Cleveland-Cliffs Inc.
04/21/2026 | Press release | Distributed by Public on 04/21/2026 14:43
Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)
| MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Management's Discussion and Analysis of Financial Condition and Results of Operations is designed to provide a reader of our financial statements with a narrative from the perspective of management on our financial condition, results of operations, liquidity and other factors that may affect our future results. The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and related notes that appear in Part 1 - Item 1 - Financial Statements and Supplementary Data of this Quarterly Report on Form 10-Q and with our Annual Report on Form 10-K for the year ended December 31, 2025, as well as other publicly available information. During the third quarter of 2025, we identified an immaterial error related to our accrual for certain employment costs, resulting in an understatement of Costs of goods sold in prior periods. Prior periods affected include the interim periods ended March 31, 2025 and June 30, 2025, and the interim and annual periods during the years 2022, 2023 and 2024. Refer to NOTE 1 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES for further information.
OVERVIEW
We are a leading North America-based steel producer with focus on value-added sheet products, particularly for the automotive industry. We are vertically integrated from the mining of iron ore, production of pellets and direct reduced iron, and processing of ferrous scrap through primary steelmaking and downstream finishing, stamping, tooling, and tubing. Headquartered in Cleveland, Ohio, we employ approximately 25,000 people across our operations in the United States and Canada.
ECONOMIC OVERVIEW
STEEL MARKET OVERVIEW
Steel market conditions improved throughout the first quarter of 2026 driven by higher than historical HRC pricing, continued subdued import levels, extending lead times and increasing but still subdued demand. The price for domestic HRC, the most significant index impacting our revenues and profitability, averaged $980 per net ton during the first quarter of 2026, representing a 24% increase compared to the first quarter of 2025. Finished steel import levels remained significantly below historical levels during the first quarter of 2026, which helped support domestic steel pricing. Looking forward, we expect domestic steel demand to grow, as implemented tariffs support demand for domestically produced steel, steel imports remain unattractive, and other end-user demand continues to improve. Additionally, the war with Iran, along with other global tensions, has led to rising global steel costs and increased freight rates, making imports less attractive and supporting higher domestic steel demand and HRC pricing. Steel and light vehicles remain at the top of the Trump administration's trade agenda, and we operate at the intersection of both of these industries.
We believe steel tariffs play a crucial role in protecting the U.S. economy, national security and the industrial base from violators of fair trade. The American steel industry has long faced significant challenges resulting from global overcapacity and overproduction of steel, as well as other unfair trade practices. The overproduction by certain countries has led to dumping of steel in the U.S. at below market value. The U.S. remains the only major steel-producing country that produces less steel than it consumes. Additionally, foreign steel producers often take advantage of government subsidies, currency manipulation and weak environmental and safety regulations. During 2025, President Trump signed a Presidential proclamation to implement 50% tariffs on steel imports originating from all major steel producing countries. In early April 2026, President Trump issued a proclamation adjusting the Section 232 tariffs on steel and steel derivative products. The proclamation maintained 50% tariff coverage on steel products and expanded the 50% tariff rate coverage to the full value of articles of iron and steel, including pipe and tube products. This proclamation also added new steel derivative products, including certain types of transformers, while simplifying the steel derivative product tariff regime. The strong commitment of President Trump's Administration to the resilience of the Section 232 national security tariffs should help the competitive landscape by reducing the prevalence of dumped steel in the U.S. market, ultimately leading to increased domestic demand. As a leading American steel producer, we expect to benefit for years to come from President Trump's pro-manufacturing and America-first agenda, along with the implemented Section 232 tariffs, not only for steel but also for the automotive industry.
The Canadian steel industry is also an important market for us. Similar to the U.S. steel market, the Canadian steel market is impacted by global overcapacity and other unfair trade practices, resulting in the dumping of steel in Canada at below market value. This contributed to weakened results for our Canadian operations in 2025. In the second half of 2025, Canada imposed tariff-rate quotas on steel imports to protect their domestic steel industry. We expect these tariff-rate quotas to help support a healthier Canadian steel industry and allow Stelco to generate improved margins throughout 2026. During the first quarter of 2026, the Canadian steel industry experienced lower than historical import levels, indicating an improving Canadian steel market. We believe it is crucial for Canada to maintain or improve measures in place to protect its domestic steel industry in order to preserve the Canadian economy and national security.
OTHER KEY DRIVERS
The largest market for our steel products is the automotive industry in North America, which makes light vehicle production a key driver of demand. North American light vehicle production in the first quarter of 2026 was approximately 3.7 million units, down from approximately 3.8 million units in the first quarter of 2025. During the first quarter of 2026, light vehicle sales in the U.S. saw an average seasonally adjusted annualized rate of 15.7 million units sold, representing a 5% decrease compared to the first quarter of 2025. The average age of light vehicles on the road in the U.S. is at an all-time high of 12.8 years, surpassing the previous
record set in 2024, which should support demand as older vehicles need to be replaced. Furthermore, we expect the 25% tariff on imports of automobiles and certain automobile parts, which were implemented during 2025, to lead to increased demand for domestically produced vehicles that consume domestically made steel. As a leading supplier of automotive-grade steel in the U.S., we expect to benefit from improved domestic vehicle production over the coming years as we continue to be an established and reliable supplier.
The current war between the United States and Iran, along with other global tensions, could result in certain implications to the domestic and global steel industry. In the U.S., the steel industry could see increased costs from elevated freight rates, electricity, gas, and other utilities. However, rising global steel costs, along with elevated freight rates, are expected to make imported steel in the U.S. less attractive. Additionally, certain foreign aluminum and steel facilities have experienced disruptions in production as a result of the war with Iran, which could impact the global supply of aluminum and steel. As the U.S. is heavily reliant on imported aluminum, a negative impact to the global aluminum supply chain, along with higher aluminum costs, could result in customers pursuing steel as an alternative material. We expect rising domestic steel demand, along with lower imports, to support higher steel prices, which should mitigate any inflationary costs we experience as a result of the war with Iran.
Since 2021, the price for busheling scrap, a necessary input for flat-rolled steel production in EAFs in the U.S., has continued to average well above the prior annual ten-year average of approximately $400 per long ton. The busheling price averaged $434 per long ton during the first quarter of 2026. We expect the supply of busheling scrap to further tighten due to decreasing prime scrap generation from original equipment manufacturers and the growth of EAF capacity in the U.S., reduced metallics import availability, supply chain disruptions from global tensions, and a push for expanded scrap use globally. As we are fully integrated and have primarily a blast furnace footprint, increased prices for busheling scrap in the U.S. bolster our competitive advantage, as we source the majority of our iron feedstock from our stable-cost mining and pelletizing operations in Michigan and Minnesota.
We have made significant progress in our cost-cutting efforts and have continuously reduced our year-over-year cost per ton since 2023. We have been able to capture cost reductions as a result of optimizing our integrated footprint, reducing overhead and fixed costs, improving efficiencies, working through higher cost inventory, and benefiting from lower coal and alloy costs, which has helped mitigate any inflationary cost increases we have experienced. Our steel unit costs in the first quarter of 2026 were impacted by elevated utility costs, primarily driven by a temporary spike in natural gas prices due to extreme weather conditions.
