Cleveland-Cliffs jumps 16% on $4 billion 2027 forecast; debt still $7.6 billion

Cleveland-Cliffs makes steel in the United States and Canada and employs about 25,000 people. It calls itself the largest producer of flat-rolled steel in North America, with a focus on sheet steel for the auto industry.¹ It is vertically integrated: it mines iron ore, makes pellets and processes scrap, then makes and finishes the steel itself.² In the third quarter, direct sales to automakers were $1.5 billion, or 28% of steel sales, and distributors and converters took 34%. More than 90% of its roughly 20,000 hourly workers are represented by unions.³

2025 was a hard year. Revenue was $18.6 billion, but adjusted EBITDA for the whole year was only $37 million, and the fourth quarter of 2025 alone showed a $21 million loss on that measure.¹ Chief executive Lourenco Goncalves blamed weak auto production, an expiring slab contract that lost money in its last year, and a worse Canadian market.² The company sold 75 million new shares at $12.69 each on October 31, 2025, for net cash of $951 million. The recovery then built quarter by quarter: adjusted EBITDA was $95 million in the first quarter of 2026 and $286 million in the second, when management guided $575 million for the third.³

Trade policy is the main reason prices rose. Section 232 tariffs on imported steel were generally raised to 50% in June 2025. Total American steel imports fell 29% year to date through April 2026, and domestic hot-rolled coil, the benchmark sheet price, averaged $1,079 a ton in the second quarter.¹ Rival Steel Dynamics said in its own third-quarter release that coated sheet imports had eased because of trade actions and that its sheet-steel spreads widened.² The risks run the other way too. Competitors are building new steel capacity, and Cliffs sells 40-45% of its sheet shipments on fixed-price contracts, so price moves reach that volume only when contracts reset.³

On July 21, 2026, the board made chief financial officer Celso Goncalves president as well, and a director. He is the son of the chief executive.¹ His base salary rose from $884,000 to $1,000,000, and the severance multiple in his change-in-control agreement rose from two years to three years.²

Cliffs also has a memorandum of understanding with POSCO, Korea's largest steelmaker. In February it targeted a definitive agreement in the first half of 2026, but its quarterly report for the period ended June 30, 2026 said there was no assurance one would be signed.

Canada is a live dispute. The Wall Street Journal reported on October 16 that Canada's government was weighing legal options that include fines and a forced sale of assets, after Stelco began handing out layoff notices.¹ Goncalves told the paper a temporary cut in headcount is needed to counter tariff pressure on the industry. On results day he told it the 2027 outlook had improved in recent months, helped by domestic trade policy.²

Cliffs released the results on October 19, 2026. Third-quarter revenue was $5,612 million, up from $4,734 million a year earlier and $5,226 million in the second quarter.¹ Steel shipments rose to 4,150 thousand net tons from 4,029 thousand a year earlier. The average selling price rose to $1,177 a ton, from $1,032 a year earlier and $1,124 in the second quarter.² Operating income was $311 million, against a $204 million operating loss a year earlier.³

This quarter's profit is mostly clean. Reported net income was $165 million, or $152 million for Cliffs shareholders after $13 million owed to minority partners, and the adjusted figure for shareholders was $161 million.¹ Reported EBITDA of $618 million was close to the adjusted $612 million, and a $14 million gain on asset sales was one of the items taken out.² The quarter also carried $259 million of depreciation, a non-cash cost, and $46 million of income tax expense.³

The year so far is weaker. From January through September, Cliffs lost $198 million on a reported basis, or $230 million for its shareholders, and $182 million on the adjusted measure.

Cash flow lagged profit. Operations brought in $224 million in the third quarter and capital spending took $152 million, leaving about $72 million of free cash flow.¹ From January through September, operations brought in only $129 million against $461 million of capital spending, a gap of about $332 million. Higher prices raise what customers owe, and receivables absorbed $723 million of cash over that span, while inventories took $170 million in the third quarter.² The company expects about $900 million of capital spending over the 12 months after June 30.³

Cash was $77 million at September 30, and liquidity was $3.2 billion. Most of that liquidity is room on a revolving credit line backed by assets, whose lenders hold a first-priority claim on the receivables; at June 30, $3,014 million of the line was available.¹ The June 30 debt schedule showed nothing due in 2026 or 2027. The line had $895 million drawn and matures on June 9, 2028, or 91 days before certain other debt, and $1,268 million of notes come due in 2029, the nearest note maturities.² A covenant requiring fixed charges to be covered at least 1.0 times applies only if the line's liquidity tests are not met, and it did not apply at June 30.³

Long-term debt was $7,645 million at September 30. That is $58 million less than at June 30 but $392 million more than at the end of 2025.¹ Net borrowing on the credit line was $383 million from January through September, with $61 million repaid in the third quarter.²

Debt less cash comes to about $7.57 billion. Against the past year's adjusted EBITDA, about $972 million, that is roughly 7.8 times.¹ If the third quarter's pace held for a year, it would be about 3.1 times. On a $4 billion 2027 it would be about 1.9 times, even before any debt is repaid.² Interest took $148 million in the third quarter, so adjusted EBITDA covered it about 4.1 times. From January through September, interest was $452 million and the cover was only about 2.2 times.³

