Cliffs (CLF) Q3 2026 Earnings Call Transcript

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DATE

Mon, Oct. 19, 2026

CALL PARTICIPANTS

• Chairman and Chief Executive Officer - C. Lourenco Goncalves
• President and Chief Financial Officer - Celso L. Goncalves Jr.

TAKEAWAYS

• Revenues -- $5.6 billion, increasing from $5.2 billion in the previous quarter driven by higher shipments and selling prices.
• Adjusted EBITDA -- $612 million, representing the strongest quarterly result in three years and a $326 million sequential improvement reflecting favorable price and cost movements.
• Fourth-Quarter Adjusted EBITDA Guidance -- Approximately $715 million, reflecting expected pricing improvements offset by maintenance outages and seasonality.
• 2027 Adjusted EBITDA Guidance -- Over $4 billion, based on current price forecasts and favorable customer contract renewals.
• Steel Product Sales Volumes -- 4.2 million net tons, compared to 4 million net tons in the second quarter.
• Average Net Selling Price -- $1,177 per net ton, an increase of $53 per ton sequentially due to rising market pricing in the U.S. and Canada.
• Unit Cost Performance -- A decline of $17 per net ton, exceeding previous guidance because of high facility utilization rates.
• GAAP Net Income -- $165 million, or $0.26 per diluted share, for the third quarter.
• Adjusted Net Income -- $0.28 per diluted share, representing an improvement from an adjusted net loss of $0.20 per diluted share in the second quarter.
• Total Liquidity -- $3.2 billion as of Sept. 30, 2026.
• Contract Renewal Impact -- Expected to generate more than 1 billion in year-over-year EBITDA improvement for 2027 based on signed agreements.
• Middletown Works Modernization -- A $1 billion investment project, supported by $500 million from the Department of Energy, to upgrade steelmaking capacity.
• 2026 Capital Expenditures -- Approximately $700 million, compared to $560 million in the prior year.
• 2027 Capital Expenditures -- Expected to exceed 1 billion, driven by strategic projects and preparation for blast furnace maintenance.
• Incremental 2027 Shipments -- 500,000 net tons, made available by the decision to postpone the Burns Harbor C-blast furnace reline to April 2028.
• Grain-Oriented Electrical Steel Production -- Increasing 25% at Butler Works to support domestic electrical grid demand.
• Stelco Acquisition Cost -- 3.4 billion Canadian dollars for the acquisition completed less than two years ago.
• Leverage Target -- A net debt to EBITDA ratio between 2 times to 2.5 times, which management expects to reach by mid-2027.
• Distributors and Converters Sales -- $1.8 billion, representing 34% of total steelmaking segment revenue.
• Automotive Sales -- $1.5 billion, or 28% of steelmaking revenue, with shipments reaching their highest level since 2023.
• Infrastructure and Manufacturing Sales -- $1.5 billion, representing 28% of segment revenue.
• Steel Producers Sales -- $532 million, or 10% of total steelmaking segment revenue.
• Working Capital Build -- $160 million during the third quarter, primarily due to a $170 million increase in inventory.

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RISKS

• Celso L. Goncalves Jr. warned that fourth-quarter costs are expected to "increase slightly, that is driven by repair and maintenance schedules, a little bit of higher energy costs, higher alloy costs, elevated diesel prices."
• C. Lourenco Goncalves stated, "The domestic market for galvanized steel in Canada is not big enough to accommodate 2 Canadian producers of galvanized steel Stelco and ArcelorMittal Dofasco, and also an avalanche of imports," noting this condition led to the idling of lines.
• C. Lourenco Goncalves warned that for reasons "beyond our control or ability to predict Stelco became a negative contributor to Cliffs' results" for more than one year following the acquisition.

SUMMARY

Cleveland-Cliffs Inc. (NYSE:CLF) reported sequential growth in revenue and profitability during the third quarter, supported by higher average selling prices and decreased unit costs. Management attributed the recovery to domestic trade enforcement and higher facility utilization rates. The company stated it is prioritizing debt reduction using free cash flow and proceeds from contracted property sales, with a goal of reaching its leverage target by mid-2027. Strategic initiatives discussed on the call include the modernization of Middletown Works and a 25% capacity expansion for grain-oriented electrical steel production to meet growing infrastructure demand.

• The company is postponing the Burns Harbor C-blast furnace reline to April 2028; Celso L. Goncalves Jr. stated that by pushing out the reline, the company can "capitalize on a highly favorable commercial environment" and increase cash generation.
• Management has implemented a "take or pay" structure for minimum tonnage in more than 55% of new customer contracts; C. Lourenco Goncalves noted, "now the minimum tonnage contracted is a take or pay for Cleveland Cliffs."
• The Middletown Works modernization project scope was finalized at $1 billion, integrating artificial intelligence process controls and a new co-generation facility with expected completion in the first quarter of 2030.
• C. Lourenco Goncalves reported that negotiations with the United Steelworkers have extended past the original deadline but remain "professional respectful, and productive."
• Management idled galvanizing lines at the Stelco Hamilton facility; C. Lourenco Goncalves stated, "Stelco would be even more profitable if dumped galvanized steel imported into Canada would no longer be tolerated."
• The company concluded coal contract negotiations for 2027 at "rollover pricing," providing stability for one of its largest raw material cost components.

