クリーブランド・クリフス (CLF) 2026年第3四半期決算説明会：EBITDAは倍増、2027年見通しは40億ドルを突破

クリーブランド・クリフス（NYSE: CLF）が発表した2026年第3四半期の調整後EBITDAは6億1,200万ドルとなり、出荷量の増加、販売価格の上昇、製鉄所の稼働率向上が寄与し、前四半期の2倍以上に拡大しました。経営陣は第4四半期におけるさらなる業績改善を見込むとともに、現在の市場環境が維持されれば2027年には調整後EBITDAが40億ドルを超える道筋を示しました。

要点

• 第3四半期の調整後EBITDAは6億1,200万ドルに達し、前四半期の2億8,600万ドルから3億2,600万ドル増加し、同社が事前に示していたガイダンス（5億7,500万ドル）を上回りました。
• 鋼材出荷量は第2四半期の400万ネットトンから420万ネットトンへ増加し、平均純販売価格は1トンあたり53ドル上昇して1トンあたり1,177ドルとなりました。
• 単位コストは主に生産量と製鉄所稼働率の向上により、1ネットトンあたり17ドル低下し、経営陣が事前に対象としていた10ドルのコスト削減を上回る改善を示しました。
• 経営陣は、1トンあたり約45〜55ドルのさらなる販売価格上昇を見込み、2026年第4四半期の調整後EBITDAの見通しを7億1,500万ドルと発表しました。
• クリーブランド・クリフスは、基礎となる価格指数の変動を含めないベースで、2027年の契約更新により前年比で10億ドル以上のEBITDA改善が見込まれると述べました。
• 現在の市場環境が続けば、経営陣は2027年に40億ドルを超える調整後EBITDAを達成する道筋を見出しており、引き続きフリーキャッシュフローの最優先課題を負債削減としています。

主要財務データ

事業・操業実績

経営陣によると、第3四半期はクリーブランド・クリフスにとって過去3年間で最高の四半期となりました。北米の自動車生産が前四半期比で減少したにもかかわらず、自動車向け出荷量は2023年第3四半期以来の最高水準を記録しました。

経営陣によると、2026年の大半において米国の指数価格は毎月おおむね1トンあたり40ドル上昇しました。決算電話会議の時点で同社の受注残高に減速の兆候は見られず、顧客は供給の確保に注力していました。

クリーブランド・クリフスによると、2027年の顧客契約の半数以上がすでに締結されています。新規契約ではテイク・オア・ペイ（引き取り義務）に基づく最低数量の規定が増加しており、顧客は割引の縮小または撤廃を伴う指数連動型価格設定へと移行しつつあります。年次契約更新に参加したほぼすべての顧客が、2026年よりも多くの鋼材契約量を2027年に求めていました。

バーンズハーバーC高炉の改修工事は2027年半ばから2028年4月に延期されました。経営陣は、これにより現在の需要と価格環境の恩恵を享受しながら、2027年の生産量約50万トンを維持できると説明しました。

生産能力拡大への取り組みとして、バトラー製鉄所における方向性電磁鋼板生産の25%増産や、バーンズハーバーでの合金化溶融亜鉛めっき鋼板能力の追加などが挙げられます。バーンズハーバーの亜鉛めっきラインでのホット試運転は2027年序盤に予定されており、2027年半ばからの追加生産を目指しています。

カナダでは、関税割当枠の拡大が熱延鋼板市場を下支えしたことで、ステルコが黒字に復帰したと経営陣は述べました。しかし、ハミルトンの亜鉛めっき鋼板事業は輸入供給の影響を受け続けており、一時解雇が発生しています。

同社は、米国エネルギー省からの5億ドルの支援を含め、ミドルタウン製鉄所の10億ドル規模の近代化も進めています。建設中も生産を中断することなく、2030年第1四半期に完了する見込みです。

経営陣による業績見通し（ガイダンス）

クリーブランド・クリフスは、第4四半期の調整後EBITDAを7億1,500万ドルと予想しています。平均販売価格は第3四半期の上昇幅とほぼ同等の1トンあたり45〜55ドルのさらなる上昇が見込まれています。コストについては、定期修理による操業停止、エネルギー、合金、軽油費用の増加に伴い、緩やかに上昇すると予想されています。

経営陣は、第3四半期に1億6,000万ドルの増加を記録した運転資本について、第4四半期にはほぼニュートラルになると述べました。また、売却契約済みの不動産案件が同四半期中に完了すると予想していますが、完了時期は地元の承認や電力供給などの影響を受ける可能性があります。

2027年について、経営陣は市場環境が2026年第3四半期と同水準で維持された場合、調整後EBITDAが平均で四半期あたり10億ドルを超え、年間で40億ドルを超える可能性があるとしています。この見通しには、固定価格の引き上げ、指数連動型契約における割引の縮小、持続的な価格上昇モメンタム、および利用可能な生産量の拡大が反映されています。

設備投資額は、2026年の約7億ドルから2027年には10億ドル強へと増加する見込みです。経営陣は、予想される収益およびキャッシュフローの状況を考慮すれば、このレベルは十分に管理可能であると述べています。