COMPETITIVE STRENGTHS
As a leading North America-based steel producer, we benefit from having the size and scale necessary in a competitive, capital intensive business. We have a unique vertically integrated profile from mined raw materials, direct reduced iron, and ferrous scrap to primary steelmaking and downstream finishing, stamping, tooling and tubing. This positioning gives us more predictable costs throughout our supply chain and more control over both our manufacturing inputs and our end-product destination.
Our primary competitive strength lies within our automotive steel business. We are a leading supplier of automotive-grade steel in the U.S. Compared to other steel end markets, automotive steel is generally higher quality, more operationally and technologically intensive to produce, and requires significantly more devotion to customer service than other steel end markets. This dedication to service and the infrastructure in place to meet our automotive customers' demanding needs took decades to develop. We have continued to invest capital and resources to meet the requirements needed to serve the automotive industry. We continue to be an established and reliable supplier of automotive-grade steel and intend to bolster our position as an industry leader going forward.
Due to its demanding nature, the automotive steel business typically generates higher through-the-cycle margins, making it a desirable end market. Demand for our automotive-grade steel is expected to be healthier in the coming years as a result of government support for domestically produced vehicles, the further shift away from other metals such as aluminum, low unemployment rate, and the replacement of older vehicles. As an established and reliable supplier of domestically produced automotive-grade steel, we expect customers to continue to look to us to serve increased demand in the coming years.
Since becoming a steel company in 2020, we have dedicated significant resources to maintain and upgrade our facilities and equipment. The quality of our assets gives us a unique advantage in product offerings and operational efficiencies. After elevated spend in 2022 to perform overdue maintenance work at the facilities acquired as part of our 2020 acquisitions, we resumed normalized levels of maintenance capital and operating expenses, which we have maintained since 2023. The necessary resources that we have invested in our footprint are expected to keep our assets at an automotive-grade level of quality and reliability for years to come.
Our utilization of annual or multi-year fixed price contracts provides us a competitive advantage, as the steel industry is often viewed as volatile and subject to the market price of steel. Our fixed price contracts mitigate pricing volatility through the cycle. Approximately 40-45% of our flat-rolled steel shipments are sold under fixed price contracts.
Our ability to source our primary feedstock domestically, and primarily internally, is a competitive strength. This model reduces our exposure to volatile pricing and unreliable global sourcing. The war with Iran, the ongoing conflict between Russia and Ukraine, other global tensions, and the Trump administration's focus on U.S. manufacturing underscore the importance of our North American-centric footprint, as our competitors primarily operating EAF facilities rely on imported pig iron and prime scrap to produce flat-rolled steel, the supply of which, from time to time, has been disrupted. The best example is our legacy business of producing iron ore pellets. By internally sourcing the vast majority of our iron ore pellet requirements, our primary steelmaking raw material feedstock can be secured at a stable and predictable cost and not be subject to as many factors outside of our control.
We believe we offer the most comprehensive flat-rolled steel product selection in the industry, along with several complementary products and services. A sampling of our offering includes advanced high-strength steel, hot-dipped galvanized, aluminized, galvalume, electrogalvanized, galvanneal, HRC, cold-rolled coil, plate, GOES, NOES, stainless steels, tool and die, stamped
components and slabs. Across the quality spectrum and the supply chain, our customers can frequently find the solutions they need from our product selection.
We are a leading producer of electrical steels in the U.S., which we believe will be critical for the modernization of the electrical grid. Distribution transformers are critical to the maintenance and expansion of America's electric grid. Transformers are in short supply, and that shortage stifles economic growth across the country. The shortage will continue to be exacerbated by the anticipated widespread adoption of AI in virtually all sectors of the economy, which will exponentially increase the consumption of electricity in the U.S. and worldwide. Because of these industry dynamics and our current customer base, our electrical steel business is expected to continue to achieve strong profitability in the coming years.
We are the first and the only producer of HBI in the Great Lakes region. From our Toledo, Ohio facility, we produce a high-quality, low-cost and low-carbon intensive HBI product that can be used in our blast furnaces as a productivity enhancer, or in our BOFs and EAFs as a premium scrap alternative. We use HBI to stretch our hot metal production, lowering carbon intensity and reliance on coke. With increasing tightness in the scrap and metallics markets combined with our own internal needs, we expect our Toledo direct reduction plant to continue to support our operational efficiency going forward.
One of our most critical strengths that differentiates us from others in our industry is a unique and powerful partnership with our unionized workforce, particularly the USW. With over 18,000 employees subject to collective bargaining agreements, our strong and productive labor relationships are key to our long-term success and allow us to work together in achieving our goals. A clear example of the strength of our relationship is how we partner together to fight against dumped and illegally subsidized imported steel products. Our deep alignment with our represented employees is also recognized by our political leaders, who often publicly support us as a significant employer of a unionized workforce with a track record of working to maintain and increase middle class jobs.
STRATEGY
MAXIMIZE OUR COMMERCIAL STRENGTHS
We offer a full suite of flat steel products encompassing effectively all of our customers' needs. We are a leading supplier to the automotive sector, where our portfolio of high-end products delivers a broad range of differentiated solutions for this highly sought after customer base. As an established and reliable supplier of domestically produced automotive-grade steel, we expect to bolster our position as an industry leader going forward.
Our unique capabilities, driven by our portfolio of assets and technical expertise, give us an advantage in our flat-rolled product offering. We offer products that have superior formability, surface quality, strength and corrosion resistance for the automotive industry. In addition, our state-of-the-art Research and Innovation Center in Middletown, Ohio gives us the ability to collaborate with our customers and create new products and develop new and efficient steel manufacturing processes. A prime example of our ability to help our customers through research and development occurred during the fourth quarter of 2025 when we successfully completed a production trial in collaboration with a major automotive customer, where our steel was stamped into exposed parts with no defects using the customer's existing aluminum-forming equipment. After the successful production trial, we moved to routine production and delivery of regular orders to the customer.
Our five-year contract to supply semi-finished steel slabs that was initiated in connection with the closing of the acquisition of ArcelorMittal USA concluded in December 2025, with final shipments occurring during the first quarter of 2026 as we worked through remaining inventory. This contract historically represented approximately 10 percent of our sales volume and was unprofitable in 2025 due to unfavorable market conditions. Upon conclusion of this contract, we started to shift sales and product mix to higher margin business, which ultimately improves efficiency as we increase steel throughput within our operations.
UTILIZE ARTIFICIAL INTELLIGENCE TO IMPROVE OPERATIONAL EFFICIENCY
We recently partnered with a prominent enterprise software company that offers platforms for integrating, managing, and securing organizational data in order to improve real-time operational decisions through the use of AI. As a leading steel producer, it is crucial for us to modernize our operational systems and continuously improve our efficiency across our footprint. Utilizing cutting edge platforms and AI capabilities, we expect to improve real-time visibility into production and material flows and inventory levels, enable faster identification of bottlenecks, and assist with production planning to improve coordination across our facilities. By leveraging AI directly in our operations, we expect to reduce costs, improve yields and strengthen our operational efficiency across our steelmaking operations.