INDUSTRY GLOSSARY

• HBI (Hot-Briquetted Iron): A premium, compacted form of direct reduced iron used as a high-quality feedstock in steelmaking.
• HRC (Hot-Rolled Coil): A flat steel product produced from slabs that is used in various industrial and manufacturing applications.
• Section 232: Trade regulations under the Trade Expansion Act of 1962 that allow the U.S. to impose tariffs on imports deemed a threat to national security.
• TRQ (Tariff-Rate Quota): A trade mechanism that applies a lower tariff to a specific quantity of imports and a higher tariff to any volume exceeding that limit.
• Grain-Oriented Electrical Steel (GOES): A specialized type of steel with magnetic properties used primarily in the cores of high-efficiency transformers.
• Galvaneal: A specialized carbon steel coated with a zinc-iron alloy to provide superior corrosion resistance and paint adhesion.
• USW (United Steelworkers): The labor union representing a significant portion of the company's North American workforce.
• Fortress North America: A strategic concept advocating for integrated trade protection and cooperation between the United States and Canada to support domestic steel production.

Full Conference Call Transcript

Operator: Good morning, ladies and gentlemen. My name is Donna, and I am your conference facilitator today. I would like to welcome everyone to Cleveland Cliffs' Third Quarter 26 Earnings Conference Call. All lines have been placed on mute to prevent background noise. After the speakers' remarks, there will be a question and answer session. The company reminds you that certain comments made on today's call will include predictive statements that are intended to be made as forward looking within the Safe Harbor protections of the Private Securities Litigation Reform Act of 2 thousand.

Although the company believes that its forward looking statements are based on reasonable assumptions, such statements are subject to risks and uncertainties that could cause actual results to differ materially. Important factors that could cause results to differ materially are set forth in reports on Forms 10 ks and 10 Q and news releases filed with the SEC, which are available on the company website. Today's conference call is also being broadcast at clevelandcliffs.com. At the conclusion of the call, it will be archived on the website and available for replay. The company will also discuss results excluding certain special items. Reconciliations for Regulation G purposes can be found in the earnings release which was published this morning.

At this time, I would like to introduce Lourenco Goncalves, Chairman and Chief Executive Officer. Please go ahead.

C. Lourenco Goncalves: Thank you, Donna, and good morning, everyone. 3 months ago, we told you that the earnings recovered that Cleveland Cliffs was becoming visible Today, the recovery is firmly underway. Our Q3 adjusted EBITDA was $612 million more than double the $286 million we generated in Q2. All 3 of our major profit drivers improved. Shipments increased selling prices rose in line with our expectations. And costs performed better than we had guided. 1 thing that has become very clear over the past year is that a healthy domestic steel industry happens when trade laws are enforced and when foreign producers are no longer allowed to dump steel into our markets without consequences.

Today, The United States has a much more rational trade environment and the result is exactly what you would expect. Stronger domestic production, higher utilization rates, more investment in steel facilities, and more confidence from both steel producers and steel consumers. Every conversation about reshoring manufacturing rebuilding infrastructure, expanding energy production, strengthening the electrical grid or supporting national defense starts with steel. At Cleveland-Cliffs, we mine iron ore produce pellets and also produce HBI. And we produce steel from scratch. With a 25 thousand person workforce that spans some of the most important industrial communities in The United States.

The trade policies of the Trump administration are helping create the conditions needed for companies like ours to continue investing in those communities and expanding domestic production. What the Trump administration has done on trade is not just good for Cleveland Cliffs, it is good for America. As a consequence of the renaissance of manufacturing in The United States. We are currently selling steel under the best price environment in 3 years. And these are the prices we need to run a thriving business that grows employment, pays its workers well, reinvest in people and equipment, and protect our critical supply chains and national defense.

The most important and positive development for Cleveland Cliffs since our last call has been the strength of our 2027 round of contract negotiations with our clients. The largest portion of our steel volume consists of tons sold to service centers and end users under annual fixed price or index linked contracts. These agreements cover every segment of light flat rolled steel consumption outside automotive. All these contracts reset on January 1 of next year, and nearly all of these customers want more steel under contract in 2027 than in 2026. Suffice to say, that we have been very successful in renewing this contract. In aggregate, the improvements should generate more than $1 billion of year over year EBITDA improvement.

Before even contemplate changes of the underlying pricing index. More importantly, our customers are not fleeing to imported steel. Actually, we are finally operating within The United States with a fair commercial structure that is critical to sustaining a healthy business allowing us to reinvest in our facilities and in our people. The strong contract renewal environment and the good health of our well maintained equipment have created a compelling opportunity to maximize the value of our existing asset base. With that, we are postponing the Burns Harbor C-Blast furnace reline from mid-27 to April 2028. Our President and Chief Financial Officer, Celso L. Goncalves Jr., will be talking about that on his prepared remarks.

We have several other similar ongoing projects bigger and smaller. The most critical being the modernization of Middletown Works, This past quarter, we officially completed the rescoping of our $1 billion modernization project for Middletown. This revised project was commemorated with a visit by Vice President, JD Vance to his hometown of Middletown, Ohio. And to our flagship automotive grade steel plant Middletown Works. The new scope entails a $1 billion investment including $500 million of support from the Department of Energy. And will modernize 1 of the most important steelmaking facilities in the country. While maintaining uninterrupted production throughout the construction period.