同社は2027年半ばまでにレバレッジを目標レンジである2.0〜2.5倍未満へ引き下げる見込みです。フリーキャッシュフローは引き続き負債削減を最優先とし、まずは資産担保融資（ABL）枠、次いで発行済み社債の削減を対象とします。経営陣は、現在の見通しの下での株式発行を明確に否定しました。

リスクと注視点

• 第4四半期には、通常の休日による季節要因、寒波の影響、計画的なメンテナンスのための操業停止が伴います。
• カナダにおけるステルコの亜鉛めっき鋼板事業は依然として輸入供給の影響を受けており、ハミルトン工場での生産と雇用が制限されています。
• 自動車向け顧客のスケジュール調整上の問題が第3四半期の出荷時期に影響を及ぼしており、今後も生産スケジュールの変更が必要となる可能性があります。
• 休止中のディアボーン高炉の再稼働は、顧客から十分な追加数量のコミットメントを得られるかにかかっています。
• 不動産売却による収入は、地域社会、インフラ、または電力供給に関する問題により遅延する可能性があります。
• クリーブランド・クリフスの見通しは、堅調な価格環境の継続、契約の履行、および米国による強力な貿易是正措置の実行を前提としています。
• 全米鉄鋼労働組合（USW）との交渉は当初の期限を超過しましたが、経営陣は討議について専門的かつ建設的なものであったと述べています。

アナリスト質疑応答のハイライト

経営陣によると、2027年の契約の半数以上が完了しており、電話会議の時点で改定後の契約構造を拒否した顧客はいません。同社はサンクスギビング（感謝祭）までに交渉が実質的に完了すると見込んでいます。

生産量の拡大について、経営陣はバーンズハーバーの改修延期により維持された50万トンの追加生産、バトラーの電磁鋼板の増産、および新たな合金化溶融亜鉛めっき能力を挙げました。ディアボーンは稼働可能な状態を維持しているものの、明確な顧客コミットメントなしに再稼働することはありません。

流動性とレバレッジに関して、経営陣は営業キャッシュフローと資産売却収入により、設備投資を賄い負債を削減するのに十分であると述べました。ロウレンコ・ゴンカルヴェスCEOは「株式を発行する予定はありません。その必要はありません。以上です」と明確に語りました。

また、経営陣は以前の5年間の鋼片（スラブ）供給協定終了に伴う効果が、すでにクリーブランド・クリフスの業績に反映されていることを確認しました。

決算電話会議全文トランスクリプト

決算説明会の完全なトランスクリプト

経営陣による説明

Operator

Good morning, ladies and gentlemen. My name is Donna, and I am your conference facilitator today. I would like to welcome everyone to Cleveland-Cliffs Third Quarter 2026 Earnings Conference Call. [Operator Instructions]

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 Forms 10-K and 10-Q and news releases filed with the SEC, which are available on the company website.

Today's conference call is also being broadcast at 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 would like to introduce Lourenco Goncalves, Chairman and Chief Executive Officer. Please go ahead.

Lourenco Goncalves

Thank you, Donna, and good morning, everyone. Three months ago, we told you that the earnings recovery at Cleveland-Cliffs was becoming visible. Today, the recovery is firmly underway. Our Q3 adjusted EBITDA was $612 million, more than double the $286 million we generated in Q2. All 3 of our major profit drivers improved. Shipments increased. Selling prices rose in line with our expectations. And costs performed better than we had guided.

One thing that has become very clear over the past year is that a healthy domestic steel industry happens when trade laws are enforced and when foreign producers are no longer allowed to dump steel into our markets without consequences. Today, the United States has a much more rational trade environment, and the result is exactly what you would expect: stronger domestic production, higher utilization rates, more investment in steel facilities, and more confidence from both steel producers and steel consumers.

Every conversation about reshoring manufacturing, rebuilding infrastructure, expanding energy production, strengthening the electrical grid or supporting national defense starts with steel. At Cleveland-Cliffs, we mine iron ore, produce pellets and also produce HBI. And we produce steel from scratch, with a 25,000-person workforce that spans some of the most important industrial communities in the United States.

The trade policies of the Trump administration are helping create the conditions needed for companies like ours to continue investing in those communities and expanding domestic production. What the Trump administration has done on trade is not just good for Cleveland-Cliffs, it's good for America. As a consequence of the renaissance of manufacturing in the United States, we are currently selling steel under the best price environment in 3 years, and these are the prices we need to run a thriving business that grows employment, pays its workers well, reinvests in people and equipment, and protects our critical supply chains and national defense.

The most important and positive development for Cleveland-Cliffs since our last call has been the strength of our 2027 round of contract negotiations with our clients. The largest portion of our steel volume consists of tons sold to service centers and end users under annual fixed price or index-linked contracts. These agreements cover every segment of light flat-rolled steel consumption outside automotive.

All these contracts reset on January 1 of next year, and nearly all of these customers want more steel under contract in 2027 than in 2026. Suffice it to say that we have been very successful in renewing these contracts. In aggregate, the improvements should generate more than $1 billion of year-over-year EBITDA improvement, before even contemplating changes of the underlying pricing index. More importantly, our customers are not fleeing to imported steel. Actually, we are finally operating within the United States with a fair commercial structure that is critical to sustaining a healthy business allowing us to reinvest in our facilities and in our people.