OPTIMIZE OUR FULLY-INTEGRATED STEELMAKING FOOTPRINT
We are a fully-integrated steel enterprise with an expansive footprint providing the opportunity to achieve healthy margins for flat-rolled steel throughout the business cycle. Our focus remains on realizing our inherent cost advantage in flat-rolled steel while continuing to optimize our footprint. The combination of our ferrous raw materials, including iron ore, scrap and HBI, allows us to do so relative to peers who must rely on more unpredictable and unreliable raw material sourcing strategies.
During 2025, we made the decision to fully or partially idle, or permanently close, six of our operations. We made the decision to idle our blast furnace, BOF steel shop, and continuous casting facilities at our Dearborn facility. We also made the decision to permanently close our Steelton, Conshohocken and Riverdale facilities due to underperformance at these operations. Additionally, we made the decision to idle the Minorca mine and partially idle the Hibbing mine. During the second quarter of 2026, we plan to further optimize our footprint by idling our Gary plate finishing line and idling one of the two plate mills at our Burns Harbor facility. We have successfully consolidated all production capabilities to one plate mill at Burns Harbor, which we expect will improve
utilization and enhance cost performance without compromising capability or steel output. These changes allow us to streamline our operations and enhance efficiency, with minimal impact to our flat-rolled steel output.
EXPLORE STRATEGIC OPPORTUNITIES
During the third quarter of 2025, we signed a Memorandum of Understanding (the "Memorandum of Understanding") with POSCO, Korea's largest steelmaker and the world's third largest steelmaker outside of China, who seeks to leverage our unmatched U.S. footprint and trade-compliant operations to support and grow its established U.S. customer base while ensuring that its products meet U.S. trade and origin requirements. The Memorandum of Understanding reflects rising interest in Cliffs amid the resurgence of U.S. manufacturing and should enable smooth onboarding for downstream industrial customers moving production from South Korea to the U.S. Any partnership we might pursue with POSCO should be strategic and accretive for our shareholders. UBS is acting as our financial advisor for the potential transaction.
Although we believe a successful transaction would be highly accretive to our shareholders, the strategic partnership contemplated by the Memorandum of Understanding remains subject to negotiation of definitive terms regarding such strategic partnership, together with the execution and closing of definitive agreements between the parties. As such, there can be no assurances that the parties will enter into such definitive agreements, that the strategic partnership will be implemented in accordance with the terms of the Memorandum of Understanding, or that the strategic partnership will proceed as currently expected or will ultimately be successful. While we expect to realize certain financial benefits arising out of the proposed partnership under the Memorandum of Understanding, including substantial proceeds that could be used to reduce our outstanding indebtedness, there is risk that the proposed partnership with POSCO does not come to fruition in a timely manner or at all or that any ultimate financial benefits could be less significant than we currently anticipate.
Also, during the third quarter of 2025, we announced that we engaged J.P.Morgan as our advisor and launched sell-side processes to explore the potential sale of certain non-core operating assets. As an American-based company with desirable assets, we are favorably positioned to potentially benefit from asset sales. In addition to non-core operating assets, we have received inbound inquiries for us to sell recently idled facilities and certain other inactive sites. We expect the net proceeds of any potential transaction would be used to pay down debt.
Beyond steelmaking, the renewed importance of rare earths in the U.S. has driven us to re-focus on this potential opportunity at our upstream mining assets. We have begun to explore rare earths at our ore bodies and tailings basins and have identified two sites with key geological indicators for rare earth extraction potential. If successful, it would align us with the broader national strategy for critical material independence. Before we can determine the economic potential for rare-earth extraction at our properties, we will need to conduct additional technical and economic studies, and there can be no assurance that rare-earth extraction at our properties will be economical. While we believe concentrations of rare earths exist within our ore bodies and tailings basins, the economic potential of this venture will depend heavily on the United States' investment in refineries, among other factors.
ENHANCE OUR ENVIRONMENTAL SUSTAINABILITY
We remain committed to operating our business in a more sustainable manner. In May 2024, we announced our commitment to achieve new GHG emissions reduction targets after we successfully achieved our prior commitment set in 2021 to reduce Scope 1 (direct emissions) and Scope 2 (indirect emissions from purchased electricity or other forms of energy) GHG emissions by 25% by 2030, relative to 2017 levels, well ahead of our 2030 target year. Our new goals set forth below, relative to 2023 levels, include:
•A target to reduce Scope 1 and 2 GHG emissions intensity per metric ton of crude steel by 30% by 2035;
•A target to reduce material upstream Scope 3 GHG emissions intensity per metric ton of crude steel by 20% by 2035; and
•A long-term target aligned with the Paris Agreement's 1.5 degrees Celsius scenario to reduce Scope 1, 2 and material upstream 3 emissions intensity per metric ton of crude steel to near net zero by 2050.
We have made significant progress in reducing our emissions on a per ton basis. Since 2020, we have reduced our average Scope 1 and 2 emissions of integrated mills from 1.82 to 1.64 metric tons of CO2e per metric ton of crude steel produced in 2025, which is significantly lower than the global industry average.
IMPROVE FINANCIAL FLEXIBILITY
Given the cyclicality of our business, it is important to us to be in the financial position to easily withstand economic cycles and be opportunistic when attractive strategic opportunities arise. Since becoming a steel company in 2020, we have demonstrated our ability to generate healthy free cash flow and use it to reduce substantial amounts of debt, return capital to shareholders, and make investments to both improve and grow our business.
We have a track record of demonstrating that we can quickly deleverage our balance sheet and have also historically shown our ability to take advantage of volatility in the debt markets and repurchase notes at a discount. We expect to generate healthy free cash flow in the coming years and intend to utilize it to deleverage our balance sheet. We also maintain a long maturity runway with our outstanding debt, with our nearest senior note maturities coming in 2029, have healthy liquidity consisting of cash and availability under our ABL Facility of $3.1 billion as of March 31, 2026, and have approximately $3.2 billion of secured note capacity, which supports our flexibility to navigate varied economic environments for extended periods of time.
