Cleveland-Cliffs earnings rebounded in the third quarter of 2026, with adjusted EBITDA more than doubling sequentially to $612 million and the steelmaker returning to a quarterly net profit. Results released on October 19 also outlined further improvement: management forecast approximately $715 million in fourth-quarter adjusted EBITDA and said 2027 adjusted EBITDA could exceed $4 billion, based on contract changes and prevailing price forecasts.
Key Takeaways
- Third-quarter adjusted EBITDA exceeded the company's $575 million guidance as prices, shipments and unit costs improved.
- Management expects 2027 contract changes to support earnings growth, but negotiations and future steel prices remain important variables.
- Higher capital spending and unresolved demand for some automotive and Canadian steel products temper the stronger outlook.
Table of Contents
- Cleveland-Cliffs earnings improve across prices, volumes and costs
- 2027 contracts underpin a conditional earnings outlook
- Cash generation faces higher investment requirements
- Automotive demand and Canadian capacity remain constraints
- Conclusion
Cleveland-Cliffs earnings improve across prices, volumes and costs
For the quarter ended September 30, adjusted EBITDA rose by $326 million from the second quarter's $286 million. Consolidated revenue increased to $5.6 billion from $5.2 billion, while GAAP net income reached $165 million, compared with a $134 million loss in the preceding quarter.
Cleveland-Cliffs' third-quarter results announcement showed improvement across the main steelmaking measures. Average net selling price rose to $1,177 per net ton from $1,124, while steel product sales volumes increased to 4.15 million net tons from 4.025 million.
On the earnings call, CFO Celso Goncalves said unit costs fell by $17 per ton, better than the $10 reduction previously guided, helped by higher production. The combination meant the earnings recovery reflected both stronger sales and lower unit costs, rather than pricing alone.
| Item | Details |
|---|---|
| Q3 2026 diluted earnings | GAAP earnings of $0.26 per share; adjusted earnings of $0.28 per share. |
| Quarter-end liquidity | $3.2 billion as of September 30, 2026. |
| Direct automotive sales | $1.5 billion, or 28% of third-quarter steelmaking revenue. |
| Leverage target | Management aims for net debt to EBITDA below 2.5 times by mid-2027. |
2027 contracts underpin a conditional earnings outlook
Management said contract negotiations were expected to generate more than $1 billion of year-over-year EBITDA improvement in 2027. CEO Lourenco Goncalves said more than half of customers had signed and that he expected negotiations to be completed by Thanksgiving.
The changes include index-linked pricing with minimal or no discounts, freight-cost pass-throughs and take-or-pay minimum volumes. Those minimums require customers to pay for contracted quantities even if they do not take delivery, giving Cliffs greater certainty over committed demand.
The broader expectation for adjusted EBITDA above $4 billion in 2027 is not a reported result or a guaranteed outcome. It depends on the new contracts and prevailing steel-price forecasts. Goncalves declined to disclose the tonnage or separate the pricing and volume contributions to the repricing opportunity.
Cash generation faces higher investment requirements
For the fourth quarter, management expects higher selling prices to outweigh seasonal effects, maintenance outages, input costs and incentive compensation accruals. The approximately $715 million adjusted EBITDA forecast would represent another sequential increase.
Cash conversion remains a separate consideration. Working capital absorbed $160 million in the third quarter, and the CFO expected it to be roughly neutral in the fourth. Management said contracted asset sales were expected to close during the fourth quarter and that operating cash flow would be used to reduce debt, starting with the asset-based lending facility.
Capital expenditure guidance remained around $700 million for 2026, rising to just over $1 billion in 2027. Cliffs postponed the Burns Harbor C blast furnace reline to April 2028, which management said would preserve approximately 500,000 tons of production in 2027. The company also reiterated that it did not plan to issue stock.
Automotive demand and Canadian capacity remain constraints
The Dearborn blast furnace remained idled because automotive customers had not committed sufficient tonnage to support a restart. Goncalves said customer commitments, rather than a preset company timetable, would determine when it returned to service.
In Canada, Stelco became a positive contributor to third-quarter EBITDA as the hot-rolled market improved. However, Cliffs announced an indefinite idling of Stelco's galvanizing lines, citing an oversupplied Canadian market for galvanized steel.
Management said Stelco would maintain total production tonnage by concentrating on hot-rolled products. The contrast highlights an uneven recovery: stronger overall earnings have not eliminated product-specific demand and capacity problems.
Conclusion
The next milestones are completion of the remaining 2027 contract negotiations and the planned fourth-quarter asset-sale closings. Fourth-quarter results will also show whether stronger pricing translates into the earnings and debt reduction management expects.
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