Cleveland-Cliffs NYSE: CLF executives told investors the company’s first quarter 2026 results marked “the beginning of a sustained improvement progression” as stronger steel pricing, tighter lead times, and a fuller order book are expected to support improved performance through the rest of the year.
Management points to tighter market and trade enforcement
Chairman, President and CEO Lourenco Goncalves said demand indicators strengthened as the quarter progressed, with “our order book…full” and automotive OEMs “booking more and more steel from Cliffs.” He added that production schedules are tight and lead times have moved out, extending the typical timing for pricing to show up in realized results. “Historically, pricing changes took about a month to flow through our realized numbers. Today, that lag is closer to two months,” Goncalves said.
Goncalves attributed market strength in part to trade dynamics, stating that U.S. steel imports are “at their lowest levels since 2009.” He said “Section 232 works,” and praised enforcement of “melted and poured” requirements, including what he described as improved enforcement related to derivative products tariffs, noting distribution transformers were added.
He also highlighted Canada as a remaining challenge, arguing that steel oversupply in Canada has been exacerbated by foreign steel redirected from the U.S. market. Goncalves said he expects Canada will ultimately implement “Fortress North America,” describing it as within Canada’s power to protect its own market and jobs.
Q1 adjusted EBITDA rises; pricing and shipments improve
CFO Celso Goncalves reported adjusted EBITDA of $95 million, up $274 million from a year earlier, “due primarily to increased pricing.” First-quarter shipments were “just over 4.1 million tons,” an increase of more than 300,000 tons sequentially, which he said reflected better demand and a more stable operating cadence after the fourth quarter. Weather disruptions still impacted results, he added, but volume improved as the quarter progressed and shipments are expected to rise further in the second quarter.
Pricing improved as well. Celso Goncalves said average selling prices increased $68 per ton year over year and $55 per ton sequentially. However, he said the quarter’s realized pricing was slightly below the company’s original estimate because contractual lags were longer than expected as customers ordered at maximum levels. With the lag now closer to two months, he said price strength should show up more fully in Q2 and Q3.
The CFO also provided details on sales exposure, saying about 45% of U.S. sales are linked to the commodity hot-rolled coil (HRC) price, with the remainder under fixed pricing (including automotive) or other indices (including plate). In Canada, he said all shipments are effectively spot priced, but Canadian pricing has “completely disconnected” from the U.S., running at a “40% discount to U.S. pricing,” though he said it remains margin positive for Stelco.
Energy spike hits costs; Q2 costs expected to rise before easing
Executives described higher energy costs as the most significant one-time factor weighing on the quarter. Celso Goncalves said an energy spike during extreme Midwest cold drove an $80 million negative impact to Q1 EBITDA “relative to historical expectations.” He said the company locks in most natural gas purchases for the following month, and the day February gas was locked “was the highest price in three years” before prices later normalized. In addition to natural gas, the company also saw pressure from electricity and industrial gases, particularly because it operates facilities in unregulated power markets in Ohio and Pennsylvania.
While natural gas and electricity prices have since normalized, Celso Goncalves said other cost pressures have emerged, including fuel affecting mining costs and scrap prices “continu[ing] to grind higher.” He said Q2 costs are expected to rise about $15 per ton before “falling meaningfully in the back half of the year,” with scheduled outages also contributing to higher second-quarter unit costs. In response to analyst questions, he attributed the expected Q3 improvement to higher utilization, fewer outages, lower energy costs, ongoing asset optimization, lower coal pricing, and reduced repair and maintenance costs.
On diesel exposure, Celso Goncalves said the company no longer hedges diesel, though it hedges natural gas at roughly 50% of exposure. He said the annual impact on truck and rail services is about $50 million, or roughly $6 per ton, and that the company consumes about 25 million gallons per year of diesel. He also said natural gas tied specifically to mining is about 20% of the company’s natural gas use.