The strong contract renewal environment and the good health of well-maintained equipment have created a compelling opportunity to maximize the value of our existing asset base. With that, we are postponing the Burns Harbor C blast furnace reline from mid-2027 to April 2028. Our President and Chief Financial Officer, Celso Goncalves, will be talking about that on his prepared remarks.

We have several other similar ongoing projects bigger and smaller, the most critical being the modernization of Middletown Works. This past quarter, we officially completed the rescoping of our $1 billion modernization project for Middletown. This revised project was commemorated with a visit by Vice President JD Vance to his hometown of Middletown, Ohio, and to our flagship automotive grade steel plant Middletown Works. The new scope entails our $1 billion investment, including $500 million of support from the Department of Energy, and will modernize one of the most important steelmaking facilities in the country while maintaining uninterrupted production throughout the construction period.

The project includes a state-of-the-art blast furnace rebuild, advanced material handling infrastructure, artificial intelligence enabled process controls, and a new cogeneration facility that will capture blast furnace gas and convert this off gas into electricity and steam for on-site use. Our work on this rescoped project has already begun, and we expect to be completely done in the first quarter of 2030.

Other notable projects on the agenda in the coming years that fit into our reinvestment master plan include the coke plant rebuild at Burns Harbor, a blast furnace [ stall ] rebuild at Stelco in Canada, and the grain-oriented electrical steel expansion GOES at Butler Works. Two weeks ago, we hosted the Secretary of Energy Chris Wright; the Assistant Secretary of Energy, Audrey Robertson; and the Undersecretary of Commerce, William Kimmitt, in Butler, Pennsylvania, where we discussed the importance of projects like this in supporting the manufacturing and energy dominance agenda of the Trump administration. They all recognize the importance of protection against unfair trade, and we are confident that they will not waver from this critical policy.

We don't believe and we don't anticipate that a surge of imports could be coming into the United States anytime soon. Imports remain approximately 35% to 40% below the level that existed before the implementation of Section 232 national security steel tariffs or 50% for the product and derivative products. Besides the tariff itself, transportation expense, long lead times, currency exposure and the risk that material will arrive into a different market than the one in which it was ordered are some of the problems could be faced by the brave that still try to import steel into the United States. Those factors create a meaningful risk premium.

None of our customers have revolted. And in fact, it's quite the opposite. Intelligent customers understand the operational cost of an unreliable supply chain. A lower quoted price offered by a trading company has little value if the product arrives late, fails qualification or cannot be replenished when production schedules change. We expect a strong trade enforcement to remain a lasting feature of the American steel market, because the underlying problem has not changed. Global steelmaking overcapacity remains enormous, and the state-subsidized production continues to seek an outlet.

Moving to Canada. The improvement in the hot-rolled market for Stelco that I discussed on last quarter's call has accelerated. It took the U.S. market roughly 12 months to see a $400 improvement to the spot price of hot-rolled coil. It took the Canadian market only 4 months to see a similar improvement. The significant improvement we have experienced in our hot-rolled business was a direct consequence of the TRQ system implemented by the Canadian government. The Canadian domestic market without protection is a lot more exposed than any other country in the world. And that's the reason we have been advising the Canadian government on what we believe needs to be done to finish what they have successfully started.

The galvanized steel business in Hamilton, Ontario, which represented less than 20% of our Stelco output, is still at risk. We met in person in Ottawa a number of times to explain the Fortress North America solution, supported by the entire Canadian steel industry, not only by Stelco, but we were not successful. Three months ago, in our Q2 investors conference call, we spoke about possible negative consequences of inaction, potentially putting at risk the jobs of Stelco workers in case the Canadian government continue to ignore our requests. Unfortunately, we were not heard.

Instead of a real solution, at the very last minute, the Canadian government offered us what they called financial support. But that's not what Stelco needs. What Stelco and Stelco workers really need is a market to sell galvanized steel, and government money cannot buy a market for galvanized steel. On the other hand, if the Canadian government use the power they already have and have the ability to only laterally exercise to block or severely reduce imports of galvanized steel into the Canadian market, Stelco can immediately bring back all the temporarily laid-off workers because that would immediately give us a market to sell and the ability to produce galvanized steel. One more time, the domestic market for galvanized steel in Canada is not big enough to accommodate 2 Canadian producers of galvanized steel, Stelco and ArcelorMittal Dofasco and also an avalanche of imports that have not been adequately reduced by the Canada's tariff rate quota system.

Cleveland-Cliffs invested CAD 3.4 billion less than 2 years ago to acquire Stelco, and Stelco was supposed to be an immediately accretive investment for Cleveland-Cliffs. A couple of months later, and for reasons clearly beyond our control or ability to predict, Stelco became a negative contributor to Cliffs' results, a situation that persisted for more than a year. Fast forward, we found a way to steer Stelco out of trouble and into a profitable path, all while waiting as long as possible to avoid the idling of the galvanized line, at a significant cost, because that business with insufficient volume was not profitable.

