Cleveland-Cliffs CEO believes in boost from auto manufacturing in North America (NYSE: CLF)

Roll steel

SlobodanMiljevic / E + via Getty Images

Cleveland-Cliffs (NYSE:CLF) close the door -8.9% in trading next Friday missing 2nd quarter earnings estimatesweighed down by higher operating costs and supply chain disruptions.

Q2 net income fell to $601 million, or $1.13 per share, from $795 million, or $1.33 per share, in the year-ago period, even as sales revenue increased 25% year-on-year to $6.34 billion.

Cleveland-Cliffs (CLF) said it produced a net 3.6 million tons of steel products in Q2, down from 4.2 million tons in the previous quarter, while benchmark steel prices averaged ~$1,300/ton during the quarter and $1,200. la/ton in Q1, but price has dropped to $920/ton currently.

The company is expected to see some price improvement when some of its annual fixed-price sales contracts are re-established in early October.

inside Conference call on Q2 earningsCEO Lourenco Goncalves has played down the risk of a recession and higher interest rates hurting auto demand, saying COVID-related supply chain issues and production shutdowns over the past two years has left the vehicle market unsupplied.

“The auto industry may have produced 8 million-10 million more cars than it actually did in the past two years,” the executive said.

Goncalves also said the Cleveland-Cliffs (CLF) will do no more “big investment” in the coming years, beating out his competitors, who have announced plans to spend billions of dollars on new factories.

According to Argus Media, Goncalves said: “Our last major capital project was to renovate Cleveland Works, and we won’t have any other capital projects of this magnitude until at least 2025.

Just this week, Steel Dynamics announced plans to build a $2.2 billion aluminum rolling mill in the southeastern United States.

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