The project includes a state of the art blast furnace rebuild, advanced material handling infrastructure artificial intelligence enabled process controls, and a new cogenerating co-generation facility that will capture blast furnace gas and convert this off-gas into electricity and steam for on-site use. Our work on this rescoped project has already begun. And we expect to be completely done in the first quarter of 30. Other notable projects on the agenda in the coming years that fit into our reinvestment master plan include the Cook plant rebuild at Burns Harbor. A blast furnace stove rebuild at Stelco in Canada, and the grain oriented electrical steel expansion goes at Butler Works.

2 weeks ago, we hosted the secretary of energy, Chris Wright, the Assistant Secretary of Energy, Audrey Robertson and the undersecretary of commerce, William Kemet in Butler, Pennsylvania where we discussed the importance of projects like these in supporting the manufacturing and energy dominance agenda of the Trump administration. They all recognize the importance of protection against unfair trade, and we are confident that they will not waver from this critical policy. We do not believe and we do not anticipate that a surge of imports could be coming into The United States anytime soon.

Imports remain approximately 35% to 40% below the level that existed before the implementation of Section 232 National Security Steel Tariffs of 50% for the product and derivative products. Besides the tariff itself, transportation expense long lead times, currency exposure, and the risk that material will arrive into a different market than the 1 in which it was ordered are some of the problems to be faced by the brave that still try to import steel into The United States. Those factors create a meaningful risk premium. None of our customers have revolted. And in fact, it is quite the opposite. Intelligent customers understand the operational cost of an unreliable supply chain.

A lower quoted price offered by a trading company has little value if the product arrives late fails qualification, or cannot be replenished when production schedules change. We expect strong trade enforcement to remain a lasting feature of the American steel market. Because the underlying problem has not changed. Global is still making overcapacity, remains enormous and the state subsidized production continues to seek an outlet. Moving to Canada, the improvement in the hot rolled market for Stelco that I discussed on last quarter's call has accelerated It took The U.S. Market roughly 12 months to see a $400 improvement to the spot price of hot rolled coil.

It took the Canadian market only 4 months to see a similar improvement. The significant improvement we have experienced in our hot rolled business was a direct consequence of the TRQ system implemented by the Canadian government. The Canadian domestic market without protection is a lot more exposed than any other country in the world. And that is the reason we have been advising the Canadian government on what we believe needs to be done to finish what they have successfully started. The galvanized steel business in Hamilton, Ontario which represented less than 20% of our Stelco output is still at risk.

We met in person in Ottawa a number of times to explain the Fortress North America solution supported by the entire Canadian steel industry not only by Stelco, but we were not successful. 3 months ago, in our Q2 investors conference call, we spoke about possible negative consequences of inaction. Potentially putting at risk the jobs of the Stelco workers, in case the Canadian government continue to ignore our request. Unfortunately, we were not heard. Instead of a real solution, At the very last minute, the Canadian government offered us what they called financial support. But that is not what Stelco needs. What Stelco and Stelco workers really need is a market to sell galvanized steel.

And government money cannot buy a market for galvanized steel. On the other hand, if the Canadian government use the power they already have and have the ability to unilaterally exercise to block or severely reduce imports of galvanized steel into the Canadian market Stelco can immediately bring back all the temporarily laid off workers because that would immediately give us a market to sell. And the ability to produce galvanized steel. 1 more time. The domestic market for galvanized steel in Canada is not big enough to accommodate 2 Canadian producers of galvanized steel Stelco and ArcelorMittal Dofasco, and also an avalanche of imports that have not been adequately reduced by the Canada's tariff rate quota system.

Cleveland Cliffs invested C$3.4 billion less than 2 years ago to acquire Stelco, And Stelco was supposed to be an immediately accretive investment for Cleveland Cliffs. A couple of months later, and for reasons clearly beyond our control or ability to predict Stelco became a negative contributor to Cliffs' results. A situation that persisted for more than 1 year. Fast forward we found a way to steer Stelco out of trouble and into a profitable path. All while waiting as long as possible to avoid the idling of the galvanized line. At a significant cost because that business with insufficient volume was not profitable.

During the many months when Hamilton's galvanizing lines were unprofitable, we were aggressively advocating for stronger measures in Canada to bring about Fortress North America. Unfortunately, more restrictive quotas for galvanized steel never materialized leading to these limited temporary layoffs at Stelco. Notwithstanding all the attention that Stelco's limited layoffs have drawn, it is important to emphasize that Stelco is finally profitable They enhance the TRQs implemented by the Canadian government in December 2025, and updated in June 2026 worked well for hot rolled steel. But Stelco would be even more profitable if dumped galvanized steel imported into Canada would no longer be tolerated. The last piece of the puzzle to be addressed by the Canadian government is galvanized steel.

And then we would be able to bring the workers back and restart production at the galvanizing department in Hamilton, Ontario. A final point to address today. Back in The United States, our contract negotiations with the USW have extended past the original deadline. Which is not uncommon. The negotiation remains professional respectful, and productive And I personally have a great deal of admiration for the union leadership and the workforce they represent. Our objective remains the same as it has always been reach an agreement that recognizes our employees for their contributions while ensuring Cleveland Cliffs remains strong competitive, and well positioned for the long term success. I have no doubt we will get there.