During the many months when Hamilton's galvanizing lines were unprofitable, we were aggressively advocating for stronger measures in Canada to bring about Fortress North America. Unfortunately, more restrictive quotas for galvanized steel never materialized, leading to these limited temporary layoffs at Stelco.

Notwithstanding all the attention that Stelco's limited layoffs have drawn, it's important to emphasize that Stelco is finally profitable. The enhanced TRQs implemented by the Canadian government in December 2025 and updated in June 2026 worked well for hot-rolled steel. But Stelco would be even more profitable if dumped galvanized steel imported into Canada would no longer be tolerated. The last piece of the puzzle to be addressed by the Canadian government is galvanized steel, and then we would be able to bring the workers back and restart production at the galvanizing department in Hamilton, Ontario.

A final point to address today. Back in the United States, our contract negotiations with the USW have extended past the original deadline, which is not uncommon. The negotiation remains professional respective and productive, and I personally have a great deal of admiration for the union leadership and the workforce they represent. Our objective remains the same as it has always been: reach an agreement that recognize our employees for their contributions while ensuring Cleveland-Cliffs remains strong, competitive and well positioned for the long-term success. I have no doubt we will get there and our American employees represented by the USW will be rewarded for the success we expect to have together in the coming years.

With that, I'll turn it over to the President and Chief Financial Officer of Cleveland-Cliffs, Celso Goncalves, for his remarks.

Celso Goncalves

Thank you, and good morning, everyone. Three months ago, we guided to an expectation of $575 million of adjusted EBITDA for Q3 of 2026. And today, we reported $612 million. As we wrap up 2026, we expect to generate $715 million in Q4. And looking ahead to 2027, under prevailing market conditions, we could realistically reach an average of more than $1 billion of adjusted EBITDA per quarter in 2027.

Q3 was our strongest quarterly result in 3 years. The third quarter of this year showed what happens when price, volume, mix and cost all move in a favorable direction, as adjusted EBITDA increased by $326 million sequentially from Q2.

Steel shipments were 4.2 million net tons, compared with 4 million net tons in the second quarter. Third quarter 2026 automotive shipments were the highest since the third quarter of 2023. That occurred even though North American automotive production declined sequentially from the second quarter of this year. Shipment levels are expected to remain strong in Q4, albeit with the typical slower behavior seen around the holidays and more difficult cold weather periods.

Average net selling price during the quarter was $1,177 per ton, an increase of $53 per ton sequentially, as we benefited from rising market pricing in both the U.S. and Canada. We expect a similar level of improvement from Q3 to Q4 as we continue to see improvements in pricing and work through our backlogs. Index pricing in the U.S. has increased by roughly $40 per ton each month for most of this year, and we do not see any signals in our order book pointing to a slowdown of this pace. Customers are more focused on securing volume than price at the moment.

Unit cost performance in Q3 was excellent as costs declined by $17 per net ton during Q3, exceeding our previous guidance and serving as the primary driver of our adjusted EBITDA beat. As an integrated mill operator, the secret sauce of unit cost performance is running the mills at full utilization, and our strong order book has allowed us to do that. We have been running our mills harder than at any time in several years, and the maintenance outages scheduled for Q4 are much needed. We give all the credit to our operators for bringing these mills to their full potential and keeping pace with the strong order book throughout the year.

Even with the typical seasonality and maintenance outages common in all fourth quarters, we expect our Q4 adjusted EBITDA performance to exceed our Q3 performance by approximately $100 million, with an expectation of $715 million in adjusted EBITDA. That step change is shaping up to be substantially larger into Q1 of next year as pricing momentum continues and new sales contracts take effect.

Given the strong momentum going into 2027, we are postponing the Burns Harbor C blast furnace reline from mid-2027 to April 2028. The decision is a direct consequence of the effectiveness of the targeted maintenance and short-term capital we have already deployed to extend the current campaign of the C blast furnace. By safely pushing out the reline, we can capitalize on a highly favorable commercial environment, preserve valuable production capacity during a period of strong demand and pricing, and enhance cash generation while maintaining operational reliability. We will still be utilizing some 2027 CapEx toward the prework on this project, but the actual 90-day outage has been moved into 2028. Moving to Burns Harbor C furnace reline into 2028 also preserves approximately 500,000 tons of production that had not been included in our original 2027 plan.

We are also happy to report that our coal contract negotiations have concluded at rollover pricing for 2027. Coal and coke are the largest raw material components of our cost structure, so seeing this piece stable year-over-year gives us a lot more comfort in our outlook.

Looking at 2027 in total and using the forward curve as our pricing guide, we expect 2027 to be our best year since 2021, which remains the all-time record year for adjusted EBITDA at Cleveland-Cliffs. The slide deck that we released this morning shows the realistic path to more than $4 billion of adjusted EBITDA in 2027 under market conditions similar to those that we experienced this past quarter. That path includes the strength already visible in the second half of 2026, higher fixed price contract resets and lower discounts on index-linked agreements.

