Cleveland-Cliffs (CLF) Q3 2026 earnings review
Cleveland-Cliffs returns to profit, but its debt barely moves
Cleveland-Cliffs sold steel at higher prices and made it more cheaply, earning a profit after eight losing quarters. Profit before interest, tax, depreciation and one-offs (adjusted EBITDA) more than doubled from the spring to $612 million, above the target it had set. Shipments fell short of what chairman and chief executive Lourenco Goncalves had promised, but he now sees 2027 adjusted EBITDA above $4 billion.
| Profit before interest, tax, depreciation and one-offs (adjusted EBITDA) | $612M $575M outlook; $286M last quarter |
|---|---|
| Net income | $165M loss of $234M a year ago |
| Average selling price | $1,177 per ton +$53 from last quarter |
| 2027 adjusted EBITDA outlook | Raised more than $4 billion, from about $3.3 billion in July |
⚖️ Verdict: 🟢 Bullish
The story got better because the 2027 plan now rests partly on signed contracts rather than on steel prices alone. Goncalves said the fixed-price contracts already agreed add $850 million of profit next year, far above his July estimate. The bad news: debt fell only $58 million, and the volume shortfall leaves that side of the recovery unproven.
The question now is whether 2027 profit comes from contracts Cliffs controls or from spot prices it does not. About a quarter of the bridge rests on price forecasts by our math, so a fall in hot-rolled prices would shrink it while signed contracts hold. Year-end debt and the contract round closing in December will tell.
🐂 Bull Case
Higher Prices and Lower Costs Tripled Cash Profit
Cleveland-Cliffs earns the gap between the price of a ton of steel and the cash cost of making it. In July, chairman and chief executive Lourenco Goncalves told investors to expect a higher price, a lower unit cost and more volume, and two of the three arrived.
The average price rose $53 a ton to $1,177. The cash cost of goods sold fell about $21 a ton by our math after three straight quarterly increases; Cliffs itself puts the saving at $17.
- Steelmaking cash margin: $685 million, from $349 million last quarter
- Cash margin per ton: $165, from $87 last quarter by our math
- Net income: $165 million, the first profit after eight losing quarters
This matters because the price side of the plan is already in the order book: Goncalves expects a higher profit again in the fourth quarter even with outages. But costs helped only after three quarters of increases, so one quarter of savings does not make a trend.
What to watch: the fourth-quarter unit cost, which the outlook says carries higher input costs and outages. A second decline would show the saving came from fuller plants, not a one-off.
Signed Contracts Lift the 2027 Profit Plan
Each autumn Cleveland-Cliffs resets prices on the fixed-price contracts that cover about 43% of its volume. "Based on the new contracts we have already signed with our clients and prevailing index price forecasts, we would expect our 2027 adjusted EBITDA to exceed $4 billion," Goncalves said, meaning profit before interest, tax and depreciation.
The presentation goes further: the reset at $850 million inside a bridge to about $4.5 billion, a third above the figure given three months ago by our math.
- Index-linked contracts, lower discounts and higher extras: +$350 million
- Fixed-price contract resets: +$850 million, from +$500 million in July
- Prevailing price forecasts, including Canadian orders: +$1.1 billion
- Cost inflation and maintenance supplies: -$250 million
This matters because signed contracts hold whatever spot steel does, but about a quarter of the bridge rests on price forecasts, so a fall in hot-rolled prices before the last contracts close would shrink it. The Palantir cost programme named in July does not appear; costs are a headwind.
What to watch: the repriced tonnage when the reset round ends, which Goncalves said in July runs to early December. It would show how much of the $850 million is signed rather than expected.
Stelco Earns Again as Canada's Hot-Rolled Price Recovers
Stelco is the Canadian mill Cleveland-Cliffs bought two years ago; management has blamed imports into Canada for its weak results since. The gap has narrowed: Canadian hot-rolled sold at $1,226 a ton on 15 October against $1,259 in the United States, the presentation shows.
Goncalves called it Stelco's best quarter since the deal, "turning Stelco into a positive contributor to EBITDA in Q3". He also chose to "indefinitely idle our galvanizing lines at Stelco", the risk flagged earlier, because Ottawa has not acted on an oversupplied galvanized market; the plant keeps its tonnage on "hot rolled products that actually have a market".
What to watch: a stated Stelco profit figure in the fourth quarter; the release gives neither the idling's cost nor Stelco's earnings. It would show how much of the 2027 plan Canada carries.
🐻 Bear Case
Shipments Missed the Volume Goncalves Set
"Average selling price, sales volumes, and unit costs all moved in the right direction relative to Q2 performance," Goncalves said. Volume did rise, to 4.15 million tons, but that is below the 4.3 million he told investors to expect in July.
The extra tons went to distributors and converters, dealers who buy steel to resell. Their share of steelmaking revenue reached 34%, from 28% a year ago. Direct automotive sales held at $1.5 billion, so carmakers, though taking their most steel since 2023, are not gaining share. Dealers buy when prices rise and wait when they fall.
What to watch: fourth-quarter shipments against the 4.2 million tons the July full-year plan needs by our math, more than this quarter despite year-end shutdowns. A lower figure would mean price, not volume, carries the recovery.
The Leverage Target Rests on Earnings, Not Repayment
Cleveland-Cliffs carries $7.6 billion of long-term debt against $77 million of cash. "Debt reduction is #1 priority", the presentation says, and Goncalves promised "a major debt reduction in the fourth quarter" from stronger cash flow and property sale proceeds.
The third quarter delivered little of it. Debt fell $58 million and free cash flow was $72 million, because receivables and inventories absorbed cash as sales grew. Borrowings remain $392 million above December, when the group cut them with the proceeds of a share sale rather than with earnings. Of roughly $500 million of agreed property sales, $130 million has arrived.
