Cleveland-Cliffs Inc. (CLF) stock forum & discussion – Yahoo Finance (2024)

Some introspective observations about Cliffs…

Perhaps obvious, but LG announced Cliffs is using third quarter cash flow to pay off the MT preferred holdings with cash (no issuance of common stock). Cliffs is approaching the half way mark of Q3. Based on earlier Cliffs guidance, the cost for clearing the preferred with cash should be covered and the balance of the quarter left to reload Cliffs cash stash. What gets attention next? The convertible debt (not timely until 2022)? Something else? Maybe just accumulate cash to deliver on the net zero debt target?

Trading set a new pps high vs. recent years this week. Timing follows Cliffs release of excellent 2Q earnings and announced payoff of the preferred with cash. 58 million prospective shares were axed with that move and Cliffs now has no external obligations to reconcile for clearing commitments from steel company acquisitions. Just the debt servicing, which is structured to be paid off early under current market conditions.

Q2 2021 results affirmed that the delivery of a string of $1 billion to $3 billion EBITDA quarters is real. The string is situated to continue into 2023 or longer, based on actual HRC steel futures pricing and market demand projections. Net zero debt in mid 2022 ought to be “baked in” to the Cliffs future while September sees Cliffs customer contracts being updated for the next year to reflect current, higher steel pricing. Improved PE ratios for Cliffs pps ought to emerge as quarterly results log the EBITDA projections, giving a non linear improvement in the in proportion to better earnings and lower debt load.

Short interest of July 15 of around 44 million shares was down only a couple million shares from June 15. What will mid August short interest indicate? The short may have been waiting out delivery of an economic down turn before ante-ing up for shares to cover, but time is running out for hedge funds to cover their shorts cheaply (e.g below $30 pps). Cliffs is only two months out from reporting 3Q results and 4Q results should outperform 3Q due to pending updating in contracts pricing. That economic disaster that would relieve short anxiety appears to be ever so much unlikely as Cliffs approaches 2022. Once Cliffs decides to clear their convertible debt, there is no new source of shares for shorts cover but to pay the price to hold their shorts or try to cover through open market purchases while sentiment is for a higher pps.

Interesting times.

Been looking at the Midwest HRC futures pricing and note how pricing per ton now ranges between $1785 in July down to $1100 through January 2023. In turn, the HRC pricing is in the queue for guiding automotive contract pricing in both September 2021 and September 2022 (timing when other posters have said auto contracts are renewed) with HRC pricing exceeding $1100. In turn, Cliffs EBITDA for the next six quarters is positioned to be $1+ billion, with near term quarters positioning EBITDA at $2+ billion once contracts are updated. Since Q3 will not have fully integrated new auto contracts pricing reflecting HRC pricing, increasing earnings look like they wont reach a quarterly crest until some time in 2022 or beyond.

Now that LG has reined in the share count with the cash conversion of MT’s preferred shares, easy math let’s one round off shares to just over 500 million.

The current share price is zeroing in on the $25 to $30+pps during 3Q 2021, so it is timely to project what Cliffs share price is supported around 1Q 2022. That early 2022 timing should see net zero debt already achieved or soon after. Then Cliffs should be resourced with cash to look beyond its clearing/closure of AKS and MT USA acquisition costs and .

It seems conservative to suggest a $40 pps price target for early 2022 (analysts are now citing such in their upper range), especially if Cliffs achieves an average steel sale price exceeding $1100 after September auto contracts renewals. Comments? Pps projections?

The Nucor comparison is interesting from a couple different angles. It was pointed out that forward PE vs Cliffs is 17 vs 10. Also, how Nucor has a history with dividends payout and has more balanced debt. So the “new Cliffs” that is a vertically integrated steel maker projecting 17+ million tons annual sales has a “born on” date of December 2020.