And our American employees represented by the USW will be rewarded for the success we expect to have together in the coming years. With that, I will turn it over to the President and Chief Financial Officer of Cleveland Cliffs, Celso L. Goncalves Jr. for his remarks.

Celso L. Goncalves Jr.: Thank you, and good morning, everyone. 3 months ago, we guided to an expectation of $575 million of adjusted EBITDA for Q3 of 2020 And today, we reported $612 million As we wrap up 2026, we expect to generate $715 million in Q4, And looking ahead to 2027, under prevailing market conditions, we could realistically reach an average of more than $1 billion of adjusted EBITDA per quarter in 2027. Q3 was our strongest quarterly result in 3 years. The third quarter of this year showed what happens when price, volume, mix, and cost all move in a favorable direction. As adjusted EBITDA increased by $326 million sequentially from Q2.

Fuel shipments were 4.2 million net tons, compared with 4 million net tons in the second quarter. Third quarter 26 automotive shipments were the highest since the third quarter of 23. That occurred even though North American automotive production declined sequentially from the second quarter of this year. Shipment levels are expected to remain strong in Q4. Albeit with the typical slower behavior seen around the holidays and more difficult cold weather periods. Average net selling price during the quarter was $11.77 per ton. An increase of $53 per ton sequentially. As we benefited from rising market pricing in both The U.S and Canada. We expect a similar level of improvement from Q3 to Q4.

As we continue to see improvements in pricing and work through our backlogs. Index pricing in The U.S. Has increased by roughly $40 per ton. Each month for most of this year. And we do not see any signals in our order book pointing to a slowdown of this pace. Customers are more focused on securing volume than price at the moment. Unit cost performance in Q3 was excellent. As cost declined by $17 per net ton. During Q3, exceeding our previous guidance and serving as the primary driver of our adjusted EBITDA beat. As an integrated mill operator, the secret sauce of unit cost performance is running the mills at full utilization.

And our strong order book has allowed us to do that. We have been running our mills harder than at any time in several years. And the maintenance outages scheduled for Q4 are much needed. We give all the credit to our operators for bringing these mills to their full potential and keeping pace with the strong order book throughout the year. Even with the typical seasonality and maintenance outages common in all fourth quarters, we expect our Q4 adjusted EBITDA performance to exceed our Q3 performance by approximately $100 million with an expectation of $715 million in adjusted EBITDA.

That step change is shaping up to be substantially larger into Q1 of next year, as pricing momentum continues and new sales contracts take effect. Given the strong momentum going into 2027, we are postponing the Burns Harbor C-blast furnace reline from mid-27 to April 2028. The decision is a direct consequence of the effectiveness of the targeted maintenance and short term capital we have already deployed to extend the current campaign. of the C-blast furnace. By safely pushing out the reline, we can capitalize on a highly favorable commercial environment preserve valuable production capacity during a period of strong demand and pricing, and enhanced cash generation while maintaining operational reliability.

We will still be utilizing some 27 CapEx toward the prework on this project, but the actual 90 day outage has been moved into 28. Moving the Burns Harbor C-furnace reline into 2028 also preserves approximately 500 thousand tons of production that had not been included in our original 2027 plan. We are also happy to report that our coal contract negotiations have concluded at rollover pricing for 2027. Coal and coke are the largest raw material components of our cost So seeing this piece stable year over year gives us a lot more comfort in our outlook.

Looking at 2027 in total and using the forward curve as our pricing guide, we expect 2027 to be our best year since 2021. Which remains the all time record year for adjusted EBITDA at Cleveland Cliffs. The slide deck that we released this morning shows the realistic path to more than $4 billion of EBITDA in 2027, under market conditions similar to those that we experienced this past quarter. That path includes the strength already visible in the second half of 2026. Higher fixed price contract resets, and lower discounts on index linked agreements.

Last but not least, as Lorenzo has already talked about today, Stelco should become a larger contributor to Cleveland Cliff's consolidated results as backlogs convert to shipments. The result of all this will be very robust cash flow generation going forward. Substantially greater than what we have showed in Q3. As previously foreshadowed, Q3 was working capital intensive, which temporarily limited cash inflows during the quarter. This will begin to change starting in Q4 as the working capital build will decline and the expected proceeds from property sales come in. On that front, we closed 1 small asset sale in the third quarter. But most of the major properties we have for sale are all contracted to close in Q4.

Some of these buyers have been granted extensions due to obstacles related to the local communities or power supply. Many of these situations have been sorted through over the past few weeks. All of this cash will be used to delever our balance sheet. The hot rolled market conditions in both The United States and now in Canada have granted us an incredible opportunity to pay down debt very quickly. We have become more confident in our ability to reduce leverage below our 2x-2.5x target by the middle of next year. And we have no intention of stopping at that point.

