Cleveland-Cliffs Earnings Call Signals Rebound Ahead

Cleveland-Cliffs ((CLF)) has held its Q1 earnings call. Read on for the main highlights of the call.

Cleveland-Cliffs’ latest earnings call struck an overall upbeat tone, with management emphasizing that firm pricing, rising shipments and strong liquidity outweigh several temporary headwinds. Executives pointed to a full order book, improving automotive demand and expected positive free cash flow in the second quarter as evidence that the company’s earnings power is set to reassert itself through 2024 and beyond.

Adjusted EBITDA Recovery

Cleveland-Cliffs reported adjusted EBITDA of $95 million for the first quarter, marking a year-over-year improvement of $274 million. Management attributed the rebound largely to better pricing and stronger operating leverage, underscoring that the business is recovering from last year’s trough despite lingering cost and energy pressures.

Shipments and Volume Recovery

First quarter shipments totaled just over 4.1 million tons, representing a sequential improvement of more than 300,000 tons, or roughly 8% quarter on quarter. The company expects volumes to increase further in the second quarter and remain above the 4.1 million ton level, supporting higher revenue and better fixed-cost absorption.

Pricing Momentum

Average selling prices rose $68 per ton year over year and $55 per ton sequentially in the first quarter, reflecting the tightening steel market. Management forecasts another roughly $60 per ton price increase from the first to the second quarter, with continued realization of market strength into the second and third quarters as extended lead times and a solid order book flow through contracts.

Strong Market Position and Demand

The company described its order book as full, with tight production schedules and extended lead times signaling healthy demand. Automotive OEM orders are increasing, and management sees meaningful substitution of steel for aluminum in autos, building products, appliances and truck trailers, reinforcing Cleveland-Cliffs’ competitive position in value-added steels.

Liquidity and Asset Monetization Plan

Liquidity remains robust at more than $3 billion, giving the company flexibility to navigate volatility and fund projects. Management reiterated its target of $425 million in proceeds from idle property sales, noting that about $70 million has already been received and outlining an expected cadence of roughly $50 million in the second quarter, $100 million in the third and the balance in the fourth.

Operational and Strategic Progress

DOE-backed modernization projects at Butler and Middletown are progressing on schedule, with both expected to be completed by 2028 and aimed at enhancing electrical steel and core mill capabilities. The company is also optimizing its footprint by consolidating to the 160-inch mill at Burns Harbor and idling Gary plate finishing without layoffs, while keeping SG&A near all-time lows following acquisitions.

Customer and Quality Recognition

Cleveland-Cliffs highlighted its February receipt of Toyota’s Quality Excellence Award as validation of its product consistency and reliability. Management framed the recognition as a competitive advantage that supports deeper relationships with OEMs and potential share gains in automotive steel, a key profit driver for the company.

Near-Term Cash Flow Outlook

Free cash flow was negative in the first quarter as expected, reflecting working capital build and timing of shipments. Management guided investors to expect meaningful positive free cash flow in the second quarter, which they called the best quarter in nearly two years, with the third quarter set to showcase the firm’s full earnings power as outages ease and utilization improves.

Energy Spike Impact in Q1

An extreme cold-weather-driven energy price spike created about an $80 million negative impact to first quarter EBITDA versus historical norms, mainly through higher electricity and industrial gas costs. The company explained that natural gas hedges and volatile power markets affected integrated plants in unregulated states, framing the hit as unusual and not indicative of underlying operations.

Canada Pricing Dislocation

Management flagged a sharp pricing dislocation at Stelco, its Canadian operation, where selling prices are running about 40% below U.S. levels in the current market. This gap materially reduces what Stelco would normally earn in such a pricing environment and remains a key drag on consolidated results until Canadian prices normalize.

Working Capital and Q1 Cash Flow Pressure

Accounts receivable increased by about $130 million in the first quarter due to higher March shipments and stronger pricing, pushing free cash flow into negative territory. Management expects most of this temporary working capital build to unwind in the second quarter as receivables convert to cash and higher prices are fully collected.

Near-Term Cost Pressures and Outages

The company expects unit costs in the second quarter to tick up roughly $15 per ton due to carryover inventory effects, planned outages and a richer automotive mix. Rising scrap and fuel costs, including diesel and freight, are adding about $50 million annually to mining expenses, but management anticipates costs will fall meaningfully in the second half as outages subside.

POSCO Transaction Timing Uncertain

Talks with POSCO remain active and management still views a potential deal as accretive, but geopolitical and currency volatility tied to Middle East tensions and knock-on effects in South Korea have delayed timing. Executives signaled less urgency to close a transaction quickly, citing improving domestic market conditions and strong internal cash generation prospects.

Slab Contract Tail and Legacy Drag

First quarter results were weighed down by roughly 175,000 tons of residual slab shipments linked to an older slab contract, which carried unfavorable terms. Management emphasized that these tail shipments have now been completed, framing the impact as a temporary legacy drag that should not recur in future quarters.

Forward-Looking Guidance and Outlook

Management expects results to improve steadily through 2026, targeting full-year shipments of about 16.5 to 17.0 million tons as pricing gains and leverage build. The mix remains roughly 45% HRC-linked with a balanced contract structure, and executives see the second quarter as a high point in near-term performance before costs drop and third-quarter results reveal the company’s full operating leverage and cash generation potential.

Cleveland-Cliffs’ earnings call painted a picture of a steel producer emerging from a challenging period with momentum in pricing, volumes and operational efficiency. While near-term cost and regional pricing headwinds remain, management’s confidence in stronger cash flow, asset monetization and modernization projects suggests a constructive medium-term setup for investors watching the stock.