STEELMAKING RESULTS
The following is a summary of our Steelmaking segment operating results, net of intersegment eliminations, for the three months ended March 31, 2026 and 2025 (dollars in millions, except for average selling price, and shipments in thousands of net tons):
| Total Revenue | Gross Margin | Adjusted EBITDA | Steel Shipments (nt) | |||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||||
| STEEL PRODUCT REVENUE: | GROSS MARGIN %: | ADJUSTED EBITDA %: | AVERAGE SELLING PRICE PER TON OF STEEL PRODUCTS: | |||||||||||||||||||||||||||||
| $4,305 | $4,056 | (2)% | (9)% | 2% | (4)% | $1,048 | $980 | |||||||||||||||||||||||||
REVENUES
The following tables represent our steel shipments by product and total revenues by market:
|
Three Months Ended March 31, |
|||||||||||||||||
| (In thousands of net tons) | 2026 | 2025 | % Change | ||||||||||||||
| Steel shipments by product: | |||||||||||||||||
| Hot-rolled steel | 1,798 | 1,693 | 6 | % | |||||||||||||
| Cold-rolled steel | 617 | 608 | 1 | % | |||||||||||||
| Coated steel | 1,187 | 1,123 | 6 | % | |||||||||||||
| Stainless and electrical steel | 143 | 142 | 1 | % | |||||||||||||
| Plate | 190 | 203 | (6) | % | |||||||||||||
| Slab and other steel products | 173 | 371 | (53) | % | |||||||||||||
| Total steel shipments by product | 4,108 | 4,140 | (1) | % | |||||||||||||
|
Three Months Ended March 31, |
|||||||||||||||||
| (In millions) | 2026 | 2025 | % Change | ||||||||||||||
| Steelmaking revenues by market: | |||||||||||||||||
| Direct automotive | $ | 1,368 | $ | 1,297 | 5 | % | |||||||||||
| Infrastructure and manufacturing | 1,374 | 1,354 | 1 | % | |||||||||||||
| Distributors and converters | 1,463 | 1,228 | 19 | % | |||||||||||||
| Steel producers | 552 | 588 | (6) | % | |||||||||||||
| Total Steelmaking revenues by market | $ | 4,757 | $ | 4,467 | 6 | % | |||||||||||
Revenues increased by $290 million, or 6%, for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. The increase was primarily driven by higher steel pricing, favorable sales mix, and improved non-steel product revenue, partially offset by lower steel product shipment volumes:
•Higher steel pricing: Steel product revenue increased by approximately $230 million due to rising pricing, particularly for hot-rolled steel, which increased our average selling price to $1,048 per net ton of steel;
•Favorable sales mix: Steel product revenue increased by approximately $50 million from favorable mix as the conclusion of the ArcelorMittal USA slab contract enabled a shift toward higher margin hot-rolled steel sales, primarily within the distributors and converters market; and
•Improved other Steelmaking revenue: Non-steel product revenue increased by approximately $40 million, primarily driven by higher revenue in the scrap business; which was partially offset by
•Lower steel product shipment volumes: Steel product revenue decreased by approximately $30 million due to a marginal reduction in overall steel product sales volume.
GROSS MARGIN
Gross margin increased by $310 million during the three months ended March 31, 2026, as compared to the prior-year period, primarily due to:
•Higher pricing on hot-rolled steel sales: Revenue increased by $290 million, primarily driven by an increase in pricing on hot-rolled steel sales, which favorably impacted gross margin for the quarter; and
•Lower cost of goods sold: Cost of goods sold decreased by approximately $20 million, reflecting a net decrease in idle charges incurred as compared to the first quarter of 2025. This was partially offset by elevated energy costs in the first quarter of 2026 driven by extreme cold weather in the quarter.
ADJUSTED EBITDA
Adjusted EBITDA from our Steelmaking segment for the three months ended March 31, 2026, increased by $269 million, as compared to the three months ended March 31, 2025, primarily due to the increased gross margin from our Steelmaking operations. This gross margin increase included a net decrease in idled facilities charges which is excluded from Adjusted EBITDA.
RESULTS OF OPERATIONS
REVENUES & GROSS MARGIN
During the three months ended March 31, 2026, our consolidated Revenues increased by $293 million, and our consolidated gross margin increased by $314 million, as compared to the prior-year period. See "- Steelmaking Results" above for further detail on our operating results.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses decreased by $8 million for the three months ended March 31, 2026, as compared to the prior-year period. The decrease was primarily driven by lower legal fees and employee compensation incurred during the period.
RESTRUCTURING AND OTHER CHARGES
During the three months ended March 31, 2025, we recorded Restructuring and other charges of $3 million related to our indefinitely idled Weirton tinplate production facility.
MISCELLANEOUS - NET
During the three months ended March 31, 2026, Miscellaneous - net decreased by $5 million compared to the prior-year period. The decrease was primarily driven by the gain on sale of certain non-core assets during the first quarter of 2026 along with various other improvements not individually significant, which was partially offset by unfavorable currency exchange expense related to routine remeasurement of an intercompany note with our Stelco subsidiary.
INTEREST EXPENSE, NET
Our consolidated Interest expense, net increased by $8 million for the three months ended March 31, 2026, as compared to the prior-year period. This increase was driven by an increase in average interest rates and from higher average borrowings in the period.
NET PERIODIC BENEFIT CREDITS OTHER THAN SERVICE COST COMPONENT
Net periodic benefit credits other than service cost component increased by $7 million for the three months ended March 31, 2026, as compared to the prior-year period. Refer to NOTE 8 - PENSIONS AND OTHER POSTRETIREMENT BENEFITS for further information.
CHANGES IN FAIR VALUE OF DERIVATIVES, NET
Changes in fair value of derivatives, net was consistent period-over-period consisting entirely of fair value adjustments to the MinnTac option.
INCOME TAXES
Our effective tax rate is impacted by state and foreign income taxes as well as permanent items. It also is affected by discrete items that may occur in any given period but are not consistent from period to period.
During the three months ended March 31, 2026, our consolidated Income tax benefit decreased by $68 million, as compared to the prior-year period. This decrease is primarily due to a decrease in Loss from continuing operations before income taxes and the impact of immaterial discrete items relative to those losses.
LIQUIDITY, CASH FLOWS AND CAPITAL RESOURCES
OVERVIEW
Our capital allocation decision-making process is focused on preserving healthy liquidity levels, strengthening our balance sheet, and creating financial flexibility to manage through the cyclical demand for our products and volatility in commodity prices. We are focused on maximizing the cash generation of our operations, reducing debt, returning capital to shareholders, and aligning capital investments with our strategic priorities and the requirements of our business plan, including regulatory and permission-to-operate related projects.
The following table provides a summary of our cash flow:
|
Three Months Ended March 31, |
|||||||||||
| (In millions) | 2026 | 2025 | |||||||||
| Cash flows provided by (used in): | |||||||||||
| Operating activities | $ | (325) | $ | (351) | |||||||
| Investing activities | (140) | (145) | |||||||||
| Financing activities | 454 | 499 | |||||||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | $ | (11) | $ | 3 | |||||||
CASH FLOWS
OPERATING ACTIVITIES
|
Three Months Ended March 31, |
|||||||||||||||||
| (In millions) | 2026 | 2025 | Variance | ||||||||||||||
| Net loss | $ | (229) | $ | (486) | $ | 257 | |||||||||||
| Non-cash adjustments to net loss | 176 | 146 | 30 | ||||||||||||||
| Working capital: | |||||||||||||||||
| Accounts receivable, net | (441) | (223) | (218) | ||||||||||||||
| Inventories | 174 | 182 | (8) | ||||||||||||||
| Income taxes | 4 | 7 | (3) | ||||||||||||||
| Pension and OPEB payments and contributions | (51) | (43) | (8) | ||||||||||||||
| Payables, accrued employment and accrued expenses | 41 | 62 | (21) | ||||||||||||||
| Other, net | 1 | 4 | (3) | ||||||||||||||
| Total working capital | (272) | (11) | (261) | ||||||||||||||
| Net cash used by operating activities | $ | (325) | $ | (351) | $ | 26 | |||||||||||
The variance was primarily driven by:
•A $287 million decrease in net loss after adjustments for non-cash items primarily due to higher gross margins resulting from an increase in selling prices for our steel products as compared to the prior-year period. See "- Steelmaking Results" above for further detail on our operating results; and
•A $218 million decrease in cash resulting from a build in Accounts receivable, net, as a result of rising steel prices and the timing of collections increased receivables.