Last but not least, as Lourenco has already talked about today, Stelco should become a larger contributor to Cleveland-Cliffs consolidated results as backlogs convert to shipments. The result of all this will be very robust cash flow generation going forward, substantially greater than what we have showed in Q3. As previously foreshadowed, Q3 was working capital intensive, which temporarily limited cash inflows during the quarter. This will begin to change starting in Q4 as the working capital build will decline and the expected proceeds from property sales come in.

On that front, we closed 1 small asset sale in the third quarter, but most of the major properties we have for sale are all contracted to close in Q4. Some of these buyers have been granted extensions due to obstacles related to the local communities or power supply, but many of these situations have been sorted through over the past few weeks.

All of this cash will be used to delever our balance sheet. The hot-rolled market conditions in both the United States and now in Canada have granted us an incredible opportunity to pay down debt very quickly. We have become more confident in our ability to reduce leverage below our 2x -- 2.5x target by the middle of next year, and we have no intention of stopping at that point. Paying down debt will remain our #1 allocation of free cash flow even after we have reached that leverage target.

Strategically, we continue to be very comfortable as a stand-alone entity. We don't need technological help from anyone from the outside to take good care of our automotive customers or grain-oriented electrical steel clients, let alone other customers in less demanding sectors. We have made this point very clear in our still ongoing discussions with POSCO. I will refer you to the POSCO Holdings Form 6-K filed with the SEC on September 30, 2026, for their disclosures on our and their own update regarding the status of our partnership discussions.

We are entering 2027 with momentum that continues to build, not fade. We have a world-class workforce, irreplaceable blast furnaces and other unique assets, and a business that is positioned at the center of America's industrial future. If the United States wants to manufacture, build infrastructure, expand energy production and strengthen national security, it needs a strong domestic steel industry, and Cleveland-Cliffs remains uniquely positioned to help make that happen. We like where we stand today, we like where we're headed, and we remain focused on executing every day. Thank you for your continued support of Cleveland-Cliffs.

Donna, with that, please go ahead and open the line for questions.

Operator

[Operator Instructions] Today's first question is coming from Timna Tanners of Wells Fargo.

質疑応答

Timna Tanners

I wanted to get a little more color on CapEx for next year. Also the asset sale Q4, is that [ 370 ]? Is that the math? Just wanted to try to get a little more color on those points, please.

Celso Goncalves

Timna, it's Celso. So Q2 CapEx was about $150 million, which run rate is lower than our guide of $700 million. CapEx will pick up going forward in the fourth quarter as we start to spend on some of these strategic projects for next year. So full year 2026 CapEx is still expected to be around $700 million, compared to, call it, $560 million last year, more normalized maintenance spend, the Butler project and spending in Q4, as I mentioned, related to some of these other projects.

As we look forward to next year, CapEx is expected to exceed just over $1 billion, driven by some of these new announced projects and prep for the Burns Harbor reline, which is now going to be in 2028. So overall, you can think of it as $700 million total in 2026, going to just north of $1 billion in 2027. But given where we are and given the EBITDA that we expect to generate looking into next year, that's more than manageable given our financial profile.

Timna Tanners

Okay. Fair. And if I could, one more. The market conditions continue to be pretty tight. It seems to be a challenge for our customers to get their hands on steel. What additional tonnage can you bring to market or would you contemplate bringing into market into 2027 to try to help catch up with orders?

Lourenco Goncalves

Yes. We have to go product by product, Timna. For example, for grain-oriented electrical steel, we are adding 25% new production in our Butler Works plant in Butler, Pennsylvania. 25% is meaningful. And it's ongoing right now. So very soon, we're going to have the availability of more grain-oriented electrical steel to support the grid, which is extremely necessary.

If you talk about galvanized for exposed parts product that Cleveland-Cliffs is basically the major supplier, if not the only supplier that is reliable for the automotive industry, we are bringing the galvanizing line at Burns Harbor to produce gavanneal for exposed parts. We're bringing that online. In early 2027, we will be starting to do hot trials. And mid-2027, we are going to have more galvanneal for exposed parts. That's a product that the clients are asking for.

And let me see if I have any other -- oh, another good example. We have -- we still have a spare capacity for exposed electrogalvanized. But the problem is that for a few generations, the engineers at the automotive industry forgot how to use electrogalvanized for exposed parts. So we are kind of reintroducing electrogalvanized to the use of the auto OEMs. And we have surprisingly been very well received by the engineering department of our clients, and we are developing the use of electrogalvanized for exposed parts with a bunch of clients in the auto industry.

So product after product after product, Timna, we have plans to increase our production. We still have capacity to spare in certain situations. Remember, I still have the Dearborn blast furnace down. And we haven't brought Dearborn back for a simple reason is that the clients are not yet committing with the tonnage that I want them to commit. Once that tonnage is committed, we're going to be okay.

One more thing on that. We are changing the structure of our contracts. The minimum contract -- of tonnage contracted by clients right now, in the usual contracts with our individual customers, are now at a take-or-pay. So it's no longer a wishful thinking thing, it's a take-or-pay. The minimum is the minimum. You commit to the minimum. If you don't take, you're going to have to pay. And the clients are accepting. More than, I would say, 55% to 60% of clients already signed. And they are the ones -- they haven't signed yet because they are not presented with the contract. Now the problem is no longer price, the problem is having access to steel. We are giving that. We are changing the structure of contracts. Very soon, this will be the new norm in the industry. It started here with Cleveland-Cliffs, we're proud of that. I hope I answered your question.

