Cliffs(US:CLF)2026-02-09 14:32Financial 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 to improve to 4 million tons in Q1 2026 [17] - Q4 price realization was $993 per net ton, down by approximately $40 per net ton, but expected to improve by about $60 per ton in Q1 2026 [18][22] - 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 [19] 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] - The automotive sector remains the core end market, with multi-year fixed-price contracts signed with major OEMs, expected to enhance market share and profitability in 2026 [7][9] Market Data and Key Metrics Changes - The spot steel price is at a two-year high, benefiting from Section 232 tariffs and increased domestic production [6] - Canadian pricing and shipments have improved following government restrictions on imported steel, positively impacting the Canadian subsidiary, Stelco [12] 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 automotive production [8][10] - A strategic partnership with POSCO is a top priority, aimed at enhancing collaboration and meeting U.S. trade requirements [14][53] 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 2026 [22] - The company is well-positioned to capitalize on the return of vehicle production to pre-COVID levels, with expectations of significant throughput and profitability gains [23] Other Important Information - The company achieved a record low total recordable incident rate in 2025, reflecting a 43% improvement compared to 2021 [15] - Capital expenditures in 2025 were $561 million, with projections for 2026 to be around $700 million, reflecting normalized maintenance spending [20] Q&A Session Summary Question: Expected benefits from the cancellation of the slab contract - Management anticipates an EBITDA improvement of approximately $500 million from the cancellation of the slab contract, with benefits expected to materialize more significantly in Q2 2026 [27][31] Question: CapEx expectations beyond 2026 - CapEx is projected to be $700 million in 2026, increasing to $900 million in 2027 due to a blast furnace reline, then returning to $700 million in 2028 [34] Question: Open capacity and potential for contracting - The company has significant downstream capacity available, with the ability to produce specialized steel products, contingent on increased domestic automotive production [39][41] Question: Outlook for Q1 2026 - Shipments are expected to return to 4 million tons in Q1 2026, with ASP projected to increase by $60 per ton, driven by improved demand and pricing dynamics [44][46] Question: Impact of Stelco on earnings - Stelco's performance in 2025 was disappointing, but improvements are expected in 2026 as Canadian market dynamics change, contributing positively to overall results [60][64]