CLEVELAND-CLIFFS INC. Q3 FY2026 earnings call

• Strong Financial Recovery: Q3 Adjusted EBITDA reached $612 million, more than double Q2’s $286 million, driven by increased shipments, higher selling prices, and better-than-guided cost performance.
• Trade Policy Impact: Management attributes success to strict enforcement of US trade laws and Section 232 tariffs, which have reduced imports by 35-40% below pre-tariff levels and created a rational domestic market.
• Contract Negotiations: Successful renewal of 2027 contracts with service centers and end-users, generating over $1 billion in year-over-year EBITDA improvement. Contracts are shifting to index-linked pricing with minimal discounts and take-or-pay minimums.
• Capital Investment & Maintenance: Postponed Burns Harbor Sea Blast Furnace reline from mid-2027 to April 2028 to maximize production during high demand. Completed re-scoping of $1 billion Middletown Works modernization project with DOE support.
• Canadian Operations (Stelco): Hot-rolled coil business improved significantly due to Canadian TRQ system. Galvanized steel business remains at risk due to import surges; management urges Canadian government to restrict galvanized imports to restore profitability and employment.

Financial performance data for specific product segments (e.g., Automotive, Construction, Stelco) is not explicitly broken down in absolute dollar terms or revenue contribution percentages within the provided transcript. The report highlights consolidated Adjusted EBITDA of $612 million and notes strong automotive shipments, but does not provide a granular segmental financial breakdown.

• Q4 2026 Guidance: Expect Adjusted EBITDA of $715 million, approximately $100 million higher than Q3, driven by continued pricing improvements and backlog conversion.
• 2027 Outlook: Projected Adjusted EBITDA of over $4 billion for full year 2027, averaging more than $1 billion per quarter, supported by favorable contract resets and stable coal costs.
• CapEx Guidance: Full-year 2026 CapEx expected around $700 million; 2027 CapEx expected to exceed $1 billion due to strategic projects like Middletown and Burns Harbor preparation.
• Balance Sheet Targets: Aim to reduce leverage below 2.5x target by mid-2027, with debt repayment remaining the primary use of free cash flow.

• Canadian Regulatory Risk: Stelco’s galvanized steel operations remain unprofitable due to insufficient protection against dumped imports; potential job losses if Canadian government does not enforce stricter quotas.
• Operational Dependencies: Restarting the Dearborn blast furnace is contingent on OEMs reshoring production (e.g., GM Chevy Trax) rather than relying on imported steel.
• Supply Chain Reliability: Risks associated with aluminum supply chain instability affecting Ford F-150 production, highlighting the need for reliable domestic steel sourcing.
• Contract Execution: Shift to take-or-pay contracts requires client acceptance; while majority have agreed, some clients may resist lower minimum tonnage commitments.

Q: Timna Tanners asked about 2027 CapEx guidance and whether asset sales would yield ~$370M in Q4.

A: CFO confirmed 2026 CapEx at ~$700M, rising to >$1B in 2027 for strategic projects. Asset sales are contracted to close in Q4, though some delays occurred due to local power/community issues. CEO added that postponing the Burns Harbor reline adds 500k tons of incremental production in 2027.

Q: Nick Giles sought clarification on the percentage of 2027 contracts concluded and the composition of the Q4/2027 EBITDA bridge regarding costs and ASPs.

A: CEO stated >55% of contracts are signed with zero rejections, expecting completion by Thanksgiving. CFO noted Q3 cost outperformance ($17/ton beat) was volume-driven; Q4 costs will rise slightly due to maintenance/energy, while ASPs will increase $45-$55/ton.

Q: Carlos de Alba inquired about working capital normalization in Q4 and whether equity raises were considered to strengthen the balance sheet beyond the 2.5x leverage target.

A: CFO projected Q4 working capital to be neutral after a Q3 build. CEO firmly rejected equity issuance, stating the company has no need for external capital and prefers using operational cash flow to pay down debt aggressively.

Q: Nick Cash asked what conditions are needed to restart the Dearborn blast furnace given tight automotive volumes.

A: CEO explained Dearborn won’t restart until GM reshores production of its Chevy Trax from South Korea to the US. He also criticized Ford’s F-150 aluminum skin strategy as unreliable, noting that engineering challenges with aluminum have forced reliance on Cliffs’ steel capabilities.

Q: Samuel McKinney questioned why Q3 volumes missed the 300k ton guidance despite strong demand, and how contract structures are evolving.

A: CEO attributed the miss to disorganized just-in-time scheduling by auto OEMs requiring Cliffs to reschedule production. He emphasized that clients are now accepting index-linked contracts with take-or-pay minimums because securing physical steel availability is prioritized over price negotiation.