Cliffs(US:CLF)2026-02-09 14:30Financial Data and Key Metrics Changes - Total shipments in Q4 2025 were 3.8 million tons, slightly lower than Q3 due to seasonal impacts, with expectations for Q1 2026 to improve back to 4 million tons [15] - Q4 price realization was $993 per net ton, down by approximately $40 per net ton, but a substantial improvement in realized prices is expected starting in Q1 2026, with an anticipated increase of about $60 per ton [16][30] - Unit costs decreased by $40 per ton in 2025, marking the third consecutive year of reductions, with further expectations of a $10 per ton decrease in 2026 [16][17] Business Line Data and Key Metrics Changes - The company has shifted melting capacity from low-margin slabs to higher-margin flat-rolled products, anticipating continued demand for domestically produced slabs [5] - Multi-year fixed-price contracts with major automotive OEMs have been signed, increasing market share and securing high-margin business for 2026 [7][9] Market Data and Key Metrics Changes - The Canadian government has implemented restrictions on imported steel, positively impacting the Canadian subsidiary Stelco and improving pricing and shipments [4][12] - The U.S. market is benefiting from Section 232 tariffs at 50%, driving demand for domestically produced steel and reducing import competition [4][20] Company Strategy and Development Direction - The company is focused on leveraging existing production capacity without the need for new plants, positioning itself to benefit from the anticipated increase in domestic vehicle production [8][10] - The strategic partnership with POSCO aims to enhance collaboration and meet U.S. trade requirements, with a definitive agreement targeted for the first half of 2026 [13][52] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the improving business environment, citing a solid order book, rising prices, and declining costs as key factors for profitability in 2026 [20][21] - The company is committed to maximizing profitability through operational efficiency and strategic partnerships, with a focus on the automotive sector [20][21] Other Important Information - The company achieved its lowest total recordable incident rate in 2025, reflecting significant improvements in safety performance [14] - Capital expenditures in 2025 were a record low at $561 million, with projections for 2026 to be around $700 million, reflecting normalized maintenance capital [18] Q&A Session Summary Question: Expected benefits from the cancellation of the slab contract - Management expects an EBITDA improvement of approximately $500 million from the cancellation of the slab contract, with benefits starting in Q1 but more pronounced in Q2 and Q3 [26][30] Question: CapEx expectations beyond 2026 - CapEx for 2026 is projected at $700 million, with expectations to rise to $900 million in 2027 due to a blast furnace reline, then returning to $700 million in 2028 [34] Question: Open capacity and potential EBITDA sensitivity - The company has significant downstream capacity available, with the need for increased domestic automotive production to fully utilize this capacity [39] Question: Outlook for Q1 and pricing expectations - Shipments are expected to return to 4 million tons in Q1, with ASP anticipated to increase by $60 per ton, driven by improved demand and pricing dynamics [43][44] Question: Impact of Stelco on earnings and market dynamics - Stelco's performance in 2025 was disappointing due to market conditions, but improvements are expected in 2026 as Canadian pricing stabilizes [60][64]