Cleveland-Cliffs Inc. (NYSE: CLF) shares gained another 8.9% on July 24, 2026, extending the steelmaker’s two-session advance to approximately 26% after management forecast a sharp improvement in second-half profitability. The company expects third-quarter adjusted EBITDA of approximately $575 million, more than double the $286 million generated during the second quarter, while fourth-quarter adjusted EBITDA is currently expected to rise further. Higher steel prices, increasing automotive volumes, lower costs and improving Canadian operations are supporting the recovery. The investment tension is that Cleveland-Cliffs remains loss-making, carries approximately $7.7 billion of debt and depends heavily on a cyclical automotive and tariff-supported domestic steel market.
Why did Cleveland-Cliffs stock keep rallying after its second-quarter earnings report?
Cleveland-Cliffs reported second-quarter revenue of $5.23 billion, up from $4.92 billion in the first quarter and $4.93 billion in the corresponding period of 2025. Revenue exceeded market expectations as stronger steel pricing offset lower shipment volumes.
The company recorded an adjusted loss of $0.20 per diluted share, slightly better than the approximately $0.21 loss expected by analysts. The result also represented a meaningful improvement from the adjusted loss of $0.40 per share reported during the first quarter.
Adjusted EBITDA increased to $286 million from $95 million in the preceding quarter. Although the company remained unprofitable under generally accepted accounting principles, the tripling of adjusted EBITDA showed that pricing, production utilisation and cost performance were moving in a more favourable direction.
The market’s attention quickly shifted from the second-quarter loss to management’s forward outlook. Cleveland-Cliffs expects third-quarter adjusted EBITDA of approximately $575 million and said fourth-quarter performance should exceed that level.
This guidance implies a major change in earnings power during the second half. Management expects the period to produce the company’s strongest second-half adjusted EBITDA since 2021, supported by higher average selling prices, increased automotive shipments, lower production costs and improving results at Stelco.
The stock closed at $11.93 on July 24 after gaining almost 16% during the previous session. Trading volume approached 70 million shares on both days, compared with volumes commonly below 30 million shares before the results.
Cleveland-Cliffs shares gained approximately 29% from their July 17 close and about 20% from June 26. The stock remained below its 52-week high of $16.70 but stood well above the 52-week low of $7.73.
What does Cleveland-Cliffs currently produce and why is vertical integration important?
Cleveland-Cliffs is a North American steel producer focused on value-added flat-rolled products. It supplies steel used in automobiles, infrastructure, manufacturing, appliances, electrical equipment and other industrial applications.
The company is vertically integrated from iron ore mining through finished steel production. Its operations include iron ore mines, pellet plants, direct-reduced-iron production, scrap processing, blast furnaces, electric arc furnaces, rolling mills, coating lines, stamping, tooling and tubular-component manufacturing.
This structure gives Cleveland-Cliffs greater control over raw materials than steel producers that depend heavily on purchased iron ore or imported semi-finished products. It can also coordinate production across mines, mills and finishing facilities based on customer demand.
Vertical integration does not eliminate cyclicality. Cleveland-Cliffs still faces changes in steel prices, automotive production, energy costs, labour expenses and mill utilisation. Its large fixed-cost base means weak volumes can quickly compress profitability.
Second-quarter steel shipments totalled approximately 4.03 million net tons, down from 4.29 million tons a year earlier and 4.11 million tons in the first quarter. However, the average selling price increased to $1,124 per ton from $1,015 a year earlier and $1,048 in the preceding quarter.
The improvement in price more than offset much of the volume decline. Steelmaking revenue increased to $5.05 billion, while the segment’s cash margin rose to $349 million from $136 million in the first quarter and $138 million a year earlier.
Cleveland-Cliffs’ sales mix is relatively diversified across customer categories. Distributors and converters represented 33% of second-quarter steelmaking revenue, automotive customers accounted for 29%, infrastructure and manufacturing contributed 28%, and other steel producers represented 10%.
Automotive exposure remains particularly important because vehicle manufacturers purchase specialised coated, cold-rolled and advanced high-strength steels under contracts that can provide greater visibility than spot-market sales.
Can higher automotive volumes and steel prices deliver the projected Q3 recovery?
Management expects automotive shipments to increase during the third quarter as customers raise production and Cleveland-Cliffs’ finishing lines operate at higher utilisation rates. Higher utilisation should help distribute fixed operating costs across a larger volume of steel.
The company also expects improved average selling prices. Some steel contracts reset periodically rather than immediately following changes in spot-market pricing, meaning favourable pricing movements can enter reported results with a delay.
Cleveland-Cliffs said demand was improving, imports remained subdued and customer lead times were extending. These conditions generally strengthen a producer’s ability to maintain or increase prices.
The company continues to expect full-year steel shipments of between 16.5 million and 17 million net tons. First-half shipments totalled approximately 8.13 million tons, leaving the company dependent on a stronger second half to reach the guidance range.
The third-quarter adjusted EBITDA target of $575 million is therefore supported by several simultaneous assumptions. Shipments must improve, higher prices must be realised, planned maintenance must decline and production costs must move lower.