Shareholders held 570,540,047 shares on July 23, 2026, and no preferred shares exist. Stock pay adds little: about 2.8 million market stock units were granted in the first quarter, and 0.2 million options were outstanding at the end of 2025.¹ The board had $1.4 billion of buyback authority left at June 30. In a downturn, credit-line lenders have the first claim on receivables, while the senior notes are unsecured and backed by subsidiary guarantees.² The release itself warns that the company may not cut debt or return capital within the expected time, or at all.³

What follows are the company's goals, not results. Management expects fourth-quarter adjusted EBITDA of about $715 million, with higher prices partly offset by seasonality, more maintenance outages, input costs and bonus accruals.¹ Adding that to the year so far gives about $1.7 billion for 2026. The 2027 goal of more than $4 billion would be about 2.3 times that, and it rests on 2027 contract changes and prevailing price forecasts.² In July, management named the higher reset of fixed-price contracts and much better profits in Canada as 2027 drivers.³

The company says it cannot tie the fourth-quarter and 2027 figures to net income without unreasonable effort, so there is no matching forecast of reported profit.¹ Hedges cut both ways. At June 30 the company had hot-rolled coil sales swaps on 583,450 net tons running to September 2027, which fix the price on that volume for better or worse.²

Stelco, bought about two years ago, had its strongest quarter under Cliffs. Even so, Cliffs is idling Stelco's galvanizing lines indefinitely, blaming an oversupplied Canadian market, and says focusing Stelco on hot-rolled steel preserves about 2,000 Canadian jobs.¹ Its own risk list warns that idling a plant can cut the book value of its assets and lead to impairment charges. The Stelco purchase left $802 million of goodwill on the books.² Stelco also holds an option to buy 25% of the MinnTac iron ore mine from U. S. Steel for $500 million, open until January 31, 2027.³

CLF rose 16.1% from its October 16 close of $12.145 to $14.1 at the October 19 close, while the S&P 500 fund was up 0.4% from its October 16 close of $763.335 at its freshest price, an after-hours quote at 16:15 ET on October 19.¹ Over the same span, Steel Dynamics went from $240.5 to $244.85 and Nucor from $256.36 to $260.82, gains of about 1.8% and 1.7%. So most of the move belongs to Cliffs.² Before the news the stock traded between $11.005 and $12.975 in our price file, and it now sits above the $12.69 price of the 2025 share sale.³

At $14.1 the shares are worth about $8.04 billion, against about $6.93 billion at the October 16 close. Adding debt less cash gives an enterprise value near $15.6 billion.¹ That enterprise value is roughly 16.1 times trailing adjusted EBITDA but about 3.9 times the 2027 floor. The gap between those two numbers is the bet a buyer makes today.²

The strongest bull case is that profit is turning fast. Adjusted EBITDA went from a $21 million loss in the fourth quarter of 2025 to $612 million in the third quarter of 2026, and the company beat its own target by $37 million.¹ Imports are down, prices are up, and a $4 billion 2027 would put debt less cash under the 2.5-times target even before repayments.²

The bear case, ranked. First, the $4 billion depends on price forecasts the company does not spell out, in a market where steel prices swing and rivals are adding capacity.¹ Second, the balance sheet: at September 30, $7.6 billion of long-term debt and $77 million of cash; from January through September, operating cash flow of $129 million against $461 million of capital spending; and a release warning that debt cuts may slip.² Third, Stelco: idled lines, possible impairment charges and the Canadian dispute. Fourth, the gains lean on tariffs, and the release lists Section 232 trade policy as a risk.³

The dated tests come quickly. Stelco's MinnTac option expires on January 31, 2027, and the fourth-quarter report should arrive early in 2027; last year's came on February 9, 2026.¹ Canada's tariff-rate quota on steel runs through June 2027, and the leverage target falls in the middle of 2027. The credit line matures in June 2028 and the first notes in 2029.²

What would prove the bull case wrong: fourth-quarter adjusted EBITDA well short of about $715 million, or year-end long-term debt that has not clearly fallen from $7,645 million despite the promised major cut.¹ A slide in steel prices or a change in tariffs would put the 2027 forecast in doubt before that year even starts.²

Management counts on property sale proceeds for a major fourth-quarter debt cut, but the release does not name the property, the purchaser, the price or how much debt will be repaid.

The 2027 forecast rests on contract changes and prevailing price forecasts, but the company gives no price level, no split between contract and spot tons and no matching profit forecast.

The release says the galvanizing lines will be idled indefinitely and warns that idling can lead to impairment charges, but it gives no dollar cost for worker payouts or write-downs, and nothing we read sizes any penalty from Canada.

No filing says whether Stelco will pay the $500 million to exercise its option for 25% of the MinnTac mine before it closes on January 31, 2027; the 10-Q carries the option at $30 million as of June 30, and exercising would cost more than the $461 million of capital projects the company bought from January through September.

Our price file starts with an $11.79 close on September 15, 2026, and no filing gives the stock's high or low for the past year, so that range is not confirmed.

No analyst rating, price target change or credit-rating action on Cliffs since the results appears in the filings or pages we read.