INVESTING ACTIVITIES
|
Three Months Ended March 31, |
|||||||||||||||||
| (In millions) | 2026 | 2025 | Variance | ||||||||||||||
| Purchase of property, plant and equipment | $ | (152) | $ | (152) | $ | - | |||||||||||
| Other investing activities | 12 | 7 | 5 | ||||||||||||||
| Net cash used by investing activities | $ | (140) | $ | (145) | $ | 5 | |||||||||||
Our cash used for capital expenditures during the three months ended March 31, 2026 was consistent with the prior-year period. Our cash used for capital expenditures primarily relates to sustaining capital spend, which includes infrastructure, mobile equipment, fixed equipment, product quality, environmental, and health and safety spend. Included within cash used for capital expenditures was $1 million related to our non-owned SunCoke Middletown VIE for the three months ended March 31, 2026, compared to a nominal amount for the three months ended March 31, 2025.
We anticipate total cash used for capital expenditures during the next 12 months to be approximately $800 million, which primarily consists of sustaining capital spend.
FINANCING ACTIVITIES
|
Three Months Ended March 31, |
|||||||||||||||||
| (In millions) | 2026 | 2025 | Variance | ||||||||||||||
| Net proceeds of senior notes | $ | - | $ | 850 | $ | (850) | |||||||||||
| Net borrowings (repayments) under ABL Facility | 507 | (305) | 812 | ||||||||||||||
| Other financing activities | (53) | (46) | (7) | ||||||||||||||
| Net cash provided (used) by financing activities | $ | 454 | $ | 499 | $ | (45) | |||||||||||
The period-over-period change in financing activities reflects differences in our capital-raising and borrowing activity:
•For the three months ended March 31, 2025: We issued $850 million aggregate principal amount of 7.500% Senior Notes due 2031 at par. The net proceeds were used in part to repay borrowings under our ABL Facility; and
•For the three months ended March 31, 2026: No senior notes were issued, and borrowings under our ABL Facility increased to support general corporate requirements.
LIQUIDITY AND CAPITAL RESOURCES
Our primary sources of liquidity are Cash and cash equivalents, cash generated from our operations, availability under our ABL Facility and access to capital markets. Cash and cash equivalents, which totaled $45 million as of March 31, 2026, include cash on hand and on deposit, as well as short-term securities held for the primary purpose of general liquidity. The combination of cash and availability under our ABL Facility equated to $3.1 billion in liquidity as of March 31, 2026. We believe our liquidity and access to capital markets will be adequate to fund our cash requirements for the next 12 months and for the foreseeable future.
Our ABL Facility, which matures in June 2028, has a maximum borrowing base of $4.75 billion. The available borrowing base, which was $3.1 billion as of March 31, 2026, is determined by applying customary advance rates to eligible accounts receivable, inventory and certain mobile equipment. As of March 31, 2026, outstanding letters of credit totaled $48 million, which reduced availability under our ABL Facility. We issue standby letters of credit with certain financial institutions in order to support business obligations, including, but not limited to, workers' compensation, operating agreements, employee severance, environmental obligations and insurance. Our ABL Facility agreement contains various financial and other covenants. As of March 31, 2026, we were in compliance with the ABL Facility liquidity requirements and, therefore, the springing financial covenant requiring a minimum fixed charge coverage ratio of 1.0 to 1.0 was not applicable.
We have the capability to issue additional unsecured notes and, subject to the limitations set forth in our existing senior notes indentures and ABL Facility, additional secured debt, if we elect to access the debt capital markets. We currently have approximately $3.2 billion of secured note capacity. However, our ability to issue additional notes could be limited by market conditions. We intend from time to time to seek to redeem or repurchase our outstanding senior notes with cash on hand, borrowings from existing credit sources or new debt or equity financings and/or exchanges for debt or equity securities, in open market purchases, privately negotiated transactions or otherwise. Such redemptions or repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors, and the amounts involved may be material. We also have the potential to generate liquidity from the sale of non-core assets, recently idled facilities and certain other inactive sites.
Refer to NOTE 7 - DEBT AND CREDIT FACILITIES for more information on our ABL Facility and debt.
NON-GAAP FINANCIAL MEASURE
The following provides a description and reconciliation of our non-GAAP financial measure to its most directly comparable GAAP measure. The presentation of this measure is not intended to be considered in isolation from, as a substitute for, or as superior to, the financial information prepared and presented in accordance with GAAP. The presentation of this measure may be different from non-GAAP financial measures used by other companies.
ADJUSTED EBITDA
We evaluate performance on an operating segment basis, as well as a consolidated basis, based on Adjusted EBITDA, which is a non-GAAP measure. This measure is used by management, investors, lenders and other external users of our financial statements to assess our operating performance and to compare operating performance to other companies in the steel industry. In addition, management believes Adjusted EBITDA is a useful measure to assess the earnings power of the business without the impact of capital structure and can be used to assess our ability to service debt and fund future capital expenditures in the business.
The following table provides a reconciliation of our Net loss to Adjusted EBITDA:
|
Three Months Ended March 31, |
|||||||||||
| (In millions) | 2026 | 2025 | |||||||||
| Net loss | $ | (229) | $ | (486) | |||||||
| Less: | |||||||||||
| Interest expense, net | (148) | (140) | |||||||||
| Income tax benefit | 81 | 149 | |||||||||
| Depreciation, depletion and amortization | (259) | (282) | |||||||||
| Total EBITDA | 97 | (213) | |||||||||
| Less: | |||||||||||
|
EBITDA from noncontrolling interests1
|
15 | 18 | |||||||||
| Idled facilities credits (charges) | 10 | (44) | |||||||||
| Currency exchange | (14) | (2) | |||||||||
| Changes in fair value of derivatives, net | (10) | (9) | |||||||||
| Gain (loss) on disposal of assets, net | 7 | (2) | |||||||||
| Amortization of inventory step-up | - | 7 | |||||||||
| Other, net | (6) | (2) | |||||||||
| Total Adjusted EBITDA | $ | 95 | $ | (179) | |||||||
|
1 EBITDA from noncontrolling interests includes the following:
|
|||||||||||
| Net income attributable to noncontrolling interests | 8 | 12 | |||||||||
| Depreciation, depletion and amortization | 7 | 6 | |||||||||
| EBITDA from noncontrolling interests | $ | 15 | $ | 18 | |||||||
The following table provides a summary of our Adjusted EBITDA by segment:
|
Three Months Ended March 31, |
|||||||||||
| (In millions) | 2026 | 2025 | |||||||||
| Adjusted EBITDA: | |||||||||||
| Steelmaking | $ | 80 | $ | (189) | |||||||
| Other Businesses | 15 | 10 | |||||||||
| Intersegment Eliminations | - | - | |||||||||
| Total Adjusted EBITDA | $ | 95 | $ | (179) | |||||||
INFORMATION ABOUT OUR GUARANTORS AND THE ISSUER OF OUR GUARANTEED SECURITIES
The accompanying summarized financial information has been prepared and presented pursuant to SEC Regulation S-X, Rule 3-10, "Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered," and Rule 13-01 "Financial Disclosures about Guarantors and Issuers of Guaranteed Securities and Affiliates Whose Securities Collateralized a Registrant's Securities." Certain of our subsidiaries (the "Guarantor subsidiaries") as of March 31, 2026 have fully and unconditionally, and jointly and severally, guaranteed the obligations under the 4.625% 2029 Senior Notes, the 6.875% 2029 Senior Notes, the 6.750% 2030 Senior Notes, the 4.875% 2031 Senior Notes, the 7.500% 2031 Senior Notes, the 7.000% 2032 Senior Notes, the 7.375% 2033 Senior Notes, and the 7.625% 2034 Senior Notes issued by Cleveland-Cliffs Inc. on a senior unsecured basis. See NOTE 7 - DEBT AND CREDIT FACILITIES for further information.
