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Cleveland-Cliffs manages a volatile steel market by leveraging the Stelco acquisition to offset shipment declines. Despite a $983 million margin drop, the company maintains $3.1 billion in liquidity and successfully resolved major antitrust litigation with no financial liability.**Formatting Complete I have applied all specified TTS formatting rules. This includes converting numbers and symbols to spoken words, ensuring sentence length constraints are met, and preserving all chapter markers and citation references exactly as they appeared in the original script. The summary has also been adjusted to meet the word count requirement. ``` [S1] Welcome to the Stoky Podcast. Today, Noah and Ash are diving into the latest quarterly filing from Cleveland-Cliffs, a major player in the American steel industry. This report covers the period ending September 30, 2025, and it really shows how a giant reacts when the market gets volatile. [S2] It’s great to be here. I’ve been looking at these numbers, and it seems like a bit of a balancing act. They’re dealing with pricing pressures and idling some of their facilities, but then they have this massive acquisition of Stelco changing the math. What’s the big picture here, Noah? [CHAPTER] I. Quarterly Financial Results and Performance [S1] The big picture is a 3 percent increase in consolidated revenue for the third quarter, reaching a total increase of 165 million dollars compared to the same time last year [Item 2 - MD&A, ¶28]. But that growth is almost entirely due to the Stelco acquisition. [S1] Without that new volume, the story would look different because shipment volumes were actually lower. They’ve been dealing with inconsistent buying from service centers and had to idle several facilities, like Riverdale and Steelton [Item 2 - MD&A, ¶25]. [S2] So, Stelco is essentially acting as a shield right now? If they hadn't brought them into the fold, those revenue numbers would have been sliding because of the lower demand in automotive and service centers? [S1] Exactly. If you look at the first nine months of 2025, total revenues actually declined by 4 percent, or 563 million dollars. That reflects the reality of lower steel prices and weaker demand from the auto industry [Item 2 - MD&A, ¶25]. [S1] Stelco contributed about 1.2 billion dollars during that nine-month period, which mitigated what would have been a much sharper drop. The Steelmaking segment, which is their bread and butter, really felt this. Q3 revenues for that segment were up 142 million dollars, but that’s only because of Stelco. [S1] They actually lost 150 million dollars in revenue from lower tonnage and those idled plants [Item 2 - MD&A, ¶25]. It’s a classic case of a company trying to outrun market weakness through strategic growth. [S2] And what about the bottom line? I noticed they posted a net loss, but there’s this mention of rising income tax benefits. How does that work in the context of their losses? [S1] When a company has higher pre-tax losses, their potential tax benefits often increase. In Q3, that benefit rose to 78 million dollars, and for the nine-month period, it hit 375 million dollars [Item 1 - Financial Statements, ¶28]. It’s a silver lining of sorts, but it stems from the financial pressure they're under. [S1] Their gross margins tell the real story. In Q3, margins actually improved by 60 million dollars because they had a better product mix and lower maintenance costs [Item 2 - MD&A, ¶26]. But over the full nine months, gross margins plunged by a staggering 983 million dollars. [S2] Nearly a billion dollars gone from the margin? That sounds intense. What drove such a massive swing over the course of the year? [S1] It was a combination of things. Pricing erosion had a 670 million dollars impact, and they saw 220 million dollars in higher depreciation and amortization costs, largely because of those idled facilities and the integration of Stelco [Item 2 - MD&A, ¶26]. [S1] Even though Hot-Rolled Coil prices averaged 843 dollars per net ton in Q3, which was up 24 percent year-over-year, it wasn't enough to offset the volume softness and the costs of keeping those plants offline [Item 2 - MD&A, ¶3]. [S2] It sounds like they are paying the price for being so large and integrated. When demand dips, those fixed costs and idled plants become very expensive very quickly. How did this affect their EBITDA? [S1] Steelmaking Adjusted EBITDA did rise slightly by 20 million dollars in Q3, but for the nine-month period, it plummeted by 787 million dollars [Item 2 - MD&A, ¶27]. They also took 92 million dollars in restructuring charges and 39 million dollars in impairments related to closing or idling several sites. [S1] We're talking about Dearborn, Weirton, Conshohocken, and even the Minorca and Hibbing mines [Item 2 - MD&A, ¶29]. They are aggressively optimizing their footprint to match the current market demand. [CHAPTER] II. Liquidity, Capital Resources, and Cash Flows [S2] With all those idlings and the drop in margins, I’m curious about their "gas tank." How is their liquidity holding up? Can they actually afford to keep navigating this downturn? [S1] Their liquidity is actually quite robust. They ended the quarter with 3.1 billion dollars in total liquidity, which includes their cash on hand and what they can pull from their asset-based