CLF — Cleveland-Cliffs Inc.

Cleveland-Cliffs Q1 2026 Earnings Call Summary

1. Key Financial Results and Metrics

• Adjusted EBITDA: $95 million, up $274 million year-over-year, primarily due to increased pricing.
• Shipments: Over 4.1 million tons, a sequential recovery of more than 300,000 tons, with expectations for further increases in Q2.
• Average Selling Prices: Increased by $68 per ton year-over-year and $55 per ton sequentially.
• Free Cash Flow: Negative in Q1 due to working capital timing, but expected to return to positive in Q2.
• Liquidity: Maintained above $3 billion.

2. Strategic Updates and Business Highlights

• Order Book: Full, with strong demand from automotive OEMs leading to longer production schedules and improved efficiency.
• Market Position: Domestic steel producers are benefiting from lower steel imports and effective enforcement of tariffs, enhancing competitiveness.
• Operational Changes: Idling of less efficient mills to consolidate capabilities and improve cost performance without reducing overall production.
• Quality Recognition: Received the Toyota Quality Excellence Award, indicating high standards in production quality.
• AI Initiative: Partnering with an AI provider to enhance production planning and decision-making processes.

3. Forward Guidance and Outlook

• Q2 Expectations: Anticipate improved shipments above 4.1 million tons, with prices expected to rise by about $60 per ton.
• Q3 Outlook: Expected to show significant improvement due to lower outages and higher utilization, with maximum operating leverage anticipated.
• Cost Guidance: Q2 costs expected to rise by $15 per ton due to outages and higher energy costs, but should decline in Q3 as operational efficiencies improve.
• Asset Sales: Projected cash inflow of $425 million from idle property sales, with expectations of $50 million in Q2 and $100 million in Q3.

4. Bad News, Challenges, or Points of Concern

• Energy Costs: Significant impact from energy price spikes in Q1, resulting in an $80 million negative EBITDA impact.
• Cost Pressures: Continued increases in fuel and scrap prices, with expectations for higher costs in Q2 before a decline in Q3.
• Canadian Market: Oversupply issues in Canada affecting pricing, with Canadian prices at a 40% discount to U.S. prices.
• Labor Agreement: Upcoming negotiations with the United Steelworkers represent a potential challenge in maintaining competitiveness and flexibility.

5. Notable Q&A Insights

• Price Expectations: Q2 pricing expected to improve, with a lag in realization impacting Q1 results.
• Slab Contract: 175,000 tons shipped in Q1 as part of the tail end of a contract, now concluded.
• Working Capital: A $130 million build in Q1 primarily from accounts receivable, with a slight release expected in Q2.
• POSCO Negotiations: Ongoing discussions with POSCO remain active, but external market changes have altered the urgency and dynamics of the negotiations.
• Shift from Aluminum to Steel: Notable momentum in automotive and other sectors shifting back to steel from aluminum, enhancing market share opportunities.

This summary encapsulates the key points from Cleveland-Cliffs' Q1 2026 earnings call, highlighting financial performance, strategic initiatives, future guidance, challenges, and insights from the Q&A session.