Paying down debt will remain our number 1 allocation of free cash flow even after we have reached that leverage target. Strategically, we continue to be very comfortable as a standalone We do not need technological help from anyone from the outside take good care of our automotive customers or grain oriented electrical steel clients. Let alone other customers in less demanding sectors. We have made this point very clear in our still ongoing discussions with POSCO. I will refer you to the POSCO Holdings' Form 6-Ks filed with the SEC on September 30, 2026, for their disclosures on our MOU and their own update regarding the status of our partnership discussions.

We are entering 2027 with momentum that continues to build not fade. We have a world class workforce irreplaceable blast furnaces and other unique assets and a business that is positioned at the center of America's industrial future. If The United States wants to manufacture, build infrastructure, expand energy production, and strengthen national security, it needs a strong domestic steel industry. And Cleveland-Cliffs remains uniquely positioned to help make that happen. We like where we stand today, We like where we are headed. And we remain focused on executing every day. Thank you for your continued support of Cleveland Cliffs. Donna, with that, please go ahead and open the line for questions.

Operator: Thank you. The floor is now open for questions. You may press 2 if you would like to remove your question from the queue. First question is coming from Timna Tanners of Wells Fargo. Please go ahead.

Timna Tanners: Yes. Hey, good morning. Wanted to get a little more color on CapEx for next year. Also, the asset sale Q4, is that $370 million Is that the math wanted to try to get a little more color on those points, please.

Celso L. Goncalves Jr.: Yeah. Hey, Timna. it is Celso. So Q2 CapEx was about $150 million which run rate is lower than our guide of $700 million CapEx will pick up going forward in the fourth quarter as we start to spend on some of these strategic projects for next year. So, full year 2026 CapEx is still expected to be around 700 million compared to, call it, $5.60 last year. More normalized maintenance spend, the Butler project, and spending in Q4, as I mentioned, related to some of these other projects. As we look forward to next year, CapEx is expected to exceed just over a billion dollars.

You know, driven by some of these new announced projects and prep for the Burns Harbor really line, which is now going to be in 2028. So, overall, you can think of it as 700 million total in 2026 going to just north of 1 billion in 2027. But, given where we are and given the EBITDA that we expect to generate, looking into next year, that is more than manageable. Given our financial profile.

Timna Tanners: Okay, fair. And if I could ask 1 more, the market conditions continue to be pretty tight. It seems to be a challenge for your customers to get their hands on steel. What additional tonnage can you bring to market or would you contemplate bringing into 2027 to try to help catch up with orders?

C. Lourenco Goncalves: Yeah. We have to go product by product, Timna. For example, for grain oriented electrical steels, we are adding 25% new production. In our Butler Works plant in Butler, Pennsylvania. 25% is meaningful and we will. it is ongoing right now. So very soon, we are going to have the availability of more grain oriented electrical steels to support the grid, which is extremely necessary. If you talk about galvanized for exposed parts, products that we. Cleveland Cliffs is basically the major supplier, if not the only supplier that is reliable. For the automotive industry, We are bringing the galvanizing line at Burns Harbor to produce GALVANEAL for exposed parts We are bringing that online in early 2027.

We will be starting to do hot trials. And mid-2027, are going to have more GALVANEAL for exposed parts. that is a product that the clients are asking for. And, let me see if I have any other. Oh, another good example. We have. We still have a spare capacity for exposed electro galvanized But the problem is that for a few generations, the engineers at the automotive industry forgot how to use electro galvanized for exposed parts.

So we are reintroducing electro galvanized to the use of the auto OEMs, and are surprisingly being very well received by the engineering department of our clients and, we are developing the use of electro galvanized for exposed parts with a bunch of clients in the auto industry. So product after product after product, we have plans. To increase our production. We still have capacity to spare in certain situations. Remember, I still have the Dearborn blast furnace down. And we have not brought Dearborn back. For a simple reason is that the clients are not yet committing with the tonnage that I want them to commit. Once that tonnage is committed, we are gonna be okay.

1 more thing on that. We are changing the structure of our contracts. And the minimum of contract. Of tonnage contracted by clients right now in the, the usual contracts with our individual customers. Are now at a take or pay. So it is no longer a wishful thinking thing. it is a take or pay. The minimum is the minimum. You commit with a minimum. You. If you do not take, you are gonna have to pay. And the clients are accepting. More than, I would say, more than 55% to 60% of clients already signed. And the other ones, they have not signed yet because they were not presented. With the contractor.

Now the problem is no longer price. The problem is having access to steel. We are giving that. We are changing the structure of contracts. Very soon, this will be the new norm in the industry. It started here with Cleveland Cliff. Cleveland-Cliffs. We are proud of that. I hope I answered your question.

Timna Tanners: And you have another 500 thousand from not doing the reline as well, I guess. Is that incremental to 2026 or just incremental to your prior 2027 estimates?

Celso L. Goncalves Jr.: Yeah. Exactly.

C. Lourenco Goncalves: Because we are we are doing prep work that does not mean bringing the furnace down in 2027. We are gonna finalize the reline in 2028 So, yes, we are gonna have another half a. Good point. We are gonna have another 500 thousand. You said that in the prepared remarks. Thanks for catching that. We are going to have another zero 5 million tons in 2027 due to that.

Timna Tanners: Okay. I will hand it on. Okay. I will hand it on. Thank you.

Operator: Our next question is coming from Nick Giles of B. Riley Securities. Please go ahead.

