Earnings Recap — Q2 FY2026
CY Q3 2026 · Reported July 23, 2026 · Beat 4 of last 7 quarters
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Cleveland-Cliffs' strong Q2 and upbeat guidance reflect the broader reshoring of manufacturing and the positive impact of trade policies on domestic steel demand. The company's investments in electrical steel and AI-driven operational efficiency align with the AI infrastructure buildout, as they supply critical materials for grid and data center expansion. The company's improved profitability and deleveraging trajectory signal a healthier domestic steel supply chain, which is essential for the AI infrastructure buildout.
Cleveland-Cliffs reported Q2 2026 adjusted EBITDA of $286 million, its best quarter in two years, with shipments of just over 4 million tons. Average selling prices rose $76 per ton sequentially, and the company returned to positive free cash flow for the first time in two years. The quarter was impacted by maintenance outages and lagged contracts, but management highlighted strong automotive demand and improved pricing. The company also noted progress on strategic initiatives, including asset sales and ongoing discussions with POSCO, while reiterating its commitment to debt reduction.
Management guided Q3 2026 adjusted EBITDA to approximately $575 million, more than double Q2, driven by higher prices, lower costs, and higher volumes. They expect Q4 to further outperform Q3 based on the current HRC futures curve, with continued improvement into 2027. The company plans to reset a large portion of fixed-price contracts substantially higher, estimating a $500 million EBITDA improvement year-over-year. They also expect to hit their leverage target of sub-2.5x by this time next year, using free cash flow and asset sale proceeds to delever. Cost reductions from AI initiatives with Palantir and improved Stelco performance are additional tailwinds. Management expressed confidence in the durability of trade policies and the reshoring trend, positioning Cliffs as the preferred domestic steel supplier.
“After several quarters of talking about the future earnings power of this company, we can finally point to tangible evidence that the progression we have been forecasting is now reality.”
on Earnings recovery
“Section 232 has been the single most effective industrial policy implemented in our country in a generation.”
on Trade policy
“The story today is very simple. Cleveland-Cliffs is entering the strongest earnings environment that we have seen in years.”
on Outlook
Can you provide more color on the resetting of non-auto fixed-price contracts? Any specific products? Should that come on January 1 or throughout the year? And any comments on auto contracts for next year?
Lourenco Goncalves explained that the reset process starts in earnest in the second half of the year and will be done by early December. Given the much higher price environment, contracts will be reset at much higher prices. For automotive, he emphasized Cliffs' position as the leading supplier, with no escape valve for customers to import, and that they will play for higher prices and be more selective.
Of the 300,000 ton shipment uplift expected in Q3, how much is from improved automotive market?
Lourenco Goncalves said roughly half, as automotive typically represents about half of their flat-rolled carbon steel business.
Can you provide color on what you're seeing in Canadian spot pricing and how much of the $500 million potential uplift is based on today's pricing?
Lourenco Goncalves noted that the pricing gap has closed for hot-rolled steel, but galvanized remains under pressure. He said they are comfortable producing hot band and may shift production away from galvanized if Canadian trade measures are insufficient. The guidance is based on what they are booking out to September.