Timna Tanners

Okay. And you have another 500,000 from not doing the reline as well, I guess? Is that incremental to 2026, or is that incremental to your prior 2027 estimates?

Lourenco Goncalves

Yes, exactly, because we are doing prep work that doesn't mean bringing the furnace down in 2027. We're going to finalize the reline in 2028. So yes, we're going to have another half a -- good point, going to have another 0.5 million. We said that in the prepared remarks. Thanks for catching that. So we're going to have another 0.5 million tons in 2027 due to that.

Operator

Our next question is coming from Nick Giles of B. Riley Securities.

Nick Giles

So my initial question was just when we look at the lower discounts on index-linked contracts and the fixed price resets, these negotiations, how much has already been concluded? Lourenco, I think I just heard you mention 55%, but I just want to clarify kind of where that stands or how much is already locked in.

Lourenco Goncalves

Yes. Like I just said, it's more than half, and the ones that haven't -- we haven't had a single client, Nick, that said, no, I'm not going to sign that. I'm going to roll the dice. None. Zero. So when I say 55%, I'm trying to say more than 50%, a lot more than 50%. And we are still in -- today is October 19, so we have plenty of time to finish that. We just started. So by, I would say, by Thanksgiving, we'll have everything done. And I don't know how many will not take. So far, 0. So it looks like it will be the new way of doing business in the United States. So a much more mature way of doing business in the United States, we are very happy with that. And the clients are too.

Nick Giles

That's good to hear. Thanks for clarifying, Lourenco. And then maybe just a question for Celso on the 4Q guide. Kind of what's underwritten there on the cost side and ASP side, respectively? And then on the 2027 bridge, when we look at the cost impact of $250 million, could you just kind of walk us through what's embedded there, whether there's any kind of volume benefit that's offsetting the inflation? Appreciate it.

Celso Goncalves

Yes. Sure, Nick. Just to summarize on the cost side for this quarter that we just reported, we were able to bring down cost per ton by $17 a ton versus our guide of $10 a ton. And that was driven by higher production volumes, were a big driver of that cost outperformance. As we look ahead to Q4, costs are expected to increase slightly, and that's driven by repair and maintenance schedules, a little bit of higher energy costs, higher alloy costs, elevated diesel prices and things like that. So that's what's driving a little bit of a cost increase in Q4.

As it relates to ASPs, as you mentioned, in Q3, we brought ASPs up by $53 a ton versus our guide of $55, so we're kind of right in line. And as we look forward to Q4, these are expected to increase by a similar amount as it did in Q3, call it, $45 to $55 a ton, and all factors that contributed to the increase in Q3 are continuing into Q4. The monthlies, the quarterlies and the spot pricing are all improving.

Operator

The next question is coming from Carlos Alba of Morgan Stanley.

Carlos de Alba

So on the cash flow generation, maybe just to see if you can provide just a little bit more color as to what you're expecting on working capital to close out the year. You mentioned that you expect cash flow generation. It's still early on, but maybe an indication of a range of magnitude that we can see there. And then just to confirm then if you expect to have the $500 million on asset sales, also the cash coming in, in the fourth quarter, on top of what you saw and reported in the cash statement for the third quarter.

Celso Goncalves

Yes. Carlos, yes, I think working capital will be likely neutral in Q4, is the best way to think about it. In Q3, we had a build of $160 million in working capital, and that was largely driven by $170 million increase in inventory, $115 million increase in AR, which was offset by $135 million increase in payables. But as we look forward to Q4, that should neutralize and working capital will be neutral for the next quarter.

As it relates to asset sales, everything is contracted and expected to close here in Q4. Obviously, there's -- anything can happen, but that's what we expect right now. There are situations where some extensions have been needed, power supply and things like that are complicated. But as of right now, we still expect to close all those in Q4.

Carlos de Alba

Great. And then if I could squeeze one more. So your balance sheet has been improving and will continue to improve as you have laid out. But would you consider -- under what circumstances would you consider maybe being -- strengthening your balance sheet and reducing your leverage beyond the 2.5x perhaps as the stock recovers, and we've seen a strong performance of premarket, an equity raise? Is that out of the question at this time based on the strong outlook for next year and the cash coming in from the asset sales?

Celso Goncalves

Yes. Look, we don't think we need to given the outlook we have right now, as we're looking forward to north of $4 billion of EBITDA next year, and we've laid out pretty clearly how much free cash flow generation that would result in. I would much prefer to use cash from operations to pay down debt, and that's our primary goal. And the 2.5x is just the leverage target that we have clear visibility into right now.

Obviously, as things progress throughout next year, we should be able to well exceed that expectation, hopefully. So it's not a target that we're going to stop at. I think I've been pretty clear over the years in terms of my priority to reduce down debt. And we're always looking at the balance sheet, looking for opportunities to do that. So the ABL will be the primary target. We'll pay that off with cash from operations, and then we'll look to continue to drive down the bonds as well. So that's how we plan to do it with cash from operations.

