Cleveland-Cliffs Inc. (NASDAQ:CLF) reported fourth-quarter financial results on Monday. The transcript from the company’s earnings call has been provided below.
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Operator
Good morning ladies and gentlemen. I’m your conference facilitator today. Kevin and I’d like to welcome everyone to Cleveland-Cliffs fourth quarter and full year 2025 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks 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 Securities 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 SEC which are available on the Company’s website. Today’s conference call is also available and being broadcast on clevelandcliffs.com 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 Gonzalez, Chairman, President and Chief Executive Officer.
Lourenco Goncalves (Chairman, President and Chief Executive Officer)
Thank you Kevin and good morning everyone. After several years of no real actions taken to reverse the systematic destruction of the American industrial bases, we finally saw in 2025 a federal administration that values the importance of preserving and growing American manufacturing. That said, in 2025, throughout the entire year we were still exposed to a lot of steel imports poisoning our domestic market creating a demand gap that negatively impacted our steel shipments and asset utilization. In response to these challenging conditions, we made difficult decisions on shutting down assets that were dragging us down. Also in 2025 we terminated our index based slab supply contract with ArcelorMittal. The contract became very onerous in its final year when the Brazilian slab price index unnaturally separated from the US finished steel prices. The factors that weighted on our performance in 2025 were well known and addressable as we entered 2026. These problems have either been resolved or are clearly improving. We have already secured more business from our automotive clients and that will show throughout 2026 as the OEMs reshore production back to the United States. Also very important at the end of 2025 the Canadian government has finally made a move to restrict imported steel into Canada and that has created positive momentum in 2026 for our Canadian subsidiary Stelco. Our robust order book is the best confirmation that the business environment has already started to improve. Section 232 tariffs at 50% are of course a leading driver of this impact. We are seeing the benefit of melted and poured requirements in driving demand for domestically produced steel. A lot of the new galvanizing capacity in the US has come online and taken share from imports, reducing the amount of hot rolled availability in the marketplace. We have been able to use the melting capacity previously allocated to orders of low margin slabs to few orders of higher margin flat rolled products. That said, due to melted and poured requirements, we anticipate continued demand for our domestically produced slabs. We remain open to being a domestics lab supplier to those in need of domestic slabs as long as we can agree on a pricing construct that makes sense. With all this positive influence, the spot steel price is sitting at a two year high layering in the recent cold weather stretch across the Midwest, scrap prices and electricity prices have continued to grind higher which has increased the cost structure of the mini mills to a greater level than our own. This has given us a cost advantage as we generate a lot of our own power and use much less scrap. Even with our sizable fixed price automotive footprint. Because of our vertically integrated nature and the also significant size of our non automotive customer base, Cliffs’ profitability is more impacted by spot steel prices than any other company in our industry. Said another way, when hot rolled coil prices rally, we Cleveland Cliffs Benefit Automotive is still our core end market. And when domestic production levels of car trucks and SUVs remain weak for an extended period, the impact on us is unavoidable. Vehicle production in the United States was down in 2025 for the third consecutive year. But with this new era of policy driven reshoring, the return to pre Covid levels of vehicle production in the United States is inevitable. Throughout 2025 we geared up for this inevitability by signing multi year fixed price contracts with all major OEM customers. These agreements increased our market share and secured high margin business that will flow through in 2026. We have the installed capacity available right now. Cliffs does not need to build new plants. Unfortunately, the transition to Cliffs Steel from the previous suppliers is not instantaneous. It takes some time before we see the full impact of these changeovers, but we will see it in 2026. The expected combination of these market share gains with an increased domestic production of vehicles will be a massive gain for our throughput efficiency, costs and ultimately profits one more time. Differently from our competitors currently building new steel plants or announcing plans to build steel plants, Cleveland Cliffs has production capacity available Right now, again, Cliffs does not need to build plants to be ready in 2028, 2029 or 2030. The incremental volume demanded by the automotive industry can and will be absorbed by our existing footprint.