The following presents the summarized financial information on a combined basis for Cleveland-Cliffs Inc. (parent company and issuer of the guaranteed obligations) and the Guarantor subsidiaries, collectively referred to as the obligated group. Transactions between the obligated group have been eliminated. Information for the non-Guarantor subsidiaries was excluded from the combined summarized financial information of the obligated group.
Each Guarantor subsidiary is consolidated by Cleveland-Cliffs Inc. as of March 31, 2026. Refer to Exhibit 22, incorporated herein by reference, for the detailed list of entities included within the obligated group as of March 31, 2026.
As of March 31, 2026, the guarantee of a Guarantor subsidiary with respect to the 4.625% 2029 Senior Notes, the 6.875% 2029 Senior Notes, the 6.750% 2030 Senior Notes, the 4.875% 2031 Senior Notes, the 7.500% 2031 Senior Notes, the 7.000% 2032 Senior Notes, the 7.375% 2033 Senior Notes, and the 7.625% 2034 Senior Notes will be automatically and unconditionally released and discharged, and such Guarantor subsidiary's obligations under the guarantee and the related indentures (the "Indentures") will be automatically and unconditionally released and discharged, upon the occurrence of any of the following, along with the delivery to the trustee of an officer's certificate and an opinion of counsel, each stating that all conditions precedent
provided for in the applicable Indenture relating to the release and discharge of such Guarantor subsidiary's guarantee have been complied with:
(a) any sale, exchange, transfer or disposition of such Guarantor subsidiary (by merger, consolidation, or the sale of) or the capital stock of such Guarantor subsidiary after which the applicable Guarantor subsidiary is no longer a subsidiary of the Company or the sale of all or substantially all of such Guarantor subsidiary's assets (other than by lease), whether or not such Guarantor subsidiary is the surviving entity in such transaction, to a person which is not the Company or a subsidiary of the Company; provided that (i) such sale, exchange, transfer or disposition is made in compliance with the applicable Indenture, including the covenants regarding consolidation, merger and sale of assets and, as applicable, dispositions of assets that constitute notes collateral, and (ii) all the obligations of such Guarantor subsidiary under all debt of the Company or its subsidiaries terminate upon consummation of such transaction;
(b) designation of any Guarantor subsidiary as an "excluded subsidiary" (as defined in the Indentures); or
(c) defeasance or satisfaction and discharge of the Indentures.
Each entity in the summarized combined financial information follows the same accounting policies as described in the consolidated financial statements. The accompanying summarized combined financial information does not reflect investments of the obligated group in non-Guarantor subsidiaries. The financial information of the obligated group is presented on a combined basis; intercompany balances and transactions within the obligated group have been eliminated. The obligated group's amounts due from, amounts due to, and transactions with, non-Guarantor subsidiaries and related parties have been presented in separate line items.
SUMMARIZED COMBINED FINANCIAL INFORMATION OF THE ISSUER AND GUARANTOR SUBSIDIARIES
The following table is summarized combined financial information from the Statements of Unaudited Condensed Consolidated Financial Position of the obligated group:
| (In millions) | March 31, 2026 | December 31, 2025 | |||||||||
| Current assets | $ | 6,570 | $ | 6,198 | |||||||
| Non-current assets | 11,503 | 11,556 | |||||||||
| Current liabilities | (3,877) | (3,922) | |||||||||
| Non-current liabilities | (9,415) | (8,884) | |||||||||
The following table is summarized combined financial information from the Statements of Unaudited Condensed Consolidated Operations of the obligated group:
| Three Months Ended | |||||
| (In millions) | March 31, 2026 | ||||
| Revenues | $ | 4,386 | |||
| Cost of goods sold | (4,423) | ||||
| Loss from continuing operations | (163) | ||||
| Net loss | (163) | ||||
| Net loss attributable to Cliffs shareholders | (163) | ||||
The obligated group had the following balances with non-Guarantor subsidiaries and other related parties:
| (In millions) | March 31, 2026 | December 31, 2025 | |||||||||
| Balances with non-Guarantor subsidiaries: | |||||||||||
| Accounts receivable, net | $ | 770 | $ | 758 | |||||||
| Accounts payable | (1,001) | (1,069) | |||||||||
| Balances with other related parties: | |||||||||||
| Accounts receivable, net | $ | 14 | $ | 11 | |||||||
| Accounts payable | (11) | (11) | |||||||||
Additionally, for the three months ended March 31, 2026, the obligated group had Revenues of $27 million and Cost of goods sold of $23 million, in each case, with other related parties.
MARKET RISKS
We are subject to a variety of risks, including those caused by changes in commodity prices, foreign currency exchange rates, and interest rates. We have established policies and procedures to manage such risks; however, certain risks are beyond our control.
PRICING RISKS
In the ordinary course of business, we are exposed to price fluctuations in both the production and sale of our products. Price fluctuations related to the production of our products are impacted by market prices for natural gas, electricity, ferrous and stainless steel scrap, metallurgical coal, coke, zinc, chrome, nickel and other alloys. Price fluctuations related to the sale of our products are primarily impacted by market prices for HRC and other related spot indices. Our financial results can vary for our operations as a result of these fluctuations.
Our strategy to address the risk of changes in the prices of both energy and raw materials that are purchased and utilized in our operations includes improving efficiency in energy usage, identifying alternative providers, utilizing the lowest cost alternative fuels and making forward physical purchases.
Some customer contracts have fixed pricing terms, which increase our exposure to fluctuations in raw material and energy costs. To reduce our exposure, we enter into annual, fixed price agreements for certain raw materials. Some of our existing multi-year raw material supply agreements have required minimum purchase quantities. Under adverse economic conditions, those minimums may exceed our needs. Absent exceptions for force majeure and other circumstances affecting the legal enforceability of the agreements, these minimum purchase requirements may compel us to purchase quantities of raw materials that could significantly exceed our anticipated needs or pay damages to the supplier for shortfalls. In these circumstances, we would attempt to negotiate agreements for new purchase quantities. There is a risk, however, that we would not be successful in reducing purchase quantities, either through negotiation or litigation. If that occurred, we would likely be required to purchase more of a particular raw material in a particular year than we need, negatively affecting our results of operations and cash flows.