I have been focusing on how analysts don’t seem to know how to value CLF and how legacy pps projections had been lazily referencing outdated, pandemic influenced and iron ore company centric financials. Add now a “market gift” that has HRC spot pricing set at a huge margin above the 2019 and 2020 pricing that was available to analysts that are updating their pps price targets. So, the Nucor comparison suggests Cliffs has a 70% pps upside as it comes onto its own with a few quarters of sold earnings, pay down of debt and reintroduction of the dividend. It also affirms how the blending of current market pricing into steel contracts has a 2X to 4X upside compared to market analyst projections. All interesting, and awaiting for confirming results to be posted in 2021.

I guess there are still zero analysts willing to go out on a limb at this time and take a stab at the actual future earnings for the new CLF entity. Hopefully LG will provide some clarity during the February earnings call. Points that need clarification:

1. Estimate for CLF 2021 steel production. Range previously discussed was 17 to 20 million tons.

2. HRC average price for 2021. Future is unknown but current numbers put this near $1000 per ton. Of course CLF contract negotiations are an ongoing process but much of the sales of higher quality steel products are above HRC, or even better, sold by the part. An infrastructure bill could send this HRC figure much higher.

3. Profit margins. This number should surprise many considering CLF lower cost of expensive ore and certain availability of pellets and HBI. In any case, CLF should have a huge pricing advantage over the competition.

4. Tax credit situation. Eventually earnings in the billions will use up most of these credits.

5. Based on even conservative figures for sales, costs and taxes, the current 2021 analyst figures of $2 to $3 EPS seems extremely low. It may be best for LG to guide low at first allowing plenty of room for future surprise earnings numbers.

6. Additional earnings from sales of excess pellets, HBI and synergies.

7. P/E multiple considerations. This figure will need to be adjusted higher as CLF moves from fixed long term ore contracts to shorter term cyclical steel contracts with current high demand, an improving economy and possible inflationary factors.

8. Best part is we can sit back and wait to see just how high these numbers can grow while the current CLF stock price barely reflects a floor.

That was a beautiful day. But, it wasn't as much CLF as it was Infrastructure. But, it should be.

That announcement, in May no less, of wiping $400 million in debt is a head turner for those that know.

X popped 5.72%
CLF rose 6.77%

Of course, X and CLF have the worst balance sheets and therefore rose the most as this will help to attack the debt tranches long term. But, it was a Macro move with infrastructure and the debt retirement announcement added fuel to the fire. You can't say $5 trillion budget and not get the market moving. Nor can you finally have Red and Blue finally start walking towards each other with infrastructure and not think there might be a passing of infrastructure bill very soon.

But, the reality is still the same and true. CLF was/is making money before infrastructure or budget announcements. Steel at $1670 is NOT pie in the sky. Its demand and supply. Pure and simple. This is most likely why analysts won't bite on the narrative of steel higher for longer and feel a retracement to the $800 level or lower is coming next year. But, they are starkly wrong. The entire world is in consumption mode for manufacturing consumption. Its everywhere. There is a true deficit in production. Steel companies have been acquired and consolidation is taking place. This in turn allows stability in the market.

Back to CLF debt retirement.

$400 million is eyepopping. Not in numbers alone mind you, but the timing. LG and Koci has stated that $1 billion drop in debt and 1/1 debt to ebitda by EOY. Drop the debt $1 billion and you would need $4.5 billion ebitda to match the $4.5 billion in debt. Just take that statement, wad it up, and throw it in the trash. Why?
$400 million debt extinguishment barely 1/2 way through Q2, thats why.

Q2 realized numbers will be higher than $1.2 billion, but not by much IMO. The sales of tonnage for Q2 was largely in the books when that statement was made for guidance. Steel was $3-400 lower back then. But, when Automotive steps back from steel obligations, then this creates opportunity to sell HRC in the Spot market. I believe we get to $1.35-$1.4 billion for Q2. But, Q3 is going to pop.