Nick Giles: Yes. Thank you, operator. Good morning, Lorenzo and Celso. My initial question was just, when we look at the lower discounts on index linked contracts and the fixed price resets, These negotiations, how much has already been concluded Lorenzo, I think I just heard you mention 55%, but just want to clarify kind of where that stands or how much is already locked in. Thank you.

C. Lourenco Goncalves: Yes. Nick, Yes. Nick, I just said it is more than half, and the ones that have it. We have not had a single client, Nick, that said, no. I am not going to sign that. I am gonna roll the dice. None. Zero. So when I say 55%, I am trying to say more than 50. A lot more than 50. And we are still in. Today is October 19th. So we have plenty of time to finish that. We just started. So by. I would say by Thanksgiving, we will have everything done. And, I do not know how many will not take so far, Zero.

So it looks like it will be the new way of doing business in The United States. So much more mature way of doing business in The United States. We are very happy with that. Then the clients are too.

Nick Giles: that is good to hear. Thanks for clarifying, Lourenco. And then, maybe just a question for Celso on the 4Q guide. Kind of what is underwritten there on the cost side and ASP side, respectively? And then on the 2027 bridge, when we look at the cost impact of $250 million could you just kind of walk us through what is embedded there? Whether there is any volume benefit that is offsetting the inflation, appreciate it.

Celso L. Goncalves Jr.: Yes, sure. Hey, Nick. Just to summarize on the cost side for this quarter that we just reported, we were able to bring down cost per ton by $17 a ton versus our guide of $10 a ton. And that was driven by higher production volumes were a big driver of that cost outperformance. As we look ahead to Q4, costs are expected to increase slightly, that is driven by repair and maintenance schedules, a little bit of higher energy costs, higher alloy costs, elevated diesel prices and things like that. So that is what is driving a little bit of a cost increase in Q4.

As it relates to ASPs, as you mentioned in Q3, we brought ASPs up by $53 a ton, versus our guide of $55, so we are kind of right in line And as we look forward to Q4, ASPs are expected to increase by a similar amount as it did in Q3, call it, $45 to $55 a ton, and all factors that contributed to the increase in Q3 are continuing into Q4. Monthlies, the quarterlies and the spot pricing are all improving.

Nick Giles: Got it. that is very helpful. I will turn it over, but appreciate the update, guys. I will turn it over, but appreciate the update, guys. Thank you.

Operator: The next question is coming from Carlos de Alba of Morgan Stanley. Please go ahead.

Carlos de Alba: Yes. Thank you very much. Good morning, Lourenco and Celso. So on the cash flow generation, maybe just to see if you can provide just a little bit more color as to what you are expecting on working capital to close out the year. You mentioned that you spent cash flow generation still early on, but maybe an indication of a range of magnitude that we can see there. And then just to confirm then if you expect to have the 500 million on asset sales, also the cash coming in, in the fourth quarter? On top of what you saw and reported in the cash statement for the third quarter.

Celso L. Goncalves Jr.: Yes, Carlos. Yeah, I think working capital will be likely neutral in Q4 is the best way to think about it. In Q3, we had a build of $160 million in working capital, and that was largely driven by a 170 million increase in inventory. A 115 million increase in AR, which was offset by 135 million increase in payables. But as we look forward to Q4, that should neutralize and working capital will be a neutral for the next quarter. As it relates to asset sales, everything is contracted and, expected to close here in Q4. Obviously, anything can happen, but that is what we expect right now. There are situations where some extensions have been needed.

You know, power supply and things like that are complicated, but as of right now, we still expect to close all those in Q4.

Carlos de Alba: Alright. Great. And then if I could squeeze 1 more. As yes, so your balance sheet has been improving and will continue to improve as you have laid out. But do you would you consider under what circumstances would you consider maybe strengthening your balance sheet and reducing your leverage beyond the 2.5 times, perhaps as the stock recovers and we have seen a strong performance pre-market. An equity raise. Is that out of the question at this time? Based on the strong outlook for next year and the cash coming in from the asset sales?

Celso L. Goncalves Jr.: Yeah. Look, we do not think we need to. Given the outlook that we have right now, you know, as we are looking forward to north of $4 billion of EBITDA next year and we have laid out pretty clearly how much free cash flow generation that would result in. I would much prefer to use cash from operations to pay down debt, and that is our primary goal. And the 2.5 times, it is just the leverage target that we have clear visibility into right now. Obviously, you as things progress throughout next year, we should be able to well exceed that expectation, hopefully. So it is not a target that we are gonna stop at.

I think I have been pretty clear over the years in terms of my priority to reduce down debt. And we are always looking at the balance sheet, looking for opportunities to do that. So the ABL will be the primary target. We will pay that off with cash from operations, and then we will look to continue to drive down the bonds as well. So that is how we plan to do it with cash from operations.

C. Lourenco Goncalves: Yeah. In sum, Carlos, we are not going to issue stock. We do not need to. Full stock.

Carlos de Alba: Thank you.

C. Lourenco Goncalves: Thank you.

Operator: The next question is coming from Nicklaus Cash of Goldman Sachs. Please go ahead.

Nicklaus Cash: Thank you all. Can you all hear me?