Certain of our customer contracts include variable-pricing mechanisms that adjust selling prices in response to changes in the costs of certain raw materials and energy, while other of our customer contracts exclude such mechanisms. We may enter into multi-year purchase agreements for certain raw materials with similar variable-price mechanisms, allowing us to achieve natural hedges between the customer contracts and supplier purchase agreements. Therefore, in some cases, price fluctuations for energy (particularly natural gas and electricity), raw materials (such as scrap, chrome, zinc and nickel) or other commodities may be, in part, passed on to customers rather than absorbed solely by us. There is a risk, however, that the variable-price mechanisms in the sales contracts may not necessarily change in tandem with the variable-price mechanisms in our purchase agreements, negatively affecting our results of operations and cash flows.
If we are unable to align fixed and variable components between customer contracts and supplier purchase agreements, we routinely evaluate the use of derivative instruments to hedge market risk. As a result, we use commodity-based derivative contracts to hedge a portion of our exposure from our natural gas and electricity requirements. Our hedging strategy is designed to protect us from excessive pricing volatility. However, since we do not typically hedge 100% of our exposure, abnormal price increases in any of these commodity markets would negatively affect operating costs.
Our primary strategy for managing fluctuations related to the selling price of our products is to obtain competitive prices and allow operating results to reflect market price movements dictated by supply and demand; however, from time to time, we also utilize derivative instruments to manage a portion of our exposure to HRC price volatility in the average selling price of our products.
The following table summarizes the negative effect of a hypothetical change in the fair value of our derivative instruments outstanding as of March 31, 2026, due to a 10% and 25% change in the market price of each of the indicated commodities:
| Contract Type (In millions) | 10% Change | 25% Change | ||||||||||||
| Natural gas | $ | 50 | $ | 124 | ||||||||||
| Electricity | 10 | 25 | ||||||||||||
| HRC | 39 | 97 | ||||||||||||
Any resulting changes in fair value would be recorded as adjustments to AOCI, net of income taxes, or recognized in net earnings, as appropriate. These hypothetical losses would be partially offset by the benefit of lower prices paid for the related commodities or the benefit of higher selling prices related to the HRC price, respectively.
VALUATION OF GOODWILL AND OTHER LONG-LIVED ASSETS
GOODWILL
We assign goodwill arising from acquired companies to the reporting units that are expected to benefit from the synergies of the acquisition. Goodwill is tested on a qualitative or quantitative basis for impairment at the reporting unit level on an annual basis (October 1) and between annual tests if a triggering event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. We have an unconditional option to bypass the qualitative test for any reporting unit in any period and proceed directly to performing the quantitative test. Should our qualitative test indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying value, we perform a quantitative test to determine the amount of impairment, if any, to the carrying value of the reporting unit and its associated goodwill.
Triggering events could include a significant and sustained change in the business climate, including, among other factors, declines in historical or projected revenue, operating income, Adjusted EBITDA or cash flows, and declines in the stock price or market capitalization, considered both in absolute terms and relative to peers, legal factors, competition, or sale or disposition of a significant portion of a reporting unit. Automotive production and sales are cyclical and sensitive to general economic conditions and other factors, including interest rates, consumer credit, spending and preferences, and supply chain disruptions. Additionally, to the extent that commodity prices, including the HRC price, coated and other specialty steel prices, international steel prices and
scrap metal prices, significantly decline for an extended period, we may have to further revise our operating plans. As a result, testing for potential impairment on our goodwill may be adversely affected by uncertain market conditions for the global steel industry, as well as changes in interest rates, inflation, commodity prices and general economic conditions. Changes in general economic and/or industry specific conditions, such as the impacts of significant recent shifts in trade policies, including the imposition of tariffs, retaliatory tariff measures and subsequent modifications or suspensions thereof, and market reactions to such policies and resulting trade disputes, could further impact our impairment assessments. We do not believe the current challenging macroeconomic and industry conditions, or volatility in our market capitalization, have significantly changed our assessment of the fair value of our reporting units.
Application of a goodwill impairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units, assignment of goodwill to reporting units, and the determination of the fair value of each reporting unit, if a quantitative assessment is deemed necessary. The fair value of each reporting unit is estimated using the guideline public company method, the discounted cash flow methodology, or a combination of both, which considers forecasted cash flows discounted at an estimated weighted average cost of capital. Assessing the recoverability of our goodwill requires significant assumptions regarding discount rates, market multiples, the estimated future cash flows and other factors to determine the fair value of a reporting unit, including, among other things, estimates related to forecasts of future revenues, Adjusted EBITDA, capital expenditures and working capital requirements, which are based upon our long-range plan estimates. The assumptions used to calculate the fair value of a reporting unit may change based on operating results, market conditions and other factors. Changes in these assumptions could materially affect the determination of fair value for each reporting unit.
OTHER LONG-LIVED ASSETS
Long-lived assets are reviewed for impairment upon the occurrence of events or changes in circumstances that would indicate that the carrying value of the assets may not be recoverable. Such indicators may include: a significant decline in expected future cash flows; a sustained, significant decline in market pricing; a significant adverse change in legal or environmental factors or in the business climate; changes in estimates of our recoverable reserves; and unanticipated competition. Any adverse change in these factors could have a significant impact on the recoverability of our long-lived assets and could have a material impact on our consolidated statements of operations and statements of financial position.
A comparison of each asset group's carrying value to the estimated undiscounted net future cash flows expected to result from the use of the assets, including cost of disposition, is used to determine if an asset is recoverable. Projected future cash flows reflect management's best estimate of economic and market conditions over the projected period, including growth rates in revenues and costs, and estimates of future expected changes in operating margins and capital expenditures. If the carrying value of the asset group is higher than its undiscounted net future cash flows, the asset group is measured at fair value and the difference is recorded as a reduction to the long-lived assets. We estimate fair value using a market approach, an income approach or a cost approach. For the three months ended March 31, 2026, we concluded that there were no triggering events resulting in the need for an impairment assessment.
FOREIGN CURRENCY EXCHANGE RATE RISK
We are subject to changes in foreign currency exchange rates primarily as a result of our operations in Canada, which could impact our financial condition. Foreign exchange rate risk arises from our exposure to fluctuations in foreign currency exchange rates because our reporting currency is the U.S. dollar, but the functional currency of our Stelco subsidiaries is the Canadian dollar. Specifically, we are primarily exposed to fluctuations in foreign currency rates in relation to an intercompany note with our Stelco subsidiary that is denominated in the Canadian dollar. Changes in the Canadian dollar exchange rate may result in volatility in our financial condition due to the routine remeasurement of this note. As of March 31, 2026, a 1% change in the Canadian dollar foreign currency exchange rate would result in a $9 million change in currency exchange income (expense). Additionally, we engage in routine transactions denominated in foreign currencies, such as the purchases of goods and services. However, the potential impact of these transactions to our financial condition is significantly less than the potential impact of the routine remeasurement of the intercompany note.