Since we don't know the contract metrics, I will surmise its on a TTM platform. Yes its overall a yearly pricing metric, but it gets readjusted every quarter and therefore makes one believe that as each quarter passes then you can drop the previous year comparable quarter. Q2/20 average pricing was $489/ton!! Yuuuck! But, Q3/20 was a different story. $538/ton average, while still garbage, saw a major turn in pricing into the $600's. Then came Q4/20 and the realization of the steel turnaround saw the most profound movement clear up to an average of $834/ton. So, to recap, average pricing per quarter:

Q1/20-$565
Q2/20-$489
Q3/20-$538
Q4/20-$834
Q1/21-$1253
Q2/21-$1566'ish because its not done.

If we take TTM then we can adjust the TTM as we move from quarter to quarter. For example full year TTM for 2020 average pricing is approx. $606/ton

Q1/21 TTM is $778/ton.
Q2/21 TTM is currently slated for $1047/ton. Thats a near $300 pop.

Projected H2 pricing under current futures pricing
Q3/21 TTM $1330
Q4/21 TTM $1440
Q1/22 TTM $1421
Q2/22 TTM $1274
Q3/22 TTM $1118
Q4/22 TTM $1009

The sheer magnitude of realized pricing hits with powerful force at Q3/21/CC. But, the numbers will reveal themselves for analysts at Q2/21/CC. A near $300 pop in Q2 over Q1 pricing. And a near $300/ton pop in Q3 over Q2 pricing. Followed up with an even higher Q4 realized pricing will be the stunner for most. Following Q4/21 will be a slight inch back under current futures pricing for Q1/22 TTM. All these numbers are for Automotive contracts. This is just prognosticating what we truly do not know but it looks about right.

Just for grins: Q3/21 pricing comes in for automotive at $1330/ton. Automotive was 28% of sales last quarter. But, it has been as high as 45% or so. If we take 45% for automotive, thats 1.9mt of steel. That leaves 15% for spot and 40% for short term contracts. Q3 had HRC in the $1600's, its currently $1598/ton in the futures market. Therefore the numbers would potentially come out at

$2.527 billion Automotive
$3.755 billion short term and spot average
Total sales for Q3 could potentially be $6.282 billion.

If we have COGS at $775/ton, then 4.25mt should be approx. $3.29 billion leaving $2.99 billion in ebitda for Q3.

Q2/21 at 45% automotive is $2 billion. Automotive is NOT going to take 45% of steel production. But thats the conservative number im using. Then, spot and short term is closer to $2.75 billion in sales.

For a total of $4.75 billion and COGS at $3.29 billion leaving ~$1.45 billion in ebitda. LG and Koci guided for $1.2. They were conservative IMO. Not much difference, but that tells you the power of Q3 over Q2 in earnings.

Cont:...

Here is the complaint I filed with FINRA

I would like to file a complaint against Carlos De Alba, a stock analyst
with Morgan Stanley. The timing of his recommendations (near earnings and
after earnings) has adversely affected the stock price of Cleveland-Cliffs, Inc.

By a simple calculation, his recommendations have resulted in a decline of nearly
1 billion dollars in CLF enterprise value. There is no telling the damage he has
caused, or who has profited from his recommendations.

On 10/15/2021 CLF closed at 21.46.
on 10/18/2021 Carlos De Alba issued a price target change to $21 from $26.
By 10:09 AM EDT, 10/18/2021 CLF price was 20.65, a change of: -0.81

On 10/22/2021 CLF posted record earnings.

On 10/26/2021 Morgan Stanley analyst Carlos De Alba maintains Cleveland-Cliffs (NYSE:CLF)
with a Equal-Weight and raises the price target from $21 to $22.5.

On 10/26/2021 CLF reached a high of 26.51 CLF closed 25.63, a change of -0.88

Within two weeks Carlos has changed his target again to be way below the current
trading price with no justification. This timing appears odd and seems to be complete stock
manipulation.

You can check his recommendations on other steel stocks to see he has pulled the
same shenanigans on Nucor ($NUE) and Steel Dynamics ($STLD). He offers a lower price target
before earnings and adjusts the price target higher after earnings
still well below the current trading price.

