Cleveland-Cliffs (NYSE:CLF) released first-quarter financial results and hosted an earnings call on Monday. Read the complete transcript below.
This content is powered by Benzinga APIs. For comprehensive financial data and transcripts, visit https://www.benzinga.com/apis/.
View the webcast at https://event.choruscall.com/mediaframe/webcast.html?webcastid=3VsGPSh2
Summary
Cleveland-Cliffs reported a Q1 2026 adjusted EBITDA of $95 million, a significant $274 million increase from the previous year, driven by improved pricing.
The company noted a strong order book with increased demand from automotive OEMs, contributing to positive market conditions and extended production lead times.
Future outlook is optimistic with expected sequential improvements in Q2 and Q3, driven by higher shipments and pricing, alongside operational optimizations.
The company highlighted the impact of energy cost spikes on Q1 results but expects these costs to normalize moving forward.
Strategic initiatives include the Butler Works Electrical Steel expansion and a potential deal with Posco, although geopolitical factors may delay the latter.
Operational highlights include the idling of less efficient mills and the integration of AI into production processes to enhance decision-making.
Management expressed confidence in achieving strong free cash flow in the coming quarters, supported by asset sales and enhanced operational leverage.
Cleveland-Cliffs is actively engaged in labor negotiations with United Steelworkers, aiming for agreements that support competitiveness and sustainability.
Full Transcript
OPERATOR
Good morning ladies and gentlemen.
Kevin (Conference Facilitator)
My name is Kevin and I’m your conference facilitator. Today I’d like to welcome everyone to Cleveland-Cliffs first quarter 2026 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker’s prepared remarks, there will be a question and answer session. The company reminds you that certain comments made on today’s call will include predictive statements that are intended to be made as forward looking within the safe harbor protections of the Private Security Litigation Reform act of 1995. Although the company believes that its forward looking statements are based on reasonable assumptions, such statements are subject to risks and uncertainties that could cause actual results to differ materially. Important factors that could cause results to differ materially are set forth in reports on Form 10K and 10Q and news releases filed with the SEC which are available on the Company website. Today’s conference call is also available and being broadcast at clevelandcliffs.com application. At the conclusion of the call, it will be archived on the website and available for replay. The Company will also discuss results excluding certain special items. Reconciliation for Regulation G purposes, can be found in the earnings release which was published this morning. At this time I’d like to introduce Lorenzo Goncalves, Chairman, President and Chief Executive Officer.
Lorenzo Goncalves (Chairman, President and Chief Executive Officer)
Thank you, Kevin and good morning everyone. The first quarter of 2026 was the beginning of a sustained improvement progression that will continue through the rest of the year. While Q1 results could be better, and they would be better if not for a couple of one timers, we can see the clear signs of a positive trend. For me, among these one timers, the impact of the spiking on energy costs was the Most relevant to Q1 results. Now to the good news. Our order book is full and the automotive OEMs are booking more and more steel from Cliffs. Production schedules are tight and lead times have moved out. Historically, pricing changes took about a month to flow through our realized numbers. Today, that lag is closer to two months. In practical terms, that means the pricing strength visible in the market today will increasingly show up in our results as we move through the year quarter by quarter. That combination, strong backlogs, disciplined production and visibility is what a healthy steel market looks like. The extended lead times allow us to optimize production schedules in our mills, improving our overall efficiency, productivity and costs. This market strength is driven by what is happening on the trade front. Steel imports into the United States are at their lowest levels since 2009. By now it’s clear that section 232 works. The melted and poured mandate works and the enforcement works along those lines. We are very encouraged by the recent changes in how derivative products tariffs are being enforced. Distribution transformers were added, which is exactly the right outcome. The Trump administration has given the domestic steel industry what we needed and have been asking for. Union jobs are being protected, domestic supply chains are more resilient and mills are running at higher utilization with real predictability. The one piece still missing is Canada. There’s a robust domestic market in Canada for our Canadian subsidiary Stelco to sell steel into. But the Canadian market is still oversupplied with steel from countries that are no longer able to dump their excess capacity into the United States. Because of that, they dump steel in Canada. That said, we are confident that Canada will ultimately get to the right place and enhance its own national security defenses against the negative impact of foreign steel causing the destruction of Canadian companies. We truly believe the Canadian government is honest about defending Canadian jobs and Canadian steel workers. We fully expect that Fortress North America can be and will be implemented by Canada because that’s totally within their own power. Canada does not depend on anyone else to do so. In Canadian, jobs are the ones at stake. The national security base for steel tariffs is being validated in real time. The war activity in Iran has disrupted global freight lanes, driven up energy prices and destabilized metal supply chains. Imported steel is now not only subject to tariffs, it is structurally more expensive due to transportation costs, energy volatility and geopolitical risk. And while this global uncertainty is exposing weaknesses elsewhere, it is strengthening the position of domestic steel producers like Cleveland Cliffs. Nowhere is that more evident than in aluminum. The aluminum industry has been hit repeatedly. Fires, power shortages, curtailments, geopolitical disruption and customers have taken notice of all that. Automotive OEMs are prioritizing supply, certainty, total costs and safety. Our Cliffs’ steel delivers all of that without the fragility embedded in aluminum supply chains. In my long career in this business, I have never seen so much momentum in substituting aluminum with steel. And automotive is not the only place where the shift from aluminum to steel is occurring. Building products, appliances and trucker and trailer sectors have been recently gravitating toward more steel use as well as we advance the use of our Cliffs’ steel being formed in equipment previously utilized