Cleveland-Cliffs Posts Best Quarter in Three Years as Steel Tariffs Reshape the Market

Cleveland-Cliffs Inc., the largest supplier of steel to the North American automotive industry, reported its strongest quarterly results in three years on Monday, with adjusted earnings far exceeding the guidance the company had given investors just three months earlier. The report, filed before markets opened, showed that higher prices and lower costs — not higher sales volumes — drove the rebound, as import-limiting tariffs continue to reshape the domestic steel market.

The results mark a turning point for a company that spent much of the past two years absorbing losses tied to soft automotive demand, high debt and the costs of digesting a string of acquisitions, including its 2024 purchase of the Canadian steelmaker Stelco. Monday's report suggests that strategy is beginning to pay off on the U.S. side of the business even as the Canadian piece of it remains contentious.

The Cleveland-based company said third-quarter adjusted earnings before interest, taxes, depreciation and amortization reached $612 million, beating its own forecast of approximately $575 million and more than quadrupling the $143 million it reported in the same quarter a year ago, according to the earnings release the company filed with securities regulators. Shares jumped sharply in Monday trading, at one point rising as much as 17%, as investors weighed the earnings beat against a revenue figure that fell short of Wall Street forecasts.

The numbers behind the beat

Cleveland-Cliffs reported third-quarter revenue of $5.6 billion, up from $5.2 billion in the second quarter, and swung to a GAAP net profit of $165 million, or 26 cents a diluted share, after posting a $134 million loss in the prior quarter. On an adjusted basis, the company earned 28 cents a share, ahead of the 24-cent consensus tracked by analysts. The company ended the quarter with $3.2 billion in liquidity, according to the filing made available through the Form 8-K submitted to the Securities and Exchange Commission.

Unlike past turnarounds at the company, this one was not built on higher shipments. Steel shipments totaled roughly 4.2 million net tons, little changed from 4.03 million tons a year earlier. Instead, the average net selling price per ton rose to $1,177, up from $1,032 in the same period last year and from $1,124 in the second quarter of this year. Operating cash flow came in at $224 million, a sharp reversal from the $143 million the company burned through operating activities in the third quarter of 2025, while free cash flow reached $72 million after $152 million in capital spending.

The steelmaking segment, which accounts for nearly all of the company's business, posted a cash margin of $685 million on $5.4 billion of segment revenue, compared with a cash margin of just $205 million on $4.6 billion of segment revenue in the same period last year. Hot-rolled steel made up 46% of shipments, followed by coated products at 31%, cold-rolled steel at 15%, and plate, stainless and electrical steel making up the balance.

A tariff-driven recovery

The improvement follows more than a year of federal tariff policy aimed at propping up domestic steelmaking, including duties on imported steel imposed under Section 232 of the Trade Expansion Act that have been in place in various forms since 2018 and were expanded further in 2025. Chairman and chief executive Lourenco Goncalves credited that backdrop directly for the company's pricing power, saying import volumes remain depressed and that customers have grown more willing to pay up for domestic supply reliability rather than risk longer lead times from overseas mills.

The same trade dynamics, however, have created a headache north of the border. Cleveland-Cliffs' Canadian subsidiary, Stelco, began idling its galvanizing and cold-rolled finishing lines at its Hamilton, Ontario plant in early October, a move the company has blamed on a decline in demand for those products of nearly 25% as American tariffs redirected trade flows and left Canada's galvanized steel market oversupplied. The idling followed a union notice that roughly 350 Hamilton steelworkers would be laid off, and it has drawn a sharp rebuke from Ottawa, which approved Cleveland-Cliffs' takeover of Stelco on the condition that staffing levels be maintained for five years.

Automakers, Canadian steelworkers and shareholders

Cleveland-Cliffs employs roughly 25,000 people across the United States and Canada, and the quarter's results ripple outward to several distinct groups. Automakers remain its single largest identifiable customer base: sales to the automotive sector accounted for 28% of steelmaking revenue, or roughly $1.5 billion, with distributors and converters taking a slightly larger 34% share and infrastructure and manufacturing customers another 28%. A higher-priced, higher-margin Cleveland-Cliffs generally translates into higher input costs for vehicle manufacturers that depend on its sheet steel.

In Hamilton, the picture is more mixed. The company says total production tonnage at Stelco will be maintained by shifting output toward hot-rolled products, preserving roughly 2,000 Canadian jobs even as the galvanizing lines sit idle and affected employees wait to learn whether they will be redeployed to the company's Lake Erie Works. Canadian officials have signaled they intend to pursue the matter further, with Prime Minister Mark Carney's government weighing legal action under the Investment Canada Act over whether the company has honored the job commitments tied to its purchase of Stelco. For shareholders, Monday's report offered the clearest signal yet that the company's U.S. operations are recovering faster than its Canadian unit, and faster than the broader domestic steel sector.

What Goncalves and the market are saying

Third quarter was our strongest quarter in three years, with adjusted EBITDA of $612 million, a number above the $575 million guidance we provided three months ago. Average selling price, sales volumes, and unit costs all moved in the right direction relative to Q2 performance.

Goncalves made that statement in the company's earnings release, adding separately that "the trade environment continues to support a healthy American steel industry" and that imports "remain well below historical levels." On the Canadian dispute, he struck a more combative tone, saying the company had made "the difficult but necessary decision to indefinitely idle" the galvanizing lines because Canada's market for that product is "clearly oversupplied," while arguing that more than 2,000 Canadian jobs are being preserved by the shift in product mix.

Market reaction largely tracked the earnings beat rather than the Canadian dispute. According to a markets analysis published Monday, Cleveland-Cliffs shares outpaced rivals Nucor and Steel Dynamics by a wide margin, even though both of those companies also benefit from the same tariff-supported pricing environment. The analysis attributed the gap partly to structural differences between the companies: Nucor and Steel Dynamics run scrap-fed electric-arc furnaces with comparatively steady margins, while Cleveland-Cliffs is an integrated producer that mines its own iron ore and carries heavier exposure to swings in automotive contract pricing, making its earnings — and its stock — more volatile in both directions.

The outlook: fourth quarter and 2027

Cleveland-Cliffs guided fourth-quarter adjusted EBITDA to approximately $715 million, which would mark a fourth consecutive quarterly improvement despite typical seasonal slowdowns and planned maintenance outages. The company said it expects "a major debt reduction" in the current quarter, funded by stronger free cash flow and proceeds from pending property sales, as it works toward a long-stated target of reducing net debt to below 2.5 times adjusted EBITDA by the middle of 2027.

Looking further out, the company said that based on newly signed customer contracts and prevailing price forecasts, it expects 2027 adjusted EBITDA to exceed $4 billion, a figure it described as having improved materially since its previous earnings call. Additional detail was published in an earnings presentation posted to the company's investor relations site. That outlook will be tested over the coming months by two forces pulling in different directions: a U.S. trade policy that has so far rewarded domestic steelmakers with higher prices, and a Canadian dispute over the Stelco plant that shows no sign of resolving quickly. Cleveland-Cliffs' conference call Monday morning gave analysts their first chance to press Goncalves on how the two will be reconciled as the company works toward its debt and earnings targets.