Cleveland-Cliffs Inc., a major U.S.-based steel producer, released its financial results for the fourth quarter and full year of 2025, presenting a detailed earnings call underscoring key factors influencing its performance and outlook. Despite a challenging 2025 marked by significant import competition and operational disruptions, management conveyed a cautiously optimistic stance for 2026 grounded in improved market conditions and strategic initiatives.
During the year, the company encountered substantial headwinds from an influx of steel imports into the North American market. This import pressure created a mismatch in demand that adversely affected the company's steel shipment volumes and asset utilization rates. In response, Cleveland-Cliffs made the difficult decision to shut down lower-performing assets to optimize operational efficiency.
A notable event was the termination of the slab supply contract with ArcelorMittal, a relationship that had become financially disadvantageous in its final year due to a divergence between the Brazilian slab price index and U.S. finished steel prices. Management emphasized that while these challenges weighed on results, many were identifiable and addressable as 2026 commenced.
The company has secured expanded contracts with automotive original equipment manufacturers (OEMs), a critical growth driver expected to manifest more fully in 2026 as the industry experiences reshoring of automotive production back to the United States. The restructuring of trade policies, including Section 232 tariffs set at 50%, has supported domestically produced steel demand by discouraging imports and bolstering capacity utilization of U.S. steel producers.
Additionally, Cleveland-Cliffs observed constructive developments in its Canadian subsidiary, Stelco, following recent regulatory interventions by the Canadian government aimed at limiting imported steel volumes. These interventions have begun to restore market balance, favorably impacting pricing and shipment metrics for Stelco in early 2026.
Pricing trends have shown promise, with hot rolled coil steel prices reaching a two-year high, buoyed by cold weather conditions in the Midwest and rising input costs such as scrap and electricity which disproportionately affect mini mill competitors. The company's vertically integrated steel production and power generation capabilities provide a cost advantage in this environment.
Cleveland-Cliffs underlined that its profit margins are sensitive to spot steel prices due in part to its substantial fixed-price automotive supply commitments and diverse customer base. The company experienced a decline in U.S. vehicle production for a third straight year in 2025, which has historically pressured its results. However, it remains confident that policy-driven reshoring will facilitate a return to pre-pandemic automotive manufacturing levels.
Operationally, the company notes it has adequate installed capacity to meet rising automotive steel demand without needing new facilities, contrasting competitors with plans to build new plants. This capacity leverage, combined with multi-year fixed price contracts with major OEMs, should support improved throughput efficiency and profitability in 2026 and beyond.
In innovation, Cleveland-Cliffs has successfully adapted its steel products to replace aluminum in certain automotive applications without requiring new tooling or capital expenditures from customers. This transition is particularly timely given recent disruptions in the aluminum supply chain caused by a series of fires and the inherent dependency on imports, including from Canada which is not subject to the same tariff protections as domestic steel under Section 232.
The acquisition of Stelco in November 2024 brought strategic benefits, notably repositioning its output exclusively for the Canadian market to avoid U.S. tariffs and provide feedstock compliance benefits. Notwithstanding initial challenges from the Canadian market becoming a dumping ground for tariff-avoidant imports, recent governmental actions have stabilized pricing and improved conditions for Stelco, which is expected to become a growing contributor to Cleveland-Cliffs’ overall results.
Cleveland-Cliffs has also announced a strategic partnership memorandum of understanding (MOU) with Posco, South Korea’s largest steelmaker. This collaboration aims to support Posco's U.S. customer base by ensuring compliance with U.S. country of origin and melted and poured steel requirements. Both firms are actively pursuing an accretive and strategically beneficial definitive agreement anticipated in the first half of 2026.
The company reported a commendable safety record in 2025 with the lowest total recordable incident rate since becoming an integrated steelmaker six years ago, reflecting disciplined operational leadership and consistent safety improvements.
Financially, fourth-quarter shipments totaled 3.8 million tons, a slight decline from the previous quarter due to seasonal factors, with expectations to rebound to approximately 4 million tons in the first quarter of 2026, contributing to an annual range forecasted at 16.5 to 17 million tons. The lowered shipment volumes and pricing lag effects led to a quarter-over-quarter decline in price realization to $993 per ton.
Cleveland-Cliffs recorded a third consecutive year of unit cost reductions in 2025, approximately $40 per ton, achieved through operational rationalization including a workforce reduction of about 3,300 employees. The company projects further unit cost declines of about $10 per ton in 2026, driven by locked-in coal pricing savings exceeding $100 million annually and higher production utilization rates. Temporary cost increases in the first quarter due to utility price spikes are expected to normalize in subsequent quarters.
Capital expenditures in 2025 reached a record low $561 million, reflecting reduced spend in maintenance and idle plant management. The 2026 CapEx forecast is approximately $700 million, aligned with normalized maintenance costs and preparatory work for the Burns Harbor furnace relining planned for 2027.
Management highlighted ongoing asset sales expected to generate $425 million in proceeds in 2026, with potential additional proceeds from larger asset sales currently on hold pending the outcome of the Posco partnership discussions. These divestitures complement balance sheet improvements and debt reduction efforts, with total liquidity reported at $3.3 billion as of year-end 2025.
Looking ahead, management expressed confidence in Cleveland-Cliffs’ positioning to capitalize on a market characterized by firm steel prices, robust order books, tariff support, returning automotive production, and ongoing operational efficiencies. The company is focused on sustaining EBITDA growth and cash flow generation to further deleverage the balance sheet and drive shareholder value.