exclusive for aluminum. Cleveland-Cliffs has demonstrated to our clients with real life results, the most potential benefit to market share gains from Alumina. We are also pleased to inform all of our stakeholders that in February, Cleveland-Cliffs received from our clients Toyota the Toyota Quality Excellence Award. Toyota does not hand out quality excellence awards lightly. Their standards are among the strictest in the world. quality excellence awards lightly. Their standards are among the strictest in the world. Winning that award is confirmation that our processes, consistency, execution and our overall quality are at the highest level for Toyota’s high standards. That strength has drawn attention from companies outside the United States. When we last spoke, we expected to achieve during the second quarter a mutually satisfactory transaction with Posco. In accordance with the Memorandum of Understanding signed by both companies last year. This goal remains achievable, but the current disruption in the Middle east and its impact on the country of South Korea have not helped accelerate the conclusion of our ongoing discussions. That said, our engagement with Posco is active and we still believe a deal can be completed within this time frame or slightly later. Our Department of Energy funded projects on this side, we continue to make solid progress. The Butler Works Electrical Steel expansion project is moving along as planned and remains on schedule for 2028 completion. Similarly, our Middletown Works project has received clear affirmation that the project will proceed once the updated scope is finally approved and we are now in the final stages of completing their work. The revised scope of the project reflects a modern blast furnace configuration that positioning Middletown among the most energy efficient in the world. Taken together, the Butler and Middletown projects underscore our disciplined approach to modernization, investing in critical infrastructure in a way that strengths domestic steelmaking improves efficiency and supports long term competitiveness. At the same time, we are continuing the footprint optimization actions we began last year at Burns Harbor. We are idling our smaller plate mill as we have successfully been able to consolidate all capabilities of the 110 inch mill into the 160 inch mill. This removes an inefficient line, improves utilization at the efficient 160 inch mill and strengths our cost performance without sacrificing any capability. We are also idling the Gary plate finishing line which is no longer needed. There will be no loss in overall steel production or layoffs as we will backfill those roles in areas where we have seen retiree attrition. We expect that these operational changes, coupled with the positive momentum we have been currently seeing in the plate market should enhance our earnings from the plate business on rare earths. We continue to analyze our potential on these critical minerals. That said, economics hinge on domestic refinement capability and today that infrastructure is extremely limited in the United States. Refinement is capital intensive and not something we intend to pursue ourselves. If and when viable domestic refinement infrastructure becomes available, either through government supported projects or third party investments, we see ourselves well positioned to take advantage of the opportunity we have also partnered with a leading and prominent AI provider to help us take a meaningful step forward in how we run the interface between operations and commercial, particularly by embedding AI into our production, planning and order entry processes. Their platform allows us to use machine learning models across our internal data to anticipate constraints optimizing, sequencing and making better decisions in real time rather than after the fact. Our people are good, but it is impossible to perfect these processes with humans running Excel spreadsheets. This initiative will ultimately move us from human experience driven planning toward a new and enhanced AI assisted decision making system that scales with the complexity of our operations. We expect to make a full announcement on our AI initiative, including the name of our partner in the next few weeks. One important milestone we will navigate in the coming months is the renegotiation of our labor agreement with United Steelworkers. Our employers are the backbone of this company and their skills, commitment and pride in what they produce are critical to our success in our evolving and increasingly capital intensive industry. We must ensure that the structure of our labor agreements supports competitiveness, flexibility and long term sustainability. We approach these discussions with respect and realism with the goal of reaching an agreement that rewards our workforce while strengthening the company’s ability to invest, grow and remain a strong employer for decades to come. This process represents a meaningful opportunity for both Cleveland Cliffs management team and our union workforce to demonstrate the depth and strength of our partnership and we will not disappoint anyone with that. I’ll turn it over to our CFO Celso Gonçalves to go over our financial results.
Celso Goncalves (Chief Financial Officer)
Thank you. Good morning everyone. Our adjusted EBITDA in The quarter was 95 million dollars, a 274 million dollar increase from a year ago due primarily to increased pricing. Starting with the top line first quarter shipments totaled just over 4.1 million tons, which represents a recovery of more than 300,000 tons sequentially. That improvement was driven by better demand conditions across spot and trade channels and by a more stable operating cadence. Coming out of the fourth quarter we were still impacted by weather related disruptions, but volume strengthened as the quarter progressed. Shipments should increase further into Q2 as this trend continues. That volume recovery is critical because of the fixed cost nature of our business. Every incremental ton we produce and ship has a disproportionate impact on margins. The operating leverage embedded in integrated steelmaking remains substantial. Pricing also moved in the right direction. Average selling prices increased by $68 per ton from a year ago and sequentially by $55 per ton during the quarter reflecting improving market conditions and better automotive pull. This came in slightly below our original estimate as contractual lags were longer than anticipated based on customers ordering at max levels. As mentioned earlier by Lorenzo, what used to be roughly a one month realization lag has effectively extended to closer to two months as our order book has filled and schedules have stretched. That means price strength visible today will will show up more fully in Q2 and Q3 results. In the US about 45% of our sales are linked to the commodity HRC price. The remainder are under fixed price arrangements like in automotive or linked to other indices like we have with plate in Canada. Effectively all shipments …
This post was originally published here
