Cleveland-Cliffs Inc. (CLF) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call revealed mixed signals: positive automotive sector growth and strategic partnerships are offset by automotive market weakness and high debt levels. The Q&A highlighted unquantified risks and uncertainties, such as open capacity utilization. Financial metrics showed improvements, but cost pressures and delayed contract benefits persist. Overall, these factors balance out, suggesting limited short-term stock price movement.
Key Financial Performance
Total shipments in Q4 3.8 million tons, slightly lower than Q3 due to heavier-than-usual seasonal impacts.
Full year 2026 shipment level expectation 16.5 million to 17 million tons, an improvement from 2025 due to higher mill utilizations.
Q4 price realization $993 per net ton, fell by around $40 per net ton due to lagging indices on spot prices, automotive volume decline, and slab price disconnection.
Expected Q1 2026 price realization Increase of approximately $60 per ton from Q4 2025 due to improving pricing trends.
Unit cost reductions in 2025 Reduced by $40 per ton, driven by rationalization of footprint and reduction of around 3,300 employees.
Projected unit cost reduction in 2026 Down another $10 per ton, with locked-in coal contracts generating over $100 million in savings year-over-year.
Capital expenditures in 2025 $561 million, a record low as a steel company.
Projected capital expenditures in 2026 Around $700 million, reflecting normalized maintenance capital and prework for a coke plant upgrade.
Total liquidity at the end of 2025 $3.3 billion, with the lowest ABL draw since the Stelco acquisition.
Asset sale proceeds expectation $425 million, with several idled properties under contract or agreements in principle.
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Operating Highlights
Automotive steel products: Secured multiyear fixed price contracts with major OEMs, increasing market share and ensuring high-margin business for 2026. Developed steel products that can replace aluminum in automotive components without requiring new tooling or capital investment.
Canadian market: Improved pricing and shipments due to Canadian Government's restrictions on steel imports. Stelco's output redirected entirely to the Canadian market, improving U.S. marketplace dynamics.
POSCO partnership: Announced a strategic partnership with POSCO, Korea's largest steelmaker, to support U.S. customer base and meet domestic melted import requirements. Targeting a definitive agreement in the first half of 2026.
Cost reductions: Achieved third consecutive year of unit cost reductions in 2025, with further reductions expected in 2026. Locked in coal contracts generating over $100 million in savings.
Asset optimization: Rationalized footprint and reduced workforce by 3,300 employees in 2025. Selling idled properties with expected proceeds of $425 million.
Steel import tariffs: Section 232 tariffs at 50% driving demand for domestically produced steel, benefiting Cleveland-Cliffs.
Reshoring manufacturing: Policy-driven reshoring of manufacturing in the U.S. expected to increase domestic vehicle production, benefiting Cleveland-Cliffs' automotive steel business.
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Risk or Challenges
Steel Imports Impact: The company faced challenges due to high levels of steel imports in 2025, which negatively impacted domestic market demand, steel shipments, and asset utilization.
Onerous Slab Supply Contract: The terminated index-based slab supply contract with ArcelorMittal became financially burdensome in its final year, affecting profitability.
Canadian Steel Market Dynamics: Canada became a dumping ground for steel producers avoiding U.S. tariffs, leading to pricing decoupling and negatively impacting the Canadian subsidiary Stelco until late 2025.
Automotive Market Weakness: Domestic vehicle production was down for the third consecutive year in 2025, adversely affecting the company's core automotive market.
Cost Pressures: Rising scrap and electricity prices increased the cost structure for mini mills, although Cleveland-Cliffs mitigated some of this due to its vertically integrated operations.
Transition Delays in Automotive Contracts: The transition to Cleveland-Cliffs steel from previous suppliers for automotive OEMs is not instantaneous, delaying the full realization of benefits from new contracts.
Debt Levels: The company’s leverage remains high, although the debt structure provides flexibility. Elevated debt levels could pose financial risks.
Utility Cost Spikes: Temporary spikes in utility costs are expected to increase costs in Q1 2026 before normalizing.
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Guidance & Outlook
Automotive Market Recovery: The company expects a return to pre-COVID levels of vehicle production in the United States, driven by policy-driven reshoring. This is anticipated to result in increased throughput, efficiency, and profitability in 2026.
Steel Pricing and Demand: Spot steel prices are at a two-year high, and the company anticipates continued demand for domestically produced slabs due to melted import requirements. This is expected to benefit Cleveland-Cliffs' profitability.
Automotive Contracts: Cleveland-Cliffs has signed multiyear fixed-price contracts with major OEMs, securing high-margin business that will flow through in 2026. The company has the capacity to meet incremental automotive demand without building new plants.
Canadian Market Improvements: The Canadian Government's restrictions on steel imports have created positive momentum for the company's Canadian subsidiary, Stelco, with improved pricing and shipments expected in 2026.
POSCO Partnership: The company is targeting a definitive agreement with POSCO in the first half of 2026, aiming for a strategic partnership that is accretive to shareholders.
Operational Efficiency and Cost Reductions: The company expects unit costs to decline for the fourth consecutive year in 2026, with a projected reduction of $10 per ton. This includes savings from coal contracts and higher utilization rates.
