Cleveland-Cliffs Q3 Adjusted EBITDA Hits Three-Year High

Cleveland-Cliffs Inc. (NYSE: CLF) reported its strongest quarterly revenue and adjusted EBITDA in three years, as higher steel prices, increased shipments and lower unit costs lifted third-quarter 2026 results. The steelmaker also outlined an illustrative path to $4.5 billion of adjusted EBITDA and $2.7 billion of free cash flow in 2027, based partly on prevailing price forecasts and planned contract resets.

Revenue totaled $5.6 billion for the quarter ended September 30, while adjusted EBITDA reached $612 million, up from $286 million in the second quarter and $143 million a year earlier. GAAP net income was $165 million, compared with net losses of $134 million in the prior quarter and $234 million in the third quarter of 2025.

The sequential adjusted EBITDA improvement of $326 million reflected stronger pricing and cost performance alongside higher volumes. Cleveland-Cliffs said its average steelmaking selling price increased by $53 per net ton from the second quarter to $1,177, while unit costs declined by $17 per ton.

Shipments and automotive volumes rise

Total shipments were 4.2 million net tons, increasing by 125,000 net tons from the second quarter. Steelmaking external sales volumes were 4.15 million net tons, compared with 4.03 million in the prior quarter and 4.03 million a year earlier. The company recorded its highest total shipments since the second quarter of 2025 and its third consecutive quarter above 4 million net tons.

Automotive volume continued to increase sequentially and reached its highest level since the third quarter of 2023. Direct automotive customers accounted for 28% of steelmaking revenue, while distributors and converters represented 34%. Infrastructure and manufacturing contributed another 28%, with steel producers accounting for the remaining 10%.

Hot-rolled steel made up 46% of shipments, followed by coated products at 31%, cold-rolled steel at 15%, and stainless and electrical steel and plate at 4% each.

The company said reduced import competitiveness had supported demand for domestically produced steel, with data centers and energy-related tube products identified as areas of strength. Cleveland-Cliffs also pointed to higher global steel and freight costs, logistics disruptions and tariffs as factors making imported steel less attractive. The presentation cited year-to-date average U.S. flat-rolled imports through July 2026 of 352,000 net tons per month, 53% below the 2024 monthly average.

Illustrative 2027 earnings and debt reduction

Cleveland-Cliffs presented an illustrative bridge from its third-quarter adjusted EBITDA to approximately $4.5 billion of adjusted EBITDA in 2027. The calculation starts with an annualized third-quarter level of about $2.45 billion and assumes $350 million from lower discounts and increased extras on index-linked contracts, $850 million from fixed-price contract improvements and $1.1 billion from prevailing price forecasts. An estimated $250 million cost impact, including inflation and maintenance, repair and operating expenses, would partly offset those gains.

After approximately $1.8 billion of interest expense, capital expenditures and pension and other post-employment benefit payments, the illustration implies about $2.7 billion of 2027 free cash flow. The prevailing-price assumption reflects the current futures curve and the company’s Canadian order book. Cleveland-Cliffs said it could not reconcile forward-looking non-GAAP measures with the most directly comparable GAAP measures without unreasonable effort because of uncertainty over future items affecting comparability.

Debt reduction remains the company’s top capital-allocation priority. Cleveland-Cliffs intends to direct 100% of cash flow toward debt repayment and said it sees a clear path to reaching its net debt-to-trailing-12-month adjusted EBITDA target of 2.5 times by the end of the second quarter of 2027. It plans to continue reducing debt after reaching that target while maintaining liquidity above $2 billion. Liquidity stood at $3.2 billion on September 30, and the company has no note maturities from 2026 through 2028.

The company has also placed all major non-EBITDA-contributing assets under contract or completed their sale. The transactions have a total value of about $500 million, including roughly $130 million already received. Cleveland-Cliffs expects to use all net cash proceeds from asset sales to repay debt.

Facility investments continue

Cleveland-Cliffs expects 2026 capital expenditures of $700 million. Its five major projects through 2030 include investments at Middletown Works, Butler Works, Burns Harbor and Lake Erie Works.

The re-scoped Middletown modernization has a net capital cost of $500 million, matched by a $500 million U.S. Department of Energy award. The project includes blast-furnace upgrades, material-handling infrastructure and AI-enabled process controls, with completion expected in 2030 and 2,300 jobs expected to be preserved.

At Butler Works, the company is investing $200 million to expand grain-oriented electrical steel capacity, supported by a $75 million Energy Department award. The project is expected to improve steel quality and operating efficiency while expanding production volume by as much as 25%. Completion is scheduled for early 2028.

Cleveland-Cliffs’ outlook remains exposed to volatile steel, scrap and iron-ore prices, the cyclical nature of steel demand and its reliance on the automotive industry. Other stated risks include global overcapacity, imports, trade-policy changes, supply-chain and logistics disruptions, higher energy and raw-material costs, project execution, indebtedness, labor relations, environmental regulation and the realization of expected benefits from acquisitions and potential asset transactions.