C. Lourenco Goncalves: Yes, Nick. Go ahead, please.

Nicklaus Cash: Thank you. So automotive volumes again have been this year and again this quarter. And in general, the market is generally tight. there is limited tons available and pricing is also extremely favorable. Just wondering are you all thinking about and what specifically still needs to happen before Dearborn becomes economic to restart?

C. Lourenco Goncalves: Yeah. Look, we. First of all, OEM is not being taken care of. that is the very first thing. You said it is extremely tight not really. Not really. Because until General Motors brings the Chevy Trak from production in South Korea to production in The United States, We do not need Dearborn, for example. there is a-- that is the best selling vehicle that they have. And it carries the same 1 ton of steel that any other car that you produce here on average. That you produce here in The United States And it is been producing South Korea. that is a slap in the face of The United States.

That car needs to be brought back to The United States. I have been talking with General Motors about that. So no need for Dearborn until that happens. The other thing that is really an annoying thing is the f 51 of Ford being aluminum skin car. I say aluminum skin car because everything else in that car is already steel, and we are the suppliers. Of that steel. And, but so far, only defenders are still And the reason why the fenders are steel is because the producer of aluminum set themselves on fire 3 times in 1 month. Showing how weak that supply chain is. So.

And then when push comes to shove, they come to Cliffs to bail them out, and we did. And they did with engineering. We did showing that we can stamp aluminum and we can stamp steel in dies that were used to stamp aluminum. So we need to bring the car to steel and I hope that the buyers of trucks understand aluminum vehicle is not a steel vehicle. And, anyway, and then we can bring Dearborn back So the clients are the ones that will dictate when Dearborn will come back. Not me.

Nicklaus Cash: No. that is extremely helpful. And just 1 more quick 1. Again, on the price deck, you increased $5 million opportunity from repricing to closer to $850 million Can you just walk us through or provide a little bit more color on what exactly changed in terms of how much reflects higher than expected pricing, additional tonnage, and how many tons are actually being repriced in that number?

C. Lourenco Goncalves: Well, everything is going very well in our renegotiation. Last quarter, we are conservative but now we are more realistic because we have deals done. I am not going to go into specifics, but that is pretty much what is happening.

Nicklaus Cash: that is helpful. I will pass it on. I will turn it over, but appreciate the update, guys. Thank you.

Operator: Our next question is coming from Samuel McKinney of KeyBanc Capital Markets. Please go ahead.

Samuel McKinney: Hey, good morning guys.

C. Lourenco Goncalves: Good morning, Samuel. I am going to stick on the contract theme with 70 plus percent of the mix on fixed or index linked contracts, Do you guys see that mix evolving into next year where we hear from a lot of buyers about the mills attempting to reduce their contract exposure to take advantage of this rich spot market. I hope you heard in the prepared remarks that we are doing well with the renewals, that is number 1. Number 2, I already informed as we are doing this dialogue with you guys in this call. I let you guys know that now the minimum tonnage contracted is a take or pay for Cleveland Cliffs. And for the 1.

We are not, by any stretch, forcing them to take the existing minimums. If they want to go to a lower minimum in order to be in a more comfortable situation from the take or pay standpoint we are fine with that. On the other hand, the lower minimum is now the lower minimum. So if we need to bring contract tonnage to a minimum, that is the new minimum. So what happens that more than the opposite, clients are asking to raise their minimums. Because at this very moment, the biggest point Samuel, is to have steel not to negotiate a price. So fixed prices are gone. Everybody is going to index.

And going to index, with a minor or no discount. Because, they all believe. Not all, but the a good number, let's put like this, of clients believe that prices have peaked So being on the discount to help them going forward. On the other hand, I believe that price of. Price. Steel prices are not at peak. So the. I also have a good view on keep contracts on index price. So we are going all index and with low discounts lower discounts to freight things like that. So no discounts to freight. Passing along to the clients our costs. They are accepting that too.

And I think we are gonna be in a much more mature as we eliminate the cancer. Of imports from this market. We are in a much more healthy environment in which the clients can plan for the future. We can invest. We can hire people. And that is what is the most important thing of bringing manufacturing back to The United States.

So kudos to president Trump secretary Howard Lutnick, and others that are implemented USTR, Ambassador Jamison Greer, all the official that, finally heard what this industry has been claiming for several decades and now we are doing it. and now The United States is the third largest producer of steel in the world ahead of Japan, rightfully so, We are a country that is growing They are a country that is shrinking. So we are in the right spot right now.

Samuel McKinney: Alright. Great. Thanks, Lorenzo. And then on the last call, you guys outlined a third quarter volume increase of about 300 thousand tons. And volumes increased to only about 125 thousand tons. Celso, you touched on third quarter auto production earlier, but any more details you guys can provide on the factors over the course of the quarter that prevented you from achieving that outlook? And if they have subsided for the fourth quarter?

C. Lourenco Goncalves: Yes. The main reason is the fact that our biggest business individually is automotive. And automotive has been reshoring. that is a good thing. But they are reshoring, in a way that is not really as, let's call, as organized as we would like to see. They have their own problems. And, they are just in time does not work as good as it looks like or sounds like when you say just in time. So we need to sometimes reschedule our own production in order to make sure that they are in steel. but not because of us. Sometimes it is, but-- more normal than not is that we have to do that because of them.

