Cleveland-Cliffs NYSE: CLF reported a sharp sequential improvement in third-quarter profitability and said it expects momentum in steel pricing, contract renewals and production utilization to continue into 2027.
Chairman and Chief Executive Officer Lourenco Goncalves said third-quarter adjusted EBITDA reached $612 million, more than double the $286 million reported in the second quarter. President and Chief Financial Officer Celso Goncalves said the result exceeded the company’s prior $575 million outlook and represented Cleveland-Cliffs’ strongest quarterly performance in three years.
The company attributed the sequential improvement to higher shipments, stronger selling prices and lower unit costs. Steel shipments rose to 4.2 million net tons from 4 million net tons in the second quarter, while average net selling price increased by $53 per ton to $1,177 per ton. Unit costs declined $17 per net ton during the quarter, exceeding management’s earlier expectation for a $10-per-ton reduction.
Fourth-Quarter and 2027 Outlook
Cleveland-Cliffs expects fourth-quarter adjusted EBITDA of approximately $715 million. Celso Goncalves said selling prices are expected to rise another $45 to $55 per ton sequentially in the fourth quarter as the company works through its order backlog, while costs are expected to increase modestly because of scheduled repairs and maintenance, energy costs, alloys and diesel prices.
Management said it sees a path to average adjusted EBITDA of more than $1 billion per quarter in 2027 under prevailing market conditions. The company’s investor presentation outlined a potential path to more than $4 billion in adjusted EBITDA for the full year, which would make 2027 its strongest year since 2021, according to Celso Goncalves.
The outlook incorporates stronger fixed-price contract resets, lower discounts on index-linked contracts, continued pricing momentum and a larger expected contribution from Stelco as its backlog converts into shipments. Management also said coal contract negotiations for 2027 concluded at rollover pricing, providing stability in the company’s largest raw-material cost categories of coal and coke.
Lourenco Goncalves said the company has renewed more than half of its 2027 contracts with service centers and end users, with the renewal process expected to be substantially complete by Thanksgiving. He said nearly all customers are seeking more contracted steel volume for 2027 than they had in 2026.
The company said the aggregate improvement from the contract renewals is expected to generate more than $1 billion in year-over-year EBITDA improvement before changes in underlying steel pricing indexes. Cleveland-Cliffs is also shifting contract terms toward take-or-pay minimum volumes, according to Lourenco Goncalves.
Production Capacity and Capital Projects
Cleveland-Cliffs is postponing the Burns Harbor C blast furnace reline from mid-2027 to April 2028. The company said targeted maintenance and short-term capital spending have extended the furnace’s operating campaign, enabling it to retain production capacity during a period of stronger demand and pricing.
The change is expected to preserve roughly 500,000 tons of production that had not been included in the company’s prior 2027 plan. Cleveland-Cliffs will still spend capital in 2027 on preparation work for the reline, but the planned 90-day outage has moved to 2028.
Capital expenditures are expected to total about $700 million in 2026, compared with roughly $560 million in the prior year. For 2027, Cleveland-Cliffs expects capital expenditures to exceed $1 billion, reflecting investments in newly announced projects and Burns Harbor reline preparation.
The company also said it completed the re-scoping of its $1 billion modernization project at Middletown Works in Ohio. The project includes $500 million of Department of Energy support and is expected to include a blast furnace rebuild, material-handling improvements, artificial intelligence-enabled process controls and a cogeneration facility. Cleveland-Cliffs expects the work to be completed in the first quarter of 2030 while maintaining production through construction.
Other projects cited by management include a coke plant rebuild at Burns Harbor, a blast furnace stove rebuild at Stelco in Canada, and an expansion of grain-oriented electrical steel production at Butler Works in Pennsylvania. Lourenco Goncalves said the Butler expansion will add 25% of new production capacity for grain-oriented electrical steel.
Stelco and Canadian Trade Conditions
Management said Stelco has returned to profitability as Canadian hot-rolled steel pricing improved following changes to Canada’s tariff-rate quota system. Lourenco Goncalves said the Canadian hot-rolled market gained approximately $400 over four months, compared with about 12 months for a similar increase in the U.S. market.
However, he said Stelco’s galvanneal steel operations in Hamilton remain under pressure from imports. Cleveland-Cliffs has temporarily laid off workers associated with the galvanizing lines and said it wants Canadian authorities to further restrict galvanneal imports. Lourenco Goncalves said the domestic Canadian market is not large enough to support production from Stelco, ArcelorMittal Dofasco and substantial imported galvanneal volume.
He said stronger limits on galvanneal imports would allow Stelco to restore the temporarily laid-off workers and restart production at its galvanizing department in Hamilton.
Cash Flow and Debt Reduction
Cleveland-Cliffs said the third quarter was working-capital intensive, with working capital increasing by $160 million. Celso Goncalves said the company expects working capital to be roughly neutral in the fourth quarter as inventory and receivable growth moderates.
The company also expects most major property sales under contract to close in the fourth quarter, though some buyers received extensions related to local-community or power-supply matters. Management said proceeds from asset sales and operating cash flow will be directed toward debt reduction.
Celso Goncalves said Cleveland-Cliffs is increasingly confident it can reduce leverage below its 2.5-times target by the middle of 2027. He said debt reduction will remain the company’s primary use of free cash flow even after reaching that threshold, with the asset-based lending facility as an initial repayment focus.
When asked about a potential equity offering, Lourenco Goncalves said the company does not intend to issue stock, while Celso Goncalves said management prefers to use cash from operations to reduce debt.
Separately, the company said negotiations with the United Steelworkers have continued beyond the original deadline. Lourenco Goncalves described the talks as professional, respectful and productive, and said Cleveland-Cliffs remains focused on reaching an agreement that recognizes employees’ contributions while preserving the company’s competitiveness.
About Cleveland-Cliffs (NYSE:CLF)
Cleveland-Cliffs Inc is an integrated steel producer headquartered in Cleveland, Ohio. The company operates across the steelmaking value chain, including the mining and processing of iron ore, production of iron ore pellets, and manufacturing of finished steel products.
Cleveland-Cliffs primarily produces flat-rolled carbon steel, including hot-rolled, cold-rolled and galvanized products, as well as coated and specialty steel. Its products are used in automotive manufacturing, construction, infrastructure, appliances, machinery and other industrial applications.
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