. and increase demand for the company’s lightweight steel used in fenders, hoods and other vehicle parts. He said Cliffs has received commitments from automotive customers to increase order volumes, a move that would boost the company’s profit.
Five years ago Goncalves embarked on a bold strategy to turn Cliffs—an iron-ore miner—into a steelmaker. By acquiring steel plants and companies at bargain prices, the Brazilian executive built Cliffs into a company able to convert its own iron ore into finished steel.
The plan isn’t aging well. Cliffs ended up with some underperforming business lines and a lineup of mostly older plants that are expensive to operate. Some need significant investments in the years ahead.
Cliffs expects to cut spending on plants and equipment by more than 20% from last year and delayed some projects.
Three plants will be closed this summer: two in eastern Pennsylvania that produce rail for railroads and steel plate, and one near Chicago that makes specialty sheet steel. Goncalves said the plants have underperformed, especially the rail mill. He accused Japan’s Nippon Steel of selling rail in the U.S. at heavily discounted prices even with a U.S. tariff.
“Nippon Steel has no limits," he said.
Nippon Steel didn’t immediately respond to a request for comment.
Cliffs is abandoning plans to make electric transformers at its closed plant in Weirton, W.Va, after a partner had “second thoughts" about the plan, Goncalves said. Weirton had produced steel for cans but closed last year.
After an unsuccessful bid for U.S. Steel—and then attempting to stop Nippon Steel from doing the same—Cliffs turned its attention north, purchasing Canadian steelmaker Stelco for $2.5 billion. The deal closed just days before voters returned Trump to the presidency after he campaigned to use tariffs aggressively against U.S. trading partners.
A 25% tariff on steel from Canada took effect in March. About one-third of Stelco’s annual sales had been to U.S. customers before the steel tariff, but Cliffs now restricts the company’s sales to Canada.
Goncalves said he didn’t anticipate broader U.S. tariffs on other Canadian products impairing steel-consuming manufacturers or the recent hostility in relations between the U.S. and Canada.
“That was not part of our plan," he said. “Otherwise, I would not have been so eager to buy Stelco, if I knew that Canada would not be treated like a friend."
Write to Bob Tita at robert.tita@wsj.com