Lourenco Goncalves

Yes. In sum, Carlos, we are not going to issue stock. We don't need to, full stop.

Operator

The next question is coming from Nick Cash of Goldman Sachs.

Nicklaus Cash

So automotive volumes have been strong this year and again this quarter. And in general, the market is generally tight -- there's limited tons available and pricing is also extremely favorable. Just wondering, how are you all thinking about what specifically still needs to happen before Dearborn becomes economic to restart?

Lourenco Goncalves

Yes. Look, we -- first of all, no OEM is not being taken care of. That's the very first thing. You said it's extremely tight. Not really. Not really. Because until General Motors brings the Chevy truck from production in South Korea to production in the United States, we don't need Dearborn, for example. That's the bestselling vehicle that they have and it carries the same ton of steel that any other car that we produce here on average that we produce here in the United States, and it's being produced in South Korea. That's a slap in the face of the United States. That car needs to be brought back to the United States. I have been talking with General Motors about that. So no need for the a until that happens.

The other thing that's really an annoying thing is the F-150 of Ford being an aluminum skin car. I say aluminum skin car because everything else in that car is already steel, and we are the suppliers of that steel. But so far, only the fenders are steel. And the reason why the offenders are steel is because the producer of aluminum set themselves on fire 3 times in 1 month, showing how weak that supply chain is. And then when push comes to shove, they come to Cliffs to build them out, and we did. And we did with engineering, we did showing that we can stamp aluminum, we can stamp steel in dies that were used to stamp aluminum. So we need to bring that car to steel. And I hope that the buyers of trucks understand an aluminum vehicle is not a steel vehicle. And anyway, and then we can bring Dearborn back. So the clients are the ones that will dictate when Dearborn will come back, not me.

Nicklaus Cash

No, that's extremely helpful. And just one more quick one. Again, on the price deck, you increased the $500 million opportunity from repricing to closer to $850 million. Can you just walk us through or provide a little bit more color on what exactly changed in terms of how much reflects higher-than-expected pricing, additional tonnage and how many tons are actually being repriced in that number?

Lourenco Goncalves

Well, everything is going very well in our renegotiation. Last quarter, we were conservative, but now we are more realistic because we have deals done. I'm not going to go into specifics, but that's pretty much what's happening.

Operator

Our next question is coming from Samuel McKinney of KeyBanc Capital Markets.

Samuel McKinney

I'm going to stick on the contract theme. With 70-plus percent of the mix on fixed or index-linked contracts, do you guys see that mix evolving into next year, where we hear from a lot of buyers about the mills attempting to reduce their contract exposure to take advantage of this rich spot market?

Lourenco Goncalves

I hope you heard in the prepared remarks that we are doing well with the renewals. That's number one. Number two, I already informed as we are doing this dialogue with you guys in this call, I let you guys know that now the minimum tonnage contracted is a take-or-pay for Cleveland-Cliffs. And for the -- we are not by any stretch forcing them to take the existing minimums. If they want to go to a lower minimum in order to be in a more comfortable situation from the take-or-pay standpoint, we are fine with that. On the other hand, the lower minimum is now the lower minimum. So if we need to bring contract tonnage to a minimum, that's the new minimum.

So what's happened is that, more than the opposite, clients are asking to raise their minimums. Because at this very moment, Samuel, the biggest point semis to have steel, not to negotiate a price. So fixed prices are gone. Everybody is going to index, and going to index with a minor or no discount because they all believe, not all, but a good number, let's put it like this, of clients believe that price have peaked. So being on the discount to help them going forward. On the other hand, I believe that steel prices are not at peak. So I also have a good view on keep contracts on index price.

So we're going all index and with low discounts -- lower discounts to freight, things like that. So no discounts to freight, passing along to the clients our costs. They are accepting that too. And I think we're going to be much more mature as we eliminate the cancer of imports from this market. We're in a much more healthy environment in which the clients can plan for the future, we can invest, we can hire people. And that's what's the most important thing of bringing manufacturing back to the United States.

So kudos to President Trump, Secretary Howard Lutnick and others that are implementing -- USTR and especially to Jamieson Greer, all the officials that finally heard what this industry has been claiming for several decades, and now we are doing and now the United States is the third largest producer of steel in the world, ahead of Japan. Rightfully so, we are a country that is growing, they are a country that's shrinking. So we are in the right spot right now.

Samuel McKinney

All right. Great. And then on the last call, you guys outlined the third quarter volume increase of about 300,000 tons, and volumes increased only about 125,000 tons. Celso, you touched on third quarter auto production earlier, but any more details you guys can provide on the factors over the course of the quarter that prevented you from achieving that outlook and if they've subsided for the fourth quarter?

Lourenco Goncalves

Yes. The main reason is the fact that our biggest business individually is automotive. And automotive has been reshoring, that's a good thing. But they are reshoring in a way that is not really, let's call, as organized as we would like to see. They have their own problems. And they're just in time doesn't work as good as it looks like or sounds like when you say just in time. So we need to sometimes reschedule our own production in order to make sure that they are in steel. But not because of us, sometimes it is, but not -- more normal than not, we have to do that because of them. And we do that because they are the clients. And we're working individually with each one of the clients, the auto OEMs, make sure that they get their own thing better organized for us to be better organized as well.