Cash flow, asset sales, and Q2 outlook
Free cash flow was negative in Q1, which Celso Goncalves said was expected and was “primarily due to working capital timing.” He said accounts receivable increased as shipments accelerated into March and pricing rose, though inventory declined. In Q&A, he said the Q1 working capital build was about $130 million and that the company expects a “slight release” in Q2 as inventory is further reduced.
Celso Goncalves said Q2 is expected to be the company’s “best quarter in nearly two years” from both an EBITDA and cash flow standpoint, even with multiple outages across its footprint. He said Q3, an “outage-light quarter,” should better reflect the company’s “full shipment and cost potential,” adding that if the steel price curve holds, the improvement from Q2 to Q3 could exceed the sequential improvement from Q1 to Q2.
He also cited liquidity of “above $3 billion” and reiterated expectations tied to real estate transactions. The company’s expected $425 million cash receipts from idled property sales “remains on target,” he said, with two more properties going under contract since the last update. In Q&A, Lourenco Goncalves added confidence that proceeds will be received in 2026 and provided a cadence expectation for the remaining proceeds after $70 million already received: “Let’s put $50 million in Q2 and $100 million in Q3 with the remainder in Q4.”
Operational updates: footprint actions, automotive mix, projects, and POSCO talks
Lourenco Goncalves said the company is continuing footprint optimization. He noted Cleveland-Cliffs is idling the smaller plate mill at Burns Harbor after consolidating capabilities into the 160-inch mill, and idling the Gary Plate finishing line. He said there will be “no loss in overall steel production or layoffs,” with roles backfilled through retiree attrition.
Goncalves also discussed a shift in end-market behavior, particularly automotive substitution of steel for aluminum. He said he has “never seen so much momentum in substituting aluminum with steel,” citing supply chain disruptions in aluminum. In response to questions, he said the shift is occurring “as we speak,” describing examples such as former aluminum fenders now being produced in steel, and noting Cleveland-Cliffs restarted its electric galvanizing line at New Carlisle, which had been idle “for a long time.” He added that automotive remains profitable for the company and that higher volumes are a key focus.
On electrical steel, Goncalves distinguished between grain-oriented electrical steel—“there is only one company that produce[s] in the United States, that’s Cleveland-Cliffs,” he said—and non-oriented electrical steel, which he noted is heavily tied to electric vehicle demand.
Regarding POSCO, Lourenco Goncalves said discussions remain active and a mutually satisfactory transaction is still possible in the second quarter timeframe “or slightly later,” though he cited Middle East disruption and impacts on South Korea as factors that have not helped speed negotiations. In Q&A, he said changing market conditions have affected how the company views the opportunity, adding, “By any stretch, we are no longer in a hurry.”
Executives also provided updates on Department of Energy-funded projects. Lourenco Goncalves said the Butler Works electrical steel expansion remains on schedule for 2028 completion, and the Middletown Works project is expected to proceed once an updated scope is approved, with the revised scope reflecting a “modern blast furnace configuration” intended to improve energy efficiency.
Finally, Goncalves said the company has partnered with a “leading and prominent AI provider” to embed AI into production planning and order entry processes, with a full announcement expected “in the next few weeks.” He also pointed to upcoming labor negotiations with the United Steelworkers as an important milestone, saying the company aims to reach an agreement that rewards employees while supporting competitiveness and long-term sustainability.
About Cleveland-Cliffs NYSE: CLF
Cleveland-Cliffs Inc is a leading North American producer of iron ore pellets and flat-rolled steel products. Tracing its roots to 1847, the company has evolved from an iron-ore mining concern in the Great Lakes region into a fully integrated steelmaker. Today, Cleveland-Cliffs operates iron ore mining complexes in Michigan and Minnesota as well as steelmaking and finishing facilities across the United States.
The company's integrated platform begins with direct control of key raw materials, including iron ore and scrap, and extends through every stage of steel production.
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