That volume carries attractive incremental margins and thanks to our multi year fixed price contracts with all major automotive OEMs, there will be no pressure on the price of cars to consumers in the US that could even remotely be attributed to to the price of Cliffs Steel. Another example of the progress we continue to demonstrate in automotive is our successful replacement of aluminum with steel using aluminum forming equipment. Our Cliffs steel is now stamped into exposed automotive components using existing forming equipment on a production scale basis. This Cleveland Cliffs development demonstrates that the changeover from aluminum to steel can be easily done without requiring new tooling or capital investment from the customer. That significantly lowers the barrier to adoption and expands the addressable market for our Cliffs Steel products. Particularly as the aluminum supply chain has suffered severe disruption with a succession of fire events clearly exposing its weakness. More than ever before, Cleveland Cliffs is seeing a clear path to replace aluminum with made in USA steel in major applications. We operate in a market that companies from around the world are spending billions of dollars to enter. We are already here. We already have the assets, we already have the workforce. As manufacturing activity in the United States continues to recover, Cleveland Cliffs is the best positioned to benefit without requiring massive capital investments. I want to drill down on another factor that impacted our 2025 performance and that was the change in dynamics in the Canadian steel market for the last several years. Even under the previous tariff regime, pricing in the Canadian market moved in tandem with the US market. We acquired Stelco on November 1, 2024, four days before President Trump’s election, and immediately took Stelco out of the US market, redirecting telco’s output 100% to the Canadian market. This was not driven by policy change, but rather our conviction on what’s in the best interest for our shareholders and our employees on both sides of the border. Even the all surprising change in Canada relations with the US should not have affected this strategy at all. But that’s not how it played out. All of a sudden, Canada became a dumping ground for producers trying to avoid U.S. tariffs and downstream Canadian manufacturing was negatively impacted as well. Canadian pricing decoupled from US Pricing. Until recently, the Canadian government insisted on doing nothing about this unsustainable situation, preferring to watch its steel industry flounder for the sake of globalism. After raising the alarm louder and louder, we finally saw the Canadian government come around late in the fourth quarter of 2025. While still insufficient and limited in scope, the restrictions implemented were at least able to stop the bleeding. As a result, we have seen Canadian pricing and shipments improve in the last month. Prior to our acquisition, Stelco was a low price exporter into the US and a highly disruptive one by the way. When you look at the big picture, what our acquisition has done to transform and improve the US marketplace more than justifies and supports a return on our $2.5 billion purchase price of Stelco. In the fourth quarter, we revealed that our Memorandum of Understanding partner was Pusco, Korea’s largest steel maker and the world’s third largest steel maker outside of China. The partnership with Cliffs will allow Posco to support and grow its established US customer base while ensuring that its products meet US country of origin melted and poured requirements. Our collaboration represents a model of how allies can deepen industrial cooperation under fair and transparent trade principles, and it aligns with U.S. policy goals to strengthen domestic industry and attract foreign investments. Busco continues to conduct due diligence as part of our recently announced strategic partnership. Both parties are focused on structuring a transaction that’s highly accretive and strategically compelling for each company. The duration of these negotiations reflects the seriousness and potential scale of the opportunity we are targeting. Signing a definitive agreement in the first half of 2026. This remains the number one strategic priority for both Cleveland Clips and Postco, and engagement between the teams is active and ongoing. Our MOU is non binding and we will only move forward on ratifying our partnership if the collaboration is accretive to Cliff’s shareholders. I would like to conclude my remarks congratulating our employees for our remarkable safety record. In 2025 we achieved the lowest total recordable incident rate since Cleveland Cliffs became a steel producer six years ago. Our TRIR including contractors, which is unusual in our industry, we include contractors. Our TRRI was 0.8 per 200,000 hours worked. That represents a 43% improvement compared with 2021, which was our first full year operating as an integrated steel maker. This is a direct outcome of how we manage and operate, in contrast with how the predecessors used to do with the same people and the same plants. Safety performance at this level requires discipline, consistency and leadership. At every site we have room for improvement, but the amount of progress we have seen in safety results since forming this new iteration of Cliffs six years ago is truly remarkable. I will now turn it over to our cfo Celso Goncalves for his remarks.
Celso Goncalves (Chief Financial Officer)
Hey, good morning. Total shipments in Q4 were 3.8 million tons, which was slightly lower than Q3 due to heavier than usual seasonal impacts. Looking forward, Q1 shipment levels should improve back to the 4 million ton level again driven by improved demand and less maintenance time at our mills. My expectation for full …