Just trying to connect some dots to determine whether a nice move up in the SP is possible between now and mid-January. The one big news we can count on is a beat of already stellar estimates for 4Q EBITDA and FCF, but that won't happen until at least February 23rd. Also, it's pretty safe that LG won't pre-announce results because when he's done so analysts subsequently upped last minute consensus EPS estimates, thereby causing Cliffs to miss them several quarters in a row prior to 3Q 2021.

So LG recently buys 50,000 shares in the open market with nearly $1 million of his own savings. This is BULLISH news for investors and especially so on the heels to his son's previous purchases totaling 10,000 shares. Then Cliffs announces that it will redeem the remaining $294 million of 1.50% convertible senior notes due in July 2025 at the earliest date possible, namely January 18, 2022. Another bit of BULLISH news for investors.

Now holders of the convertible notes have the right to early conversion into common shares. LG has stated that upon redemption (on January 18, 2022) or early conversion (now until mid-January 2022) the Company intends to pay 100% of the outstanding principal amount in cash. This statement is despite the fact that in the prospectus Cliffs said that upon conversion it could utilize cash, common shares or a combination of cash and common shares at the Company's election. Saying you are going to 100% pay cash for early converted common shares again is BULLISH for investors.

OK, here is where things get confusing to me. If the SP doesn't move over the next five weeks that should be good for Cliffs since it doesn't have to come up with as much cash to buy up the early converted shares. Similar to the MT convertible preferred shares back in late July, there is a 20-day WVSP formula for buying up the early converted common shares with cash. There is also a schedule of potential adjustments for the cash required to buy up the early converted shares based upon the actual SP on January 18 redemption day. So why would LG announce the insider stock purchases and the Company only using cash to buy out the early converted common shares knowing these news items will likely cause the SP to go up?

My SWAG is that there must be some truth to the notion that holders of the convertible debt have a virtually risk-less tranche of common shares with which to short CLF. It's been said a number of times by some on this platform that the convertible debt represents about 38 million of the 50+ million short interest CLF shares. If I understand this correctly, it seems that LG has just provided the convertible debt holders a huge DISINCENTIVE for continuing to short CLF with their "shares".

So if the short interest shares attributable to the convertible debt have been effectively taken out of daily trading might we see a nice SP run in the next several weeks? Thoughts, please.

BTW, did anyone else notice that CLF beta is down to 2.18?

Ever wonder why CLF isn't rated like NUE or STLD and is more in line with X? It's the debt ratio and the clear cash flow. X produces the more susceptible to spot price stuff. NUE is an EAF behemoth with less debt than cash on the books. It's why NUE is at 5 times the SP on 60% of the float. NUE produces a dividend because they have no other place to put all their cash. And, when they do get a wild hair, like the new plant they are building, it doesn't affect their dividend disbursem*nt in the slightest. NUE went and guided on building a new plant when HRC was sitting at $1900. How much cash do you think they put in the bank over the following 3 months? Yeah, about enough to build the plant with CoH from that quarter. Their position of strength is what makes them the KING of Steel domestically.

There is an enormous amount of talk about buybacks and dividends to shore up the price. You all will be screaming in 12-15 months with a lower float and dividend but a sizable debt overhang and Auto contracts resetting when spot sits around the $11-$1200 range after enjoying this $1900 spot in October with this current contract. The Market is going to crush the SP in 12-15 months if CLF is still heavy on debt and a whole lot less cash flow. We truly only have these 4 quarters to make the move of a lifetime.

LG has been excoriated because of timing over the years. Bloom Lake was crushing us, but people whine when they see IO popping back up to $100. We would have been BK if we didn't unload right then and even at a loss. Koolyanobbing was a Mill Stone. We were losing money. We needed to be domestic not International. But, then comes AKS and MT-USA. Bought for a song under the same metrics that LG unloaded BL and Kooly.

