Cleveland-Cliffs (CLF) Q4 2025 earnings review
Clean-Up Quarter Sets Stage for 2026 Rebound
Cleveland-Cliffs ended 2025 with a thud, reporting a GAAP net loss of $235 million and dipping back into negative Adjusted EBITDA (-$21 million) after two profitable quarters. However, the narrative is one of clearing the decks: a 'value-destructive' slab contract has finally expired, and the company claims the worst of the automotive production weakness is behind them. With a strategic POSCO partnership expected to sign in H1 2026 and guidance pointing to volume growth and cost reductions, management is aggressively pivoting to a recovery story.
🐂 Bull Case
The expiration of the 5-year slab contract, which management explicitly called 'value-destructive,' removes a significant margin drag. Combined with a projected $10/ton further cost reduction in 2026, unit economics should improve.
The 'number one strategic priority'—a partnership with POSCO—is advancing toward a definitive agreement in H1 2026. This promises to be 'highly accretive' and validates the asset base.
🐻 Bear Case
Despite volume stability, gross margin remained negative at -$220 million in Q4. The company has structurally struggled to generate consistent GAAP profits, losing $1.4B for the full year 2025.
Performance remains tethered to automotive build rates. While management claims the situation has improved, any macro shock to auto demand in 2026 would derail the recovery thesis.
⚖️ Verdict: ⚪
Neutral. The financial results are poor (negative EBITDA), but the forward-looking setup is cleaner than it has been in years. The expiration of bad contracts and the impending POSCO deal provide a credible path to profitability in 2026, provided auto demand holds.
Key Themes
Strategic Pivot: The POSCO Factor
The potential partnership with POSCO has moved to center stage. Management characterized this as the 'number one strategic priority,' superseding other initiatives. Due diligence is active, with a definitive agreement targeted for H1 2026. If successful, this could fundamentally re-rate the equity or infuse needed capital/technology.
Gross Margin Struggles
Steelmaking gross margin was negative (-$220M) for the quarter. While an improvement over the prior year (-$281M), it highlights the difficulty CLF faces in covering its high fixed-cost base when pricing or mix is suboptimal. The company needs the promised 2026 cost reductions to materialize immediately to stop the cash bleed.
Contract Rationalization
A specific 5-year slab contract expired in Q4 2025. Management took the unusual step of explicitly labeling it 'value-destructive' in the press release. Replacing these volumes with higher-margin automotive or spot tons is a key driver for the projected margin recovery in 2026.
Canadian Market Drag
Management flagged a 'newly adverse dynamic in the Canadian market' as a headwind in 2025. While they state this has improved starting 2026, the volatility in this region (Stelco assets) remains a watch item given recent trade tensions.
Automotive Resurgence Thesis
The company cited 'persistently weak production levels' in auto for 2025 but claims 2026 has started with improved conditions. With 28% of revenue tied directly to auto (and more via distributors), CLF is a high-beta play on car production volumes.
Other KPIs
Stable YoY (-1.5%) but decelerating sequentially from 4.0M tons in Q3. The sequential drop is partly seasonal, but 2026 guidance (16.5-17.0M) implies a return to ~4.1-4.2M quarterly run rate.
An improvement from the $0.92 loss in 24Q4, but still deeply in the red. The company has posted a net loss for every quarter in FY2025, accumulating a $2.91 loss per share for the full year.
Decreased slightly YoY ($4.21B in 24Q4), reflecting some success in cost containment. Management guides for a further $10/ton reduction in 2026.
Guidance
Accelerating. This range implies growth of 2% to 5% over 2025's 16.2 million tons. It signals management's confidence in the automotive recovery and improved demand environment.
Improvement. Following significant cost cuts in 2025, squeezing another $10/ton out of the system (inclusive of mix benefits from the expired slab contract) is critical for returning to GAAP profitability.
Stable. This is roughly in line with the $695M spent in 2024 and implies a normalization of spending after the heavy cuts seen in 2025 (FY25 actuals were lower due to discipline).
Key Questions
POSCO Deal Structure
Is the 'definitive agreement' with POSCO largely an asset sale to deleverage, or a joint venture? How does this impact the remaining U.S. footprint's integration?
Canadian Market Visibility
You mentioned the 'adverse dynamic' in Canada has improved. Is this due to policy changes (tariffs) or organic demand recovery, and is it sustainable?
Automotive Production Certainty
2025 was plagued by weak auto production contrary to early optimism. What specific OEM schedules or data points give high confidence that 2026 won't face similar delays?