INTEREST RATE RISK
Interest payable on our senior notes is at fixed rates. Interest payable under our ABL Facility is at a variable rate based upon the applicable base rate plus the applicable base rate margin depending on the excess availability. As of March 31, 2026, we had $959 million of outstanding borrowings under our ABL Facility. An increase in prevailing interest rates would increase interest expense and interest paid for any outstanding borrowings under our ABL Facility. For example, a 100 basis point change to interest rates under our ABL Facility at the March 31, 2026 borrowing level would result in a change of $10 million to interest expense on an annual basis.
SUPPLY CONCENTRATION RISKS
Many of our operations and mines rely on one source for each of electric power and natural gas. A significant interruption or change in service or rates from our energy suppliers could materially impact our production costs, margins and profitability.
FORWARD-LOOKING STATEMENTS
This report contains statements that constitute "forward-looking statements" within the meaning of the federal securities laws. As a general matter, forward-looking statements relate to anticipated trends and expectations rather than historical matters. Forward-looking statements are subject to uncertainties and factors relating to our operations and business environment that are difficult to predict and may be beyond our control. Such uncertainties and factors may cause actual results to differ materially from those expressed or implied by the forward-looking statements. These statements speak only as of the date of this report, and we undertake no ongoing obligation, other than that imposed by law, to update these statements. Investors are cautioned not to place undue reliance on forward-looking statements. Uncertainties and risk factors that could affect our future performance and cause results to differ from the forward-looking statements in this report include, but are not limited to:
•continued volatility of steel, scrap metal and iron ore market prices, which directly and indirectly impact the prices of the products that we sell to our customers;
•uncertainties associated with the highly competitive and cyclical steel industry and our reliance on the demand for steel from the automotive industry;
•potential weaknesses and uncertainties in global economic conditions, excess global steelmaking capacity and production, prevalence of steel imports and reduced market demand;
•severe financial hardship, bankruptcy, temporary or permanent shutdowns or operational challenges of one or more of our major customers, key suppliers or contractors, which, among other adverse effects, could disrupt our operations or lead to reduced demand for our products, increased difficulty collecting receivables, and customers and/or suppliers asserting force majeure or other reasons for not performing their contractual obligations to us;
•risks related to U.S. and Canadian government actions and other countries' reactions with respect to Section 232, the USMCA and/or other trade agreements, tariffs, treaties or policies, as well as the uncertainty of obtaining and maintaining effective antidumping and countervailing duty orders to counteract the harmful effects of unfairly traded imports;
•impacts of extensive governmental regulation, including actual and potential environmental regulations relating to climate change and carbon emissions, and related costs and liabilities, including failure to receive or maintain required operating and environmental permits, approvals, modifications or other authorizations of, or from, any governmental or regulatory authority and costs related to implementing improvements to ensure compliance with regulatory changes, including potential financial assurance requirements, and reclamation and remediation obligations;
•potential impacts to the environment or exposure to hazardous substances resulting from our operations;
•our ability to maintain adequate liquidity, our level of indebtedness and the availability of capital could limit our financial flexibility and cash flow necessary to fund working capital, planned capital expenditures, acquisitions, and other general corporate purposes or ongoing needs of our business, or to repurchase our common shares;
•our ability to reduce our indebtedness or return capital to shareholders within the currently expected timeframes or at all;
•adverse changes in credit ratings, interest rates, foreign currency rates and tax laws;
•risks and uncertainties related to our ability to realize the anticipated synergies or other expected benefits of any acquisitions, including the acquisition of Stelco, any potential transaction arising out of our Memorandum of Understanding with POSCO and completing any proposed asset divestiture transactions;
•challenges to successfully implementing our business strategy to achieve operating results in line with our guidance;
•the outcome of, and costs incurred in connection with, lawsuits, claims, arbitrations or governmental proceedings relating to commercial and business disputes, antitrust claims, environmental matters, government investigations, occupational or personal injury claims, property-related matters, labor and employment matters, mineral royalty disputes, or suits involving legacy operations and other matters;
•supply chain disruptions or changes in the cost, quality or availability of energy sources, including electricity, natural gas and diesel fuel, water, critical raw materials and supplies, including iron ore, industrial gases, graphite electrodes, scrap metal, chrome, zinc, other alloys, coke and metallurgical coal, and critical manufacturing equipment and spare parts, including as a result of geopolitical conflicts;
•problems or disruptions associated with transporting products to our customers, moving manufacturing inputs or products internally among our facilities, or suppliers transporting raw materials and spare parts to us;
•our ability to implement strategic or sustaining capital projects on time and on budget;
•uncertainties associated with natural or human-caused disasters, adverse weather conditions, unanticipated geological conditions, critical equipment failures, infectious disease outbreaks, tailings dam failures and other unexpected events;
•cybersecurity incidents relating to, disruptions in, or failures of, IT systems that are managed by us or third parties that host or have access to our data or systems, including the loss, theft or corruption of our or third parties' sensitive or essential business or personal information and the inability to access or control systems;
•emerging risks related to the adoption and regulation of AI, including our ability to achieve the expected benefits of our adoption of IT platforms that use AI;
•liabilities and costs arising in connection with business decisions to temporarily or indefinitely idle or permanently close an operating facility or mine, which could adversely impact the carrying value of associated assets and give rise to impairment charges or closure and reclamation obligations, as well as uncertainties associated with resuming production at any previously idled operating facility or mine;
•our level of self-insurance and our ability to obtain sufficient third-party insurance to adequately cover potential adverse events and business risks;
•uncertainties associated with our ability to meet customers' and suppliers' decarbonization goals and reduce our emissions in alignment with our own announced targets;
•challenges to maintaining our social license to operate with our stakeholders, including the impacts of our operations on local communities, reputational impacts of operating in a carbon-intensive industry that produces GHG emissions, and our ability to foster a consistent operational and safety track record;
•our actual economic mineral reserves or reductions in current mineral reserve estimates, and any title defect or loss of any lease, license, option, easement or other possessory interest for any mining property;
•our ability to complete technical and economic studies to determine the potential for economic extraction of rare earth minerals at our mining properties, and the risk that rare-earth extraction at our properties may not be economically viable;
•our ability to maintain satisfactory labor relations with unions and our employees;
•unanticipated or higher costs associated with pension and OPEB obligations resulting from changes in the value of plan assets or contribution increases required for unfunded obligations, including for multiemployer plan withdrawal liability;
•uncertain availability or cost of skilled workers to fill critical operational positions and potential labor shortages caused by experienced employee attrition or otherwise, as well as our ability to attract, hire, develop and retain key personnel; and
•potential significant deficiencies or material weaknesses in our internal control over financial reporting.
For additional factors affecting our business, refer to Part II - Item 1A. Risk Factors of this Quarterly Report on Form 10-Q. You are urged to carefully consider these risk factors.
Forward-looking and other statements in this Quarterly Report on Form 10-Q regarding our GHG reduction plans and goals are not an indication that these statements are necessarily material to investors or required to be disclosed in our filings with the SEC. In addition, historical, current and forward-looking GHG-related statements may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve and assumptions that are subject to change in the future.
Cleveland-Cliffs Inc. published this content on April 21, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on April 21, 2026 at 20:44 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]