Capital Expenditures: Projected capital expenditures for 2026 are around $700 million, reflecting normalized maintenance and prework for a coke plant upgrade.
Debt Management and Cash Flow: The company aims to generate healthy cash flow in 2026, which will be used to pay down debt. Asset sales are expected to bring in $425 million in proceeds.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:What is the expected benefit from the cancellation of the slab contract this year?
A:The benefit is estimated to be around $500 million in EBITDA due to replacing slabs with higher-margin products. This improvement will start to be seen in Q1 but will have a greater impact in Q2 and Q3.
Q:What is the expected CapEx for 2027 and beyond?
A:CapEx for 2027 is expected to be around $900 million due to the Blast Furnace reline at Burns Harbor, and it will normalize back to $700 million in 2028.
Q:How much open capacity does Cleveland-Cliffs have, and what is the sensitivity from an EBITDA perspective?
A:Cleveland-Cliffs has significant downstream capacity in various locations, such as Columbus, Ohio, and Rockport, Indiana. The company is ready to utilize this capacity but is limited by automotive production in the U.S. The potential EBITDA impact was not quantified.
Q:What is the outlook for Q1 2026 in terms of ASP, costs, and volumes?
A:Shipments are expected to return to 4 million tons, ASP is expected to increase by $60 per ton, and costs will likely rise by $20 per ton in Q1 before normalizing in Q2. On a full-year basis, costs are expected to decline by $10 per ton.
Q:Has Cleveland-Cliffs completed its due diligence on POSCO?
A:Yes, Cleveland-Cliffs has completed its due diligence on POSCO. The partnership is a strategic priority, and any deal will need to be accretive to shareholders.
Q:What is the potential size and timeline for taking share from aluminum?
A:Cleveland-Cliffs has proven its capability to replace aluminum with steel in automotive applications. The timeline depends on client decisions, but the company is ready to scale production.
Q:How has Stelco performed, and what is the outlook for 2026?
A:Stelco underperformed in 2025 due to low Canadian prices caused by imports. However, with changes in Canadian trade policies, Stelco is expected to be a significant contributor to Cleveland-Cliffs' results in 2026.
Q:What is the status of asset sales and proceeds?
A:Cleveland-Cliffs has $425 million in potential proceeds from idle plant sales, with $60 million already received. Larger asset sales, such as Toledo HBI, are on hold pending the outcome of the POSCO partnership discussions.
Q:Review of Unclear Management Responses
A:Management avoided providing a direct answer on the potential EBITDA sensitivity from open capacity utilization and did not quantify the size of the aluminum replacement opportunity in terms of tonnages or timeline.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Canadian Government
Cleveland Cliffs
Cliffs POSCO
Cliffs plant
Cliffs steel
Stelco
TRIR
agreement
aluminum steel
apple
capacity Cliffs
capital investment
changeover
collaboration
contractor
customer base
employee
import requirement
level ton
maintenance
manufacturing
marketplace
momentum
order margin
policy
price factor
proceeds sale
production United
requirement demand
slab
spot steel
steel price
steelmaker
tariff
team
utility
utilization
CLF Transcript
Cleveland-Cliffs Inc. (CLF) Q4 2025 Earnings Call Transcript
Unknown2-9
The earnings call revealed mixed signals: positive automotive sector growth and strategic partnerships are offset by automotive market weakness and high debt levels. The Q&A highlighted unquantified risks and uncertainties, such as open capacity utilization. Financial metrics showed improvements, but cost pressures and delayed contract benefits persist. Overall, these factors balance out, suggesting limited short-term stock price movement.
Cleveland-Cliffs Inc. (CLF) Q3 2025 Earnings Call Transcript
Positive10-20
The earnings call summary indicates strong financial performance with a 52% increase in adjusted EBITDA, favorable pricing due to automotive strength, and significant cost reductions. The company is also expanding its stainless steel business and exploring rare earth opportunities. Despite some uncertainties in the Q&A regarding timelines and specifics, the strategic focus on automotive and cost efficiencies, along with the potential for significant EBITDA growth and debt reduction, suggest a positive outlook for the stock price.
Cleveland-Cliffs Inc. (CLF) Q2 2025 Earnings Call Transcript
Positive7-21
The company's earnings call reflects a positive sentiment overall. Despite an adjusted EBITDA loss, the company anticipates improved financial results in the latter half of 2025. Operational efficiency improvements, increased shipment volumes, and cost reductions signal a positive outlook. The Q&A section further supports optimism with cost-saving strategies and potential growth in automotive volumes. However, management's avoidance of specifics on certain projects and opportunities tempers the outlook slightly. Given these factors, a positive stock price movement of 2% to 8% is expected.
Cleveland-Cliffs Inc. (CLF) Q1 2025 Earnings Call Transcript
Unknown5-8
The earnings call indicates several negative factors, including problematic AB supply, layoffs, economic pressures, and elevated debt levels. The company reported an EBITDA loss and increased unit costs, with no share repurchase program announced. While there is some optimism in cost reductions and liquidity, the Q&A reveals concerns about tariffs, competition, and unclear management responses. Overall, the negative aspects outweigh the positives, leading to a negative sentiment rating.
CLF Slides
CLF Report
Frequently Asked Questions
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