And we do that because they are the clients. And we are working individually with each 1 of the clients the auto OEMs, to make sure that, they get their own thing better organized for us to be better organized as well. So the contract renewals of automotive clients, the multiyear, contracts that we gave to them are coming soon, The first 1 will be related to a January 1st expiration. And, you know, now they know that there are take or pays for minimums for other clients. And we are going to evolve to that with them. We are the largest supplier of automotive. You buy a lot.

Continue to grow our participation at will with automotive and we are gonna have this introduced through the automotive clients, or and if they do not want. They do not want, that is fine too. We will see.

Samuel McKinney: All right. Thank you.

Operator: Our next question is coming from Albert Realini of Jefferies. Please go ahead.

Albert Realini: Hey, good morning guys. Thank you for taking my question and congrats on the impressive quarter.

C. Lourenco Goncalves: Thank you. Yes. And I think last year, you guys have talked about the expiration of the slab contract and maybe a high level estimate that could increase EBITDA by maybe 500 million Just wanted to ask you, is there more to go with that? I saw in the sales volumes, there did not look like there were slab or other products there. So Is there more, I guess, uplift remaining in the fourth quarter from, or have you guys kind of reached that run rate, which I assume is higher now just based on pricing environment? Yeah. Good point. I appreciate the question, Albert. Because you are absolutely right.

The benefit of not selling slabs is showing in our numbers. Remember, when I sold I am sorry. When I sold. When I bought ArcelorMittal USA from ArcelorMittal, 1 of the conditions that I had to agree with, otherwise, the deal would not go through, was to supply ArcelorMittal Calvert with Ildauri slab. And, that deal was a 5-year deal We counted the days until the day of the expiration. The fifth anniversary came, and, we did not renew And, there was a very positive benefit. And I am sure that ArcelorMittal is doing extremely well with their new supplier of steel. Slabs. Now that was actually a joke. They are not.

But, I do not care, and, we are good and are happy with that. Thank you.

Operator: Thank you. The next question is coming from William Peterson of JPMorgan Chase. Please go ahead.

William Peterson: Good morning. Thanks for taking the questions and nice again, echoing nice job on the quarterly execution.

C. Lourenco Goncalves: Just trying to I guess, tie in some of the questions earlier on shipment potential for next year. Maybe leaving Dearborn aside, I guess how should we think about your shipment growth quantitatively maybe versus market growth? Does this assume any sort of kind of share gain? Or is this is the market just kind of grow in line with market? Just at a high level First of all, everything that the Trump administration has implemented in terms of reshoring manufacturing is really happening. So the demand is growing. The overall number is growing. that is number 1. Number 2, imported steel that was always, always a relevant item of the mix of supply is no longer there.

You do not see the important role played by Imported steel in this market being played going forward for several reasons. We have already discussed. So now it is about the domestic supply. Third thing is that even though there are a lot of announcements, for new plants and things like that, These things are years ahead. If they really materialize. And I am not just talking about Iowa or any other plants that were announced. I am talking about even announcements that have-- announcements that have not happened yet. Because, you know, when you see an environment like what we have right now with reshoring manufacturing to United States, I really believe that other announcements will come.

But when push comes to shove, clients need reliability. Clients need people that can really supply steel. And they know where they can get steel, and they know where they can get announcements of future investments in $50 billion here, another $13 billion in CapEx that never materialized from another 1, but when But when they need to, they know where to come. So that is what is happening. Right now. I hope I am helping, not complicating you, but that. that is how I see it.

William Peterson: Okay. It sounds like it is a constructive backdrop. I guess my second question, and you pretty much define clearly what is going on in Canada.

C. Lourenco Goncalves: Obviously, HRC is now nearly on par. Just curious, though, what are the value added spreads, I guess, look like between Canada and The U.S. Just to help quantify what you were saying earlier? Yes, look, Canada caught up very quickly when the current administration implemented the TRQs and in the first place, And then fine tuned a little bit to make it really work. that is what happened. Between December 2025 and June 2026. For the hot rolled business, it worked in the extremely well. As far as the galvanized business did it. Because between ourselves our. So let me.

Ourselves, meaning Stelco, our and an incredible amount of imported galvanized steel coming through the border The domestic market in Canada simply cannot accommodate. And, when the prime minister goes on a world trip and says, come to Canada. We are open for business. They are basically inviting new imports into the market, and people here outside of Canada and they said present, and they send the steel there. So what Prime Minister Kearney did with this world trip and bringing electric vehicles to the country, 49 thousand tons of various Called elect. Chinese electric vehicles. He was basically snatching defeat out of the jaws of victory. And the punishment was not on companies like Stelco or even Cleveland Cliffs.

The punishment was on Canadian workers. So when things like that happen, consequence exists. But I do. I always believe that cool minds will prevail. And there are more intelligent people than stupid people in any place in the world. So we are gonna be okay in Canada. I do not know if your question was exactly that, but I think that is the only message about Canada that is important. All the rest is with. Just your spreadsheet, William. Thanks, Lorenzo. You are welcome.

Operator: Thank you. This brings us to the end of today's question and answer session and today's conference call. We would like to thank you for your participation and interest in Cleveland Cliffs. You may disconnect your lines at this time or log off the webcast and enjoy the rest of your day.

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