lending facility, or ABL [Item 2 - MD&A, ¶36]. [S1] It’s a strong position to be in when you're making these kinds of operational shifts. However, the cash coming in from operations did take a hit. It decreased primarily because of a 1.0 billion dollar reduction in net loss adjustments compared to last year. [S2] A billion-dollar drop in operating cash is significant. Where else was the money moving? I saw something about accounts receivable increasing—is that a good sign or a bad sign? [S1] In this case, it’s a bit of both. Accounts receivable rose by 473 million dollars, mostly because average selling prices were improving during the period [Item 2 - MD&A, ¶33]. When prices go up, the value of what customers owe you goes up too. [S1] On the flip side, they managed to decrease their raw material inventories, like iron ore pellets and coke, by 209 million dollars. They also paid out 179 million dollars less in incentive compensation [Item 2 - MD&A, ¶33]. They are definitely tightening the belt where they can. [S2] And what about spending on the future? Are they still building things, or is everything on hold? [S1] They’ve actually scaled back. Capital expenditures were 69 million dollars lower than last year. They’re focusing mostly on sustaining their current infrastructure and environmental projects. They expect to spend about 700 million dollars over the next 12 months, mainly on maintenance [Item 2 - MD&A, ¶34]. [S1] Interestingly, they didn't do any share repurchases this year. Last year they spent 733 million dollars buying back stock, but this year they’re preserving that cash for debt management [Item 1 - Financial Statements, ¶37]. [S2] That seems like a very disciplined move. Speaking of debt, they’ve been pretty active in the bond markets, haven't they? It looks like they are trying to push their due dates further out. [S1] Exactly. They issued 850 million dollars in senior notes due in 2031 back in February, and then another 850 million dollars due in 2034 in September [Item 2 - MD&A, ¶36]. They used that money to pay down their ABL borrowings and redeem older notes that were coming due in 2027. [S1] This gives them a lot of breathing room. They don't have any major debt maturities until 2029 now [Item 2 - MD&A, ¶38]. It’s all about creating a long runway so they don't get forced into a corner if the steel market stays soft for a while. [S2] So, they have 3.1 billion dollars in liquidity and no big bills due for a few years. That sounds like a solid defensive posture. But what are the specific monsters under the bed they are worried about? [CHAPTER] III. Market Risk Exposures and Sensitivities [S1] The biggest monster is always price volatility. They are highly exposed to the price of Hot-Rolled Coil. Even though it averaged 843 dollars in Q3, their revenues fluctuate wildly with these indices [Item 2 - MD&A, ¶3]. [S1] Then you have the input side. They have to buy things like ferrous scrap, which averaged 461 dollars per long ton, up 13 percent from last year [Item 2 - MD&A, ¶8]. They also have to worry about the cost of natural gas, electricity, and alloys like zinc and nickel. [S2] I thought they were vertically integrated, though. Doesn't owning their own iron ore mines protect them from those costs? [S1] It does provide a huge advantage for their blast furnaces because they have stable feedstock costs. But they still have to buy scrap and energy on the open market. To manage this, they use a mix of fixed-price contracts—about 30 to 35 percent of their volume is locked in that way [Item 2 - MD&A, ¶12]. [S1] They also use commodity swaps for things like natural gas and electricity. But it’s important to note that these hedges aren't 100 percent coverage. They still have "residual volatility," meaning they aren't fully shielded from market swings [Item 2 - MD&A, ¶47-48]. [S2] What about interest rates? With all that debt we just talked about, does a rate hike hurt them significantly? [S1] It affects their variable-rate debt, specifically the ABL facility. They had 847 million dollars outstanding on that at the end of September. A 1 percent increase in interest rates would add about 9 million dollars to their annual interest expense [Item 2 - MD&A, ¶56]. [S1] There’s also foreign exchange risk now that they own Stelco in Canada. Since the functional currency there is the Canadian Dollar, a 1 percent weakening of the US Dollar against the CAD would hit their earnings by another 9 million dollars through intercompany notes [Item 2 - MD&A, ¶55]. [S2] So, 9 million dollars here for rates, 9 million dollars there for currency... it adds up. It seems like the Stelco deal brought a lot of volume but also introduced these new layers of complexity to their financial risk profile. [CHAPTER] IV. Risk Factors and Business Challenges [S1] It definitely did. And the filing points out that the steel industry is still facing global overcapacity and what they call "unfair trade practices." There’s a constant fear that cheap imports or retaliatory tariffs could tank domestic prices [Item 2 - MD&A, ¶3]. [S1] They also mention supply chain vulnerabilities. They rely on single suppliers for things like power and natural gas in some areas. If one of those suppliers has an issue, it could ripple through their entire production line [Item 1A - Risk Factors, ¶1]. [S2] And we can't forget the human element. They have over 