Steel production has rallied along with the recovery in auto production this quarter, Cleveland-Cliffs CEO Lourenco Goncalves told CNBC on Monday.
U.S. automakers are sprinting to re-stock showrooms and get back on schedule after plants shut down earlier this year when the country took measures to slow the spread of a novel coronavirus.
"We have had a very profitable quarter and were very strong in terms of the recovery in demand, particularly in the automotive sector," he said in an appearance at Closing Bell.
The US economy quickly slipped into recession as stores closed and unemployment rose across the country. However, demand for cars, like demand in the real estate market, was one of the unexpectedly stronger parts of the economic recovery.
The Big Three automakers' plants in Detroit are now working near full speed to get back on track and get new cars out to dealerships as the holiday season approaches. Sales of SUVs and pickups have been particularly strong in consumer purchases.
Cleveland-Cliffs is the largest US manufacturer of iron ore pellets, which are used to make steel. The Cleveland, Ohio-based company announced Monday that it would acquire the U.S. assets of ArcelorMittal SA, the world's largest steel maker, for approximately $ 1.4 billion. The acquisition follows Cleveland-Cliffs' $ 1.1 billion purchase of AK Steel in December.
The steel industry suffered its worst downturn since the 2008 financial crisis, when demand and prices for the product fell due to the factory closures.
"Cleveland-Cliffs has massive automotive exposure, which hit us very hard in the second quarter," said Goncalves. "When the automotive industry shut down in this country, we had to cut our production," but "the third quarter was a whole different story."
According to Charlie Chesbrough, senior economist at Cox Auto, North American auto production is down 2 million year over year, in part because consumer demand is exceeding the time it takes to move new vehicles from the plants to the showrooms bring to.
When automakers report US auto sales in September on Thursday, analysts estimate the annualized sales pace will surpass August's rate, which stood at 15.2 million vehicles. That number is up from an annualized sales rate of 8.6 million vehicles in April, when the industry bottomed out due to pandemics.
Total sales for the month of September are expected to be 1.29 million units. That would be a decrease from 1.33 million units sold last month and a slight increase from 1.28 million units last year.
Cleveland-Cliffs' stock was up 11.6% on Monday, trading at $ 6.56.