LG Has Been Right on Every Move so far. Every single one. This company is brand new. It finally has entered the quarter that gives them a fighting chance. Last quarter was highly influenced from 2020 Auto pricing that was negotiated at the SAME TIME, same month, as MT-USA changed hands to CLF. I believe some have forgotten the timeline in all this.

It's important to take a step back and consider the health of the company verses the health of our Portfolio. If the company us not healthy, then the SP, eventually, will reflect this as well. Some of you know that I swing trade this stock. I buy a sizable portion of calls and wait conservatively for opportunities. The reason for this is because the Market doesn't respect CLF. The massive abuse gives traders a strong opportunity to buy relatively low and sell on the sprints. Why does CLF sprint? Because the value is undeniable, but so is the debt and the steel market. Who's talking loudest at the moment. This brings me to one of my catalysts for changing from calls to equity. This debt overhang has to be dealt with. Q1/CC will be the first quarter of full attention to debt. These last couple of quarters have attacked the debt and the float. We should all be grateful. LG is doing exactly what you all wanted. Will he attack the float again this current year, even this coming quarter? He needs to attack the debt if he is to be on target with his own imposed timeline.

The share price will forever be manipulated. How does NUE go to $25 in 2020? How did NUE lose 25% of value over these last few weeks? It's simple. The Market doesn't respect cyclical. CLF will get it's chance to sprint with the SP. The balance sheet will do that. But, if the debt overhang is still here when HRC resets in 12 months? You want to see a bunch of posters start crying, well stick around. Sadly, HRC can rock violently the other way to absurdly low prices. If, by chance this rising of interest rates isn't effective enough to slow inflation, then inflation could get out of hand with interest rates at abnormally high levels thereby feeding on itself into a self imposed recession. Nobody will buy a house for $400,000 and 6% loan. Then steel, along with all commodities, will go into free fall. LG will shut down mills over making steel at a loss. The Market will interpret this as BIG Steel going BK. With a debt overhang, it becomes a real scenario. But, if CLF is net debt $0, and HRC plummets, so does debt and these holders will unclinch their fists for a discounted offer. Also, the SP is going to be abused no matter what. At this point, CLF will be in a position of strength to buyback shares. Make no mistake. Added capacity coming in 2023-24 will have a massive impact if we hit a recession. And CLF will be healthy enough to take advantage.

CLF will be boring. Net debt boring. Dividend issuing boring. Navigating through ebbs and flows of pricing cycles with serious cash on hand boring. Or there is a danger, relatively small, that CLF isn't around to be floating at all. They may have to sell pieces of this new behemoth to stay afloat. A stretch? Maybe, but CLF almost went BK before by not protecting the business first. Eliminate debt, then reward shareholders. It's Econ101.

Barron's Oct 4 Paper: Some of you have wondered about that article. I get the paper via airline miles. Here are some points: /1/ Curt Woodsworth steel analyst Credit Suisse. /2/ The industry's improving financial condition could lead to higher dividends and loftier valuation. /3/ They also want steel makers to ramp up dividends and stock buybacks, as other commodity producers have done. /4/ prices will stay higher longer and that consensus earnings estimates for 2022 are too low - this was per Woodsworth again. He assumes average price per ton of $1200 in 2022. /5/ Estimates 3-4% annual demand in coming years. /6/ 40 dollar price target by JPM Michael Glick steel analyst. /7/ Shareholder centric CEO Lourenco Goncalves owns $100 million of its stock. /8/ at 20 bucks per share, Cleveland Cliffs stock trades for 3-4 times projected 2021 earnings of nearly $6 a share.

Hope this helps you all. Boolean

Cleveland-Cliffs signs go up at steel mill, hires more than 710 more workers

5/14 - Burns Harbor, IN – New Cleveland-Cliffs signs have gone up at its Burns Harbor steel mill, acquired last year from ArcelorMittal USA. ArcelorMittal signage came down shortly after the $1.4 billion deal closed in December. New Cliffs signage was just installed, identifying the mill as Cleveland-Cliffs Burns Harbor, including at the main gate and office.

