Cleveland-Cliffs (NYSE:CLF) executives said the company entered 2026 with a “robust order book,” improving pricing, and a leaner cost structure after a challenging 2025 marked by import pressure, weaker vehicle production, and unfavorable slab contract economics.
On the company’s fourth-quarter and full-year 2025 earnings call, Chairman, President and CEO Lourenco Goncalves said Cleveland-Cliffs spent 2025 “fixing what needed to be fixed,” including shutting down underperforming assets and terminating an index-based slab supply agreement with ArcelorMittal that became “very onerous” in its final year due to a disconnect between Brazilian slab index pricing and U.S. finished steel prices.
Management cites improving market backdrop entering 2026
He also said Cleveland-Cliffs has been able to reallocate melting capacity previously used for low-margin slab orders toward higher-margin flat-rolled products. At the same time, due to melted-and-poured requirements, he said the company anticipates continued demand for domestically produced slabs and remains open to supplying slabs under pricing constructs that make sense.
Goncalves said the spot steel price was at a two-year high and noted recent cold weather in the Midwest contributed to higher scrap and electricity prices, which he said increased mini-mill costs more than Cleveland-Cliffs’ own cost structure given its power generation and lower scrap usage. He also emphasized that despite a sizable fixed-price automotive footprint, Cleveland-Cliffs’ profitability is more influenced by spot pricing than peers because of its vertical integration and non-automotive exposure.
Automotive contracts, capacity utilization, and aluminum-to-steel substitution
Automotive remained the company’s core end market, management said, though U.S. vehicle production fell in 2025 for the third consecutive year. Goncalves said the company signed multi-year fixed-price contracts with all major OEM customers during 2025, increasing market share and securing high-margin business expected to flow through 2026 as supplier changeovers progress.
He argued Cleveland-Cliffs has existing installed capacity and does not need to build new plants to absorb incremental automotive demand, contrasting with competitors developing new facilities. In response to a question about available capacity, Goncalves pointed to underutilized downstream operations, including a galvanizing line in Columbus, Ohio, which he said is running at less than 300,000 tons per year versus capacity of 450,000 tons.
Goncalves also highlighted efforts to replace aluminum with steel in automotive applications, saying the company’s steel is now being stamped into exposed components using existing aluminum forming equipment “on a production-scale basis.” He said Cleveland-Cliffs has proven this capability with three different OEMs and is receiving production-scale orders, while noting timing is controlled by customers. He tied the opportunity to what he described as disruptions in the aluminum supply chain, including a “succession of fires” at the same plant over roughly 40 to 45 days.
Slab contract termination expected to lift earnings
During Q&A, Goncalves said the expiration of the ArcelorMittal slab contract should provide a material uplift. He estimated the EBITDA benefit “to the order of $500 million” from replacing slab volumes with higher-margin products, calling it a high-level figure that could ultimately be higher.
He said the financial impact would build over time as cost flows through inventory, with more impact expected in the second quarter than the first, and more in the third quarter than the second. CFO Celso Goncalves added that at then-current market levels, management viewed the change as roughly a $700 million improvement in revenue, offset by about $150 million of higher conversion costs to roll slabs, framing the math for full-year 2026.
Shipments, pricing, costs, and capital spending outlook
Celso Goncalves reported fourth-quarter 2025 total shipments of 3.8 million tons, slightly lower than the third quarter due to heavier seasonal impacts. He said first-quarter shipments should improve back to about 4 million tons, supported by improved demand and less maintenance time, and he projected full-year 2026 shipments of 16.5 million to 17 million tons as utilization rises.
Fourth-quarter price realization was $993 per net ton, down about $40 per ton, which the CFO attributed to lagging indices on spot prices, lower automotive volume, and slab price dislocation. He said those factors are “largely behind us” and forecast realized prices to improve by about $60 per ton in the first quarter of 2026 versus the fourth quarter, with potential for further increases if pricing continues trending higher.
Celso Goncalves said 2025 marked the third straight year of unit cost reductions, with about $40 per ton reduced, aided by footprint rationalization and a reduction of around 3,300 employees. He said the company expects a fourth consecutive year of cost reductions in 2026, down another $10 per ton, citing coal contracts expected to generate more than $100 million in year-over-year savings and higher utilization, partially offset by utilities and labor costs. He cautioned that first-quarter 2026 costs could rise about $20 per ton temporarily due to utility spikes and mix before normalizing in the second quarter.
On capital spending, the CFO said 2025 CapEx totaled $561 million, which he described as a record low for the company as a steel producer. For 2026, Cleveland-Cliffs projects about $700 million of CapEx, reflecting more normalized maintenance capital and pre-work plus a coke plant upgrade ahead of a Burns Harbor furnace C reline planned for 2027. In response to an analyst question, he said 2027 CapEx could be around $900 million due largely to the reline, then return to roughly $700 million in 2028.
Stelco, POSCO discussions, and asset sales
Goncalves said Cleveland-Cliffs acquired Stelco on Nov. 1, 2024 and redirected its output entirely to the Canadian market. He said Canada later became a dumping ground for steel seeking to avoid U.S. tariffs, leading to Canadian pricing decoupling from U.S. pricing. He said the Canadian government implemented restrictions late in the fourth quarter of 2025 that were “insufficient and limited in scope” but “able to stop the bleeding,” with improved Canadian pricing and shipments in the last month.
Asked about Stelco’s earnings drag, Celso Goncalves said the company does not break out EBITDA by mill, but acknowledged Stelco was “disappointing” in 2025 and said it is now contributing and should deliver a “significant EBITDA increase” in 2026 as conditions improve.
Management also discussed its memorandum of understanding with POSCO, calling it the company’s “number one strategic priority.” Goncalves said POSCO continues due diligence and that Cleveland-Cliffs is targeting signing a definitive agreement in the first half of 2026. He emphasized the MOU is non-binding and any deal must be accretive to shareholders.
On asset sales, the CFO said the company has already closed the sale of FPT Florida and remains on track for $425 million in total proceeds from sales of idled properties, with several under contract and agreements in principle for most of the rest. He added that potential larger asset sales—such as Toledo HBI and additional FPT assets—could be incremental to the $425 million but are on hold while POSCO talks continue.
Celso Goncalves also highlighted balance sheet actions in 2025, saying that after refinancing, the nearest bond maturity is now 2029 and outstanding bonds are unsecured. He said total liquidity at the end of 2025 was $3.3 billion, and management’s focus in 2026 is generating EBITDA and cash flow to pay down debt.
About Cleveland-Cliffs (NYSE:CLF)
Cleveland-Cliffs Inc is a leading North American producer of iron ore pellets and flat-rolled steel products. Tracing its roots to 1847, the company has evolved from an iron-ore mining concern in the Great Lakes region into a fully integrated steelmaker. Today, Cleveland-Cliffs operates iron ore mining complexes in Michigan and Minnesota as well as steelmaking and finishing facilities across the United States.
The company’s integrated platform begins with direct control of key raw materials, including iron ore and scrap, and extends through every stage of steel production.