By our math net debt is 7.8 times the last four quarters' adjusted EBITDA, the profit before interest, tax and depreciation. The target of under 2.5 times by mid-2027 needs about $1.7 billion of that profit in the first half of 2027 and no repayment at all, so the target follows next year's steel price rather than the balance sheet.
What to watch: long-term debt at year-end, after the property proceeds Goncalves says will land in the quarter. A figure still near $7.6 billion would mean the promised repayment did not happen.
Risks this quarter didn't answer
Six standing concerns got no new numbers in the release or the presentation, so each stays where it was, and the list below names the disclosure that would move it.
- Hedge losses: the June filing showed $71 million of sales-swap losses due to flow into revenue over a year; the September filing will show how much landed in Q3 and sits in Q4.
- Union contract: talks with the United Steelworkers covering more than 18,000 employees carry no disclosed terms or cost; a signed agreement would set 2027 labour costs.
- Cost structure: net income was 2.9% of revenue at the highest revenue in three years; a quarter of falling prices would show how far profit drops.
- Trade policy: the 50% Section 232 tariff and the pending USMCA review remain the pricing engine, and any change in either moves the 2027 plan directly.
- Stelco and mill-level earnings: still undisclosed below the single steelmaking segment.
- Property sales and POSCO: $130 million of about $500 million received, with the bulk due in the fourth quarter; the POSCO talks got no mention beyond the risk factors.
👓 Other Themes
Tariffs Keep Steel Imports at Half the 2024 Pace
Imports of flat-rolled steel averaged 352,000 tons a month this year through July, about half the 2024 pace, after the United States raised its steel tariff to 50% on every major supplier. Goncalves said "Imports remain well below historical levels, lead times are extended". The slides also list the war with Iran, higher global energy costs and disrupted shipping as reasons foreign steel costs more.
Furnace Reline Slips to 2028; Middletown Rescoped
Cleveland-Cliffs rescoped its Middletown, Ohio, project around blast-furnace upgrades and AI-enabled process controls: $500 million of net capital cost, matched by an equal Department of Energy award, with completion in 2030. The Burns Harbor blast furnace reline moved from mid-2027 to early 2028, which pushes part of next year's spending out, and the Butler electrical-steel expansion is due in early 2028.
💲 Other KPIs
Up $116 million in the quarter as sales grew; at 38% of quarterly revenue, the ratio has held between 38% and 39% all year by our math, so customers pay at the usual pace. Inventories moved the other way, down to 84% of quarterly revenue from 111% at the end of 2025.
About 585 million shares by our math from net income and earnings per share, against about 492 million a year ago, after the sale of $951 million of common shares in the fourth quarter of 2025. The company has bought back no shares since 2024, and the $1.4 billion authorisation stays unused.
Cash plus undrawn credit lines rose $162 million in the quarter to $3.2 billion, within the $3.1-3.3 billion band of the past year and above the $2.0 billion floor Cliffs sets for itself. Cash itself is $77 million; the rest is capacity on the credit facility.
🔮 Guidance
Held, now with a number. The plan has profit before interest, tax, depreciation and one-offs rising about 17% from Q3 by our math. Higher prices do the work, partly offset by "seasonality, increased maintenance outages, input costs and incentive compensation accruals". If it lands, 2026 adjusted EBITDA would be about $1.7 billion by our math, against $37 million in 2025. The Q3 figure came in 6% above its own outlook.
Raised. The release puts next year's profit before interest, tax, depreciation and one-offs above $4 billion; the presentation bridge reaches about $4.5 billion. The bridge starts from the third quarter's run rate and adds contract resets, lower index-linked discounts and the current futures curve, less inflation. Goncalves said the drivers are "developing more favorably than originally expected".
Raised. After about $1.8 billion of interest, capital spending and pension payments, the presentation shows $2.7 billion of free cash in 2027, a billion more than in July. Capital spending is not broken out; the Burns Harbor furnace reline, now moved from mid-2027 to early 2028, takes some of it out of the year.
Unchanged for a fourth quarter. With $461 million spent through September, the plan leaves about $239 million for the fourth quarter by our math, the heaviest quarter of the year. Spending has run at about $150 million a quarter since January, so the year-end figure would need a step up.
Unchanged. The presentation calls the path to the target clear. Cliffs intends to keep paying down debt after it gets there, to hold liquidity above $2.0 billion, and says all cash flow and all net proceeds from asset sales go to repayment. No note matures before 2029.
❓ Key Questions
What did Stelco earn, and what does idling cost?
The 2027 bridge counts Canadian orders inside its price-forecast line, yet the company gives no Stelco profit figure, no charge for idling the galvanizing lines and no tonnage moved to hot-rolled.
How many tons are repriced in the 2027 contract round?
The reset estimate went from $500 million to $850 million in three months without a tonnage or a price per ton, so readers cannot check it against the 43% of volume on fixed-price contracts.
How much hedge loss sits in fourth-quarter revenue?
The June filing showed sales swaps on 583,450 tons with $71 million of losses due to flow into revenue; neither the release nor the presentation says how much reached Q3 or sits inside the Q4 outlook.
Why did shipments stop short of 4.3 million tons?
Volume rose 125,000 tons but missed the floor set in July while price and cost beat; whether the shortfall came from the Stelco shift, maintenance or customer demand decides the full-year volume plan.
What labour cost does the 2027 plan assume?
Talks covering more than 18,000 represented employees opened in July; the bridge shows a $250 million cost headwind for inflation and maintenance supplies but does not say whether a new agreement sits inside it.