"It's a new day and a new dawn," said U.S. Rep. Frank Mrvan, who toured the steel mill in Porter County Monday. "We welcome Cleveland-Cliffs to the community and neighborhood. To have a corporate executive who wants to work with union labor is music to my ears. We need an economy that brings workers and employers together and that's centered around our steel industry. Making sure Cleveland-Cliffs and Cleveland-Cliffs workers have everything they need to be productive going forward is extremely important to me."

Cleveland-Cliffs has hired more than 710 steelworkers at former ArcelorMittal mills since it took over, Chairman, President and CEO Lourenco Goncalves said during a Zoom press conference.

"We want to be here in Northwest Indiana," he said. "We believe in the Midwest and we believe in the state of Indiana. We plan to grow these mills and hire people. Since we have acquired ArcelorMittal USA we hired 710 more people and continue to hire. We're putting in more shifts. We're working to grow this company. We want to invest so we get a return on investment from these plants 10 years from now and 20 years from now."

Cleveland-Cliffs is planning a series of capital investments at the Burns Harbor steel mill starting this year, Goncalves said.

"Burns Harbor is one of our main plants for flat-rolled and plates," he said. "We're planning a series of investments at Burns Harbor, everything from improvements to more protection for the environment to upgrading the blast furnaces. We're going to make a series of investments in the walking beam furnace and the hearth mill. Burns Harbor is one of our flagship plants and we're going to upgrade it over the next two to three years."

Cleveland-Cliffs expects to hire more, as its mills were running at capacity, Goncalves said. The steelmaker just opened applications in Northwest Indiana with the aim of getting 2,300 to 2,500 resumes on file.

"It's a chance for people in our community and neighborhoods to participate in the economy," Mrvan said. "It's a chance to be able to buy a house and have the income to support small businesses. When we look at what Cleveland-Cliffs has done throughout the United States, they are welcome partners going forward."

The United States, Mexico, and Canada have reached an agreement that supports North American manufacturing and mutually beneficial trade. The new United States-Mexico-Canada Agreement (USMCA) will create more balanced, reciprocal trade that supports high-paying jobs for Americans and grows the North American economies.

RULES OF ORIGIN AND ORIGIN PROCEDURES

The United States, Mexico, and Canada have concluded substantive discussions on new rules of origin and origin procedures, including product-specific rules for passenger vehicles, light trucks, and auto parts. This update to the rules of origin will provide greater incentives to source goods and materials in the United States and North America.

Key Achievement: Increasing Regional Value Content Rule

This deal encourages United States manufacturing and regional economic growth by requiring that 75 percent of auto content be made in North America.

The rules will:

Help to incentivize up to billions annually
Help to preserve and re-shore vehicle and parts production in the United States.
Transform supply chains to use more United States content, especially content that is key to future automobile production and high-paying jobs.
Close gaps in the current NAFTA agreement that incentivized low wages in automobile and parts production.
Key Achievement: Creating New Labor Value Content Rule

This deal uses trade rules to drive higher wages by requiring that 40-45 percent of auto content be made by workers earning at least $16 per hour.

The rules will:

Support better jobs for United States producers and workers by requiring that a significant portion of vehicle content be made with high-wage labor.
Ensure that United States producers and workers are able to compete on an even playing field, and incentivize new vehicle and parts investments in the United States.
Encourage more investment by auto companies in research and development in the region.
Key Achievement: Exceeding NAFTA 1.0 and TPP Standards with Stronger Rules of Origin and Enforcement

The United States, Mexico, and Canada have agreed to stronger rules of origin that exceed those of both NAFTA 1.0 and the Trans-Pacific Partnership (TPP), including for autos and automobile parts and other industrial products such as chemicals, steel-intensive products, glass, and optical fiber.