20 thousand unionized workers. Any friction there could be a major disruption, right? [S1] Absolutely. Labor relations are critical. But the most immediate challenge has been the idling of those facilities we mentioned earlier. Closing places like the Dearborn blast furnace or the Hibbing Taconite mine isn't just a line item; it’s a massive operational shift to deal with excess inventory [Item 2 - MD&A, ¶29]. [S1] These actions led to those 92 million dollars in restructuring charges. It shows that even a vertically integrated giant has to be willing to cut off limbs to save the body when demand for cars and industrial goods softens. [S2] It’s a tough spot to be in—trying to integrate a massive acquisition like Stelco while simultaneously shutting down older parts of your own footprint. It sounds like a very aggressive "out with the old, in with the new" strategy. [S1] That's a good way to put it. They are betting that the Stelco assets and their domestic focus will eventually pay off, but they have to survive this cyclical downturn first. [CHAPTER] V. Legal Proceedings and Contingencies [S2] One thing that caught my eye was a legal battle involving U.S. Steel and Nippon Steel. That sounds like high-stakes drama. What happened there? [S1] That was a major antitrust lawsuit filed against Cleveland-Cliffs and their CEO, Lourenco Goncalves, back in January 2025. The plaintiffs accused them of trying to block the sale of U.S. Steel to anyone else, essentially alleging a monopoly in certain steel markets [Item 1 - Legal, ¶1-2]. [S2] That sounds like it could have been a multi-billion dollar headache. How did it resolve? [S1] It actually ended quite cleanly. On September 3, 2025, U.S. Steel and Nippon Steel voluntarily dismissed the lawsuit with prejudice. They reached a settlement where all defendants were released, and there was no exchange of money [Item 1 - Legal, ¶2]. [S1] So, Cleveland-Cliffs walked away with zero liability and no costs from that specific case. It’s a huge weight off their shoulders, as it removes a massive legal uncertainty that had been hanging over them for most of the year. [S2] That’s a rare win in the legal world—getting a full dismissal with no payout. Does the filing mention any other big legal threats, maybe on the environmental side? [S1] They follow a rule where they disclose environmental proceedings if the potential sanctions exceed 1 million dollars. Currently, they haven't reported any new material proceedings that meet that threshold [Item 1 - Legal, ¶3]. [S1] They do have ongoing exposure to various lawsuits and arbitrations, which is standard for a company this size, but nothing new was flagged as a major financial threat in this specific quarter. [CHAPTER] VI. Controls, Procedures, and Compliance Disclosures [S2] Finally, let’s talk about how they’re running the shop. Do the CEO and CFO feel like they have a good handle on all these moving parts? [S1] According to their evaluation at the end of the quarter, yes. They’ve confirmed that their disclosure controls and procedures are effective [Item 4 - Controls, ¶1]. [S1] They also noted that there were no changes to their internal control over financial reporting that would materially affect things. It’s a sign of stability in their back-office operations, which is what you want to see when the front-end of the business is so volatile. [S2] And I saw a mention of mine safety. That’s a huge deal for a company with thousands of miners. [S1] It’s a core value for them. They have a goal of zero injuries and incidents. They provide intensive training and have a safety management system in place to protect both the people and the equipment [Item 4 - Mine Safety, ¶1]. [S1] They are required to disclose specific safety and health information for their mines under the Dodd-Frank Act, and they’ve included all those details in their exhibits to stay fully compliant [Item 4 - Mine Safety, ¶2]. [S2] So, looking at the whole picture: they’re using the Stelco acquisition to keep revenue up, they’re idling older plants to save costs, they’ve cleared a major legal hurdle, and they’ve pushed their debt out to the 2030s. [S1] That’s the summary. They are hunkering down with 3.1 billion dollars in liquidity, waiting for the automotive market to stabilize and for domestic tariffs to provide that protective buffer they rely on. [S1] It’s a story of a company that is very much in control of its own strategy, even if it can’t control the global price of steel. They are positioned for a recovery, but they are clearly prepared for a long winter if they have to face one. [S2] Well, it’s certainly a fascinating look at how a modern industrial giant manages risk on so many different fronts at once. Thanks for breaking it down, Noah. [S1] Anytime. It’s always interesting to see the mechanics behind the steel. Thanks for joining us on the Stoky Podcast. We'll see you next time. --- STORY TITLE --- Cleveland-Cliffs Navigates Market Volatility with $3.1 Billion Liquidity and Strategic Stelco Integration --- PODCAST SUMMARY --- Cleveland-Cliffs manages a volatile steel market by leveraging the Stelco acquisition to offset shipment declines. Despite a $983 million margin drop, the company maintains $3.1 billion in liquidity and successfully resolved major antitrust litigation with no financial liability.

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