Cleveland-Cliffs Signals Turnaround Momentum in 2026 Call
Cleveland-Cliffs ((CLF)) has held its Q4 earnings call. Read on for the main highlights of the call.
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Cleveland-Cliffs’ latest earnings call struck a notably upbeat tone for 2026, as management framed 2025 as a transition year marked by tough but necessary fixes. Executives pointed to rising steel prices, tightening import conditions, sizable cost cuts, and a major slab contract termination as catalysts that should transform today’s headwinds into stronger profitability next year.
Improving Shipments and 2026 Volume Guidance
Cleveland-Cliffs shipped 3.8 million tons in Q4 and expects Q1 2026 volumes to rebound to about 4.0 million tons as markets stabilize. For full-year 2026, management guided to 16.5–17.0 million tons, implying higher utilization than in 2025 and signaling confidence that demand will recover, particularly in automotive.
Price Realization Outlook
Realized prices slipped in Q4 to $993 per net ton, roughly $40 per ton lower as lagging indices caught up with earlier spot weakness. Management anticipates a reversal in 2026, targeting about a $60 per ton improvement versus 2025 and expecting average selling prices to be up around $60 per ton already in Q1 2026.
EBITDA Upside from Slab Contract Termination
A key profit driver is the termination of the index-based slab contract with ArcelorMittal, which management called a game changer. They estimate roughly $500 million in incremental EBITDA, tied to about $700 million in revenue benefit at current HRC spreads, partially offset by around $150 million in higher conversion costs.
Sustained Unit Cost Reductions and Coal Savings
The company recorded its third straight year of unit cost reductions in 2025, trimming about $40 per ton as operational efficiencies took hold. For 2026, Cleveland-Cliffs expects an additional ~$10 per ton full-year cost decline, aided by locked-in coal contracts that should deliver more than $100 million in annual savings.
Strong Liquidity and Balance Sheet Improvements
Liquidity stood at $3.3 billion at the end of 2025, giving the company a sizable buffer as markets normalize. Debt refinancings pushed the nearest bond maturity out to 2029, all bonds are now unsecured, and the ABL draw is the lowest since the Stelco deal, collectively providing balance-sheet flexibility.
Operational and Commercial Wins with Automotive OEMs
Cleveland-Cliffs highlighted multi-year fixed-price contracts signed with all major automotive OEMs, which should support margins and market share in 2026. Crucially, management stressed that existing installed capacity can absorb higher reshored automotive volumes without new plant builds, amplifying the profit leverage on any demand recovery.
Strategic Partnership Momentum with POSCO
Management underscored a memorandum of understanding with POSCO as its top strategic priority, with due diligence ongoing. Both sides are working toward a definitive agreement in 2026, and executives framed the potential partnership as highly accretive and strategically important for future growth.
Safety Progress as a Core Operational Metric
Safety performance continued to improve, with a total recordable incident rate of 0.8 per 200,000 hours in 2025, including contractors. That marks a 43% improvement versus 2021 and the best level since Cleveland-Cliffs became a steel producer, reinforcing management’s emphasis on operational discipline.
Asset Sale Program and Expected Proceeds
The ongoing asset sale program is another lever to shore up the balance sheet, with about $60 million received so far and the sale of FPT Florida completed. Management expects roughly $425 million in proceeds from currently marketed idle assets and hinted that larger asset sales remain available if conditions warrant.
Product Development: Steel Replacing Aluminum
On the innovation front, Cleveland-Cliffs showcased progress in displacing aluminum in exposed auto parts, a high-value niche. The company has successfully stamped its steel on existing aluminum forming lines at production scale with three OEMs, opening a sizeable new market opportunity if adoption accelerates.
2025 Demand Weakness and Import Pressure
Management was candid that 2025 was hurt by heavy steel imports that “poisoned” domestic markets, depressing prices and utilization. This import pressure forced lower shipments, asset shutdowns, and restructuring measures, creating a difficult backdrop that the company believes is now turning more favorable.
Q4 Pricing Lags and Automotive Volume Decline
Q4 price realization reflected lagging index mechanisms that only later captured earlier spot weakness, contributing to the $993 per ton outcome. Automotive volumes also fell in 2025 amid a third straight year of lower U.S. vehicle production, pressuring revenue but setting up potential upside if auto builds rebound.
Stelco Drag and Canadian Market Dislocation
Stelco was a notable drag in 2025 as Canadian pricing decoupled from the U.S. on the back of import dumping. Management described Stelco’s performance as disappointing and acknowledged its negative impact on near-term results, though they did not disclose mill-level EBITDA details.
Workforce Reductions and Footprint Rationalization
To align costs with demand, Cleveland-Cliffs cut about 3,300 employees in 2025 and shut underperforming assets. While disruptive, these rationalization moves are expected to streamline the footprint, reduce structural costs, and position the company to benefit more fully once volumes recover.
Near-Term Cost and Utility Pressures
Short-term margin pressure is coming from higher scrap and electricity costs, exacerbated by recent cold weather. Management warned that Q1 2026 unit costs could be about $20 per ton higher before easing back toward normalized levels in Q2 as energy markets calm.
Elevated Leverage Despite Structural Progress
Despite refinancing wins and extended maturities, leadership acknowledged that absolute debt remains too high. The company’s strategy for 2026 centers on converting expected EBITDA gains and asset-sale proceeds into cash flow to pay down debt and reduce leverage over time.
Q4 Seasonal Headwinds and Pricing Lags
Seasonal softness weighed more heavily than usual on Q4, nudging shipments below Q3 levels. Pricing lags tied to monthly and quarterly index contracts also delayed the benefits of recent contract changes, with management expecting clearer visibility by Q2 and Q3 2026 as new terms flow through.
Forward Guidance and 2026 Outlook
Management guided Q1 2026 shipments to about 4.0 million tons and full-year 2026 volumes to 16.5–17.0 million tons, with realized prices roughly $60 per ton higher than 2025. They plan about $700 million in 2026 CapEx, see >$100 million annual coal savings, target $425 million in asset-sale proceeds, and expect around $500 million in EBITDA benefit from the slab contract exit while prioritizing cash generation and debt reduction.
Cleveland-Cliffs’ call painted 2025 as a difficult but necessary reset and 2026 as the payoff period, backed by better pricing, higher volumes, and leaner costs. While import risks, energy volatility, and leverage still bear watching, the combination of strong liquidity, OEM contract visibility, and structural profit tailwinds will likely keep investors focused on the earnings power emerging over the next year.