This deal exceeds NAFTA 1.0 and the TPP by establishing procedures that streamline certification and verification of rules of origin and that promote strong enforcement. This includes new cooperation and enforcement provisions that help to prevent duty evasion before it happens.

The new rules will help ensure that only producers using sufficient and significant North American parts and materials receive preferential tariff benefits.

GOODS MARKET ACCESS

New commitments have been included in the Market Access chapter to reflect developments in United States trade agreements that address non-tariff barriers related to trade in remanufactured goods, import licensing, and export licensing.

Key Achievement: Exceeding NAFTA 1.0 and TPP Standards to More Effectively Support Trade in Manufactured Goods

The new Market Access chapter will more effectively support trade in manufactured goods between the United States, Mexico, and Canada by removing provisions that are no longer relevant, updating key references, and affirming commitments that have phased in from the original agreement.

Specifically, the Market Access chapter:

Maintains duty-free treatment for originating goods.
Maintains the prohibition on export duties, taxes, and other charges and the waiver of specific customs processing fees.
Adds new provisions for transparency in import licensing and export licensing procedures.
Prohibits Parties from applying: (a) requirements to use local distributors for importation; (b) restrictions on the importation of commercial goods that contain cryptography; (c) import restrictions on used goods to remanufactured goods; and (d) requirements for consular transactions and their associated fees and charges.
Updates provisions for duty-free temporary admission of goods to cover shipping containers or other substantial holders used in the shipment of goods.
TEXTILES

The new provisions on textiles incentivize greater North American production in textiles and apparel trade, strengthen customs enforcement, and facilitate broader consultation and cooperation among the Parties on issues related to textiles and apparel trade.

Key Achievement: Strengthening Supply Chains to Provide New Market Opportunities for the Textile and Apparel Sector

The provisions will:

Promote greater use of Made-in-the-USA fibers, yarns, and fabrics by:
Limiting rules that allow for some use of non-NAFTA inputs in textile and apparel trade.
Requiring that sewing thread, pocketing fabric, narrow elastic bands, and coated fabric, when incorporated in most apparel and other finished products, be made in the region for those finished products to qualify for trad

I just can’t get the analyst consensus Q3 EPS. Done multiple different ways I get around $6bn in revenue, $1.6bn in earnings and EPS of $3 to be announced Thursday. Indicating a 30% surprise over consensus.

That would chime with LG saying at the Platt’s awards ceremony that FY 21 revenue will be $21bn, so $6bn each in Q3 and Q4. If costs are similar (natural gas costs may have gone up) and the 21% tax assumption is the same.

For the full year I get an EPS of $7.8-8.0 on earnings of $3.8-4bn. Even with convertible repayment in Jan, at this rate (and depending of course on auto and other big contract renegotiations), net debt zero by end Q2 22 looks easy.

And if EV/EBITDA of 6-8x is the right multiple for the sector - and everything seems to trade in that range (NUE, X, STLD, etc including CLF’s recent scrap business acquisition), then with zero net debt CLF’s EV has to all be market cap. Even if longer term EBITDA goes to half where it is now, as spot HRC prices fall, we’re still looking at $2-3bn of annual EBITDA. At 6x-8x that is a valuation range of $12bn-24bn, mid point $18bn. Translating to a price target of about $36.

If you’re more bullish on spot prices and long term sustainable EBITDA, you could easily get into the mid-$40s as a price target.

If you’re more of a P/E investor, at that time we’re still only talking about mid/high single digit multiples on a zero net debt company, that will start paying out dividends and buying back its own stock some time in the next few quarters.

However I look at it, CLF seems ripe for revaluation: several quarters of good earnings coming and other catalysts like an infrastructure bill and quota based tariff reform agreed with the EU, but keeping tariffs on China.

And if it starts to pop, then there is going to be a lot of short covering to drive it higher too.

I’m happy to carry on holding for the next 6months at least, and am pretty optimistic where CLF will be in April after Q1 22 numbers.