CLF — Cleveland-Cliffs Inc.

Cleveland-Cliffs Q4 2025 Earnings Call Summary

1. Key Financial Results and Metrics

• Q4 Shipments: 3.8 million tons, slightly down from Q3 due to seasonal impacts.
• Price Realization: $993 per net ton, down by approximately $40 per ton from Q3.
• 2025 Full-Year Shipment Guidance: Expected to improve to 16.5 million to 17 million tons in 2026.
• Cost Reductions: Achieved a $40 per ton reduction in unit costs in 2025, with an expected further decline of $10 per ton in 2026.
• CapEx: 2025 CapEx was $561 million, projected to rise to $700 million in 2026 for maintenance and upgrades.
• Liquidity: Total liquidity at year-end 2025 was $3.3 billion.

2. Strategic Updates and Business Highlights

• Market Positioning: Cleveland-Cliffs is well-positioned to benefit from the reshoring of automotive production in the U.S. and has secured multi-year fixed-price contracts with major OEMs.
• Slab Contract Termination: The termination of the slab supply contract with ArcelorMittal is expected to yield an estimated $500 million EBITDA improvement by replacing lower-margin slabs with higher-margin products.
• Safety Performance: Achieved the lowest total recordable incident rate (TRIR) in the company's history, indicating improved safety standards.
• POSCO Partnership: Ongoing negotiations with POSCO for a strategic partnership aimed at meeting U.S. trade requirements, with a definitive agreement targeted for 2026.

3. Forward Guidance and Outlook

• Q1 2026 Expectations: Anticipated shipment levels to return to approximately 4 million tons, with ASP expected to increase by $60 per ton compared to 2025.
• Long-Term Outlook: The company expects a significant recovery in automotive production and market share gains in 2026, supported by favorable pricing dynamics and operational efficiencies.

4. Bad News, Challenges, or Points of Concern

• Steel Imports: Continued exposure to steel imports has negatively impacted domestic market conditions and asset utilization.
• Automotive Production Decline: U.S. vehicle production has declined for three consecutive years, which poses ongoing risks to demand.
• Canadian Market Dynamics: The Canadian market faced challenges due to pricing decoupling from the U.S. market, exacerbated by a surge in imports. However, recent government actions to restrict imports are expected to improve conditions.
• Cost Pressures: Rising scrap and utility prices could temporarily increase costs in Q1 2026 before normalizing.

5. Notable Q&A Insights

• EBITDA Improvement from Slab Contract: Management indicated that the cancellation of the slab contract could lead to a $500 million increase in EBITDA, with benefits expected to materialize more significantly in Q2 2026.
• CapEx Projections: Future CapEx is expected to normalize around $700 million in 2026, increasing to $900 million in 2027 due to a furnace reline.
• POSCO Due Diligence: Cleveland-Cliffs has completed its due diligence on POSCO, emphasizing the strategic importance of the partnership for both companies.
• Aluminum Replacement Opportunity: The company is actively working to replace aluminum with steel in automotive applications, with potential for significant market share gains as OEMs face disruptions in the aluminum supply chain.

Overall, Cleveland-Cliffs is positioning itself for a stronger 2026, with improved operational efficiencies and a favorable market environment, despite facing challenges related to imports and automotive production declines.