So the contract renewals of the automotive clients, the multiyear contract that we gave to them, are coming soon. The first one will be related to a January 1 expiration. And now they know that there are take-or-pays for minimums for other clients, and we're going to evolve to that with them. We are the largest supplier of automotive steel by a lot. We continue to grow our participation at will with automotive. And we are going to have this introduced with the automotive clients. And if they don't want, that's fine too. We'll see.

Operator

Our next question is coming from Albert Realini of Jefferies.

Albert Realini

Congrats on the impressive quarter. Yes. I think last year, you guys have talked about the expiration of the slab contract and maybe a high-level estimate that could increase EBITDA by maybe $500 million. I just wanted to ask, is there more to go with that? I saw in the sales volumes, there didn't look like there were a slab or other products there. So is there more, I guess, uplift remaining in the fourth quarter from that? Or have you guys kind of reached that run rate, which I assume is higher now just based on the pricing environment?

Lourenco Goncalves

Yes. Good point. I appreciate the question, Albert, because you're absolutely right, the benefit of not selling slabs is showing in our numbers. Remember, when I sold -- I'm sorry, when I sold -- when I bought ArcelorMittal U.S.A. from ArcelorMittal, one of the conditions that I had to agree with, otherwise that you would not go through, was to supply ArcelorMittal Calvert with our slab. And that deal was a 5-year deal. We counted the days until the day of the expiration, the fifth anniversary and we did not renew, and there was a very positive benefit. And I'm sure that ArcelorMittal is doing extremely well with their new supplier of steel slabs. No, that was actually a joke. They are not. But I don't care. And we are good. We are happy with that.

Operator

The next question is coming from Bill Peterson of JPMorgan Chase.

William Peterson

Echoing nice job in the quarterly execution. Just trying to, I guess, tie in some of the questions earlier on shipment potential for next year, and maybe leaving Dearborn aside. I guess, how should we think about your shipment growth quantitatively maybe versus market growth? Does this assume any sort of kind of share gain? Or is the market -- just kind of grow in line with market, just at a high level?

Lourenco Goncalves

First of all, everything that the Trump administration has implemented in terms of reshoring manufacturing is really happening. So the demand is growing. The overall number is growing. That's number one.

Number two, imported steel that was always, always a relevant item of the mix of supply is no longer there. You don't see the important role played by imported steel in this market being played going forward. For several reasons, we have already discussed. So now it's about the domestic supply.

Third thing is that even though there are a lot of announcements for new plants and things like that, these things are years ahead if they really materialize. And I'm not just talking about Iowa or any other plants that were announced. I'm talking about announcement that even announcements that haven't happened yet. Because when you see an environment like what we have right now with reshoring manufacturing into the United States, I really believe that other announcements will come. But when push comes to shove, clients need reliability. Clients need people that can really supply steel. And they know where they can get steel and you know where they can get announcements of future investments in [ $50 billion ] here, another $13 billion in CapEx that never materialized from another one, level that, but when they need steel, they know where to come. So that's what's happening right now. I hope I'm helping, not complicating, Bill, but that's how I see it.

William Peterson

Okay. It sounds like it's a constructive backdrop. I guess my second question, and you've pretty much defined clearly what's going on in Canada. Obviously, HRC is now nearly on par. I'm just curious, what do the value-added spreads, I guess, look like between Canada and the U.S., just to help quantify what you were saying earlier?

Lourenco Goncalves

Yes. Look, Canada caught up very quickly when the current administration implemented the TRQs and -- in the first place, and then fine-tuned a little bit to make it really work. That's what happened between December of 2025 and June of 2026. For the hot-rolled business, it worked extremely well.

As far as the galvanized business, didn't. Because between ourselves, ArcelorMittal -- ourselves meaning Stelco, ArcelorMittal Dofasco, an incredible amount of imported galvanized steel coming through the border. The domestic market in Canada simply cannot accommodate. And when the Prime Minister goes on a world trip and say, "Come to Canada, we're open for business," they're basically inviting a new imports into the market and people here outside of Canada, and they said present and they sent this deal there. So what Prime Minister Mark Carney did with this world trip and bringing electric vehicles to the country, just 49,000 tons of virus, called Chinese electric vehicles, he was basically snatching defeat out of the joys of victory. And the punishment was not on companies like Stelco or even Cleveland-Cliffs, the punishment was on Canadian workers. So when things like that happen, consequence exists.

But I always believe that cold minds will prevail and there are more intelligent people than stupid people in any place in the world. So we're going to be okay in Canada. I don't know if your question was exactly that, but I think that's the only message about Canada that's important. All the rest is just your spreadsheet, Bill.

Operator

Thank you. This brings us to the end of today's question-and-answer session and today's conference call. We would like to thank you for your participation and interest in Cleveland-Cliffs. You may disconnect your lines at this time or log off the webcast, and enjoy the rest of your day.