The projected improvement is plausible because the second quarter included extended maintenance outages during April and May. Removing those disruptions should increase production efficiency even before considering stronger demand.
However, the size of the expected sequential increase creates execution risk. A disruption at a major mill, weaker automotive production or lower-than-expected steel pricing could prevent the full earnings improvement from being realised.
The most persuasive evidence would be an increase in shipments combined with a stable or higher selling price per ton. Volume growth achieved through lower pricing would produce a weaker recovery than management’s current outlook implies.
How much support do tariffs provide to Cleveland-Cliffs and domestic steel prices?
Cleveland-Cliffs is a major beneficiary of United States trade protections designed to limit steel imports. Section 232 tariffs and antidumping measures increase the cost of foreign steel entering the domestic market and can support utilisation rates and prices for North American producers.
Management believes the current policy environment strengthens the strategic value of domestic steel production. Geopolitical conflicts and supply-chain disruptions have also increased attention on locally produced materials used in automobiles, infrastructure and defence-related manufacturing.
Tariffs do not guarantee profitability. Domestic producers still compete with one another, while customers can reduce steel consumption, delay purchases or redesign products when prices rise significantly.
Trade measures can also change through political negotiations, exemptions or legal challenges. Investors should therefore treat tariffs as an important supportive factor rather than a permanent substitute for efficient operations.
Cleveland-Cliffs’ exposure to automotive manufacturing creates an additional policy dimension. Management has suggested that more steel demand could move into the United States if vehicle manufacturers relocate production from Canada, Mexico, South Korea or other overseas locations.
The company indicated that it could consider restarting currently idle capacity in Dearborn, Michigan, if additional automotive production returns to the United States. Such a decision would require sufficient committed demand because restarting a steelmaking facility carries operating, labour and maintenance costs.
The stronger investment case does not depend solely on more protection. It depends on Cleveland-Cliffs using the current pricing environment to reduce debt, improve mill productivity and strengthen relationships with automotive and industrial customers.
Is Cleveland-Cliffs generating enough cash to reduce its $7.7 billion debt burden?
Cleveland-Cliffs generated $230 million of operating cash flow during the second quarter. After $157 million of capital expenditure, estimated free cash flow was approximately $73 million.
This represented a meaningful reversal from the first quarter, when working-capital requirements and weak earnings produced negative cash generation. For the full first half, operating cash flow remained negative by $95 million, while capital expenditure totalled $309 million.
The company therefore used approximately $404 million of free cash flow during the first six months despite returning to positive cash generation in the second quarter.
Long-term debt stood at approximately $7.70 billion at the end of June, compared with $7.25 billion at the end of 2025. Cash and cash equivalents were only $70 million, producing net debt of approximately $7.63 billion.
The low cash balance does not mean Cleveland-Cliffs has only $70 million of liquidity. The company reported total liquidity of $3.1 billion, largely through its asset-based revolving credit facility and borrowing capacity supported by receivables and inventory.
During the second quarter, Cleveland-Cliffs repaid $63 million under the asset-based lending facility. Across the first half, however, net borrowings under the facility increased by $444 million, reflecting the cash consumed earlier in the year.
Management expects stronger earnings and free cash flow to allow more meaningful debt reduction during the second half. It is targeting a debt-to-adjusted-EBITDA ratio below 2.5 times by approximately the middle of 2027.
Reaching that target depends on both sides of the calculation. Debt must decline while adjusted EBITDA rises. A cyclical earnings recovery can improve leverage ratios quickly, but those ratios can also deteriorate if steel prices or demand weaken.
Interest expense reached $156 million during the second quarter and $304 million during the first half. That cost consumes cash that could otherwise support mill investment, debt repayment or shareholder returns.
Is Cleveland-Cliffs stock still reasonably valued after its two-day surge?
At $11.93 per share, Cleveland-Cliffs had an equity market value of approximately $6.8 billion. Adding around $7.7 billion of debt and subtracting $70 million of cash produces an estimated enterprise value of roughly $14.4 billion.
The company reported adjusted EBITDA of $381 million during the first half, which makes a trailing valuation calculation look expensive. That comparison does not reflect management’s expectation for a sharp second-half earnings improvement.
Annualising the third-quarter adjusted EBITDA guidance of $575 million produces a run rate of approximately $2.3 billion. Against the estimated enterprise value, Cleveland-Cliffs would trade at roughly 6.3 times that run rate.
This is not a full-year forecast. Steel earnings vary with prices, maintenance schedules, shipments and raw-material costs, while management expects the fourth quarter to outperform the third quarter.
The calculation nevertheless explains the market reaction. If Cleveland-Cliffs can sustain quarterly adjusted EBITDA near or above $575 million and use the resulting cash to reduce debt, the equity value could become increasingly sensitive to operational improvement.
Debt creates leverage in both directions. When enterprise value is divided between a large debt balance and a smaller equity value, modest changes in expected operating performance can produce much larger percentage movements in the share price.
That dynamic helps explain why Cleveland-Cliffs gained approximately 26% across two sessions. It also means the shares could surrender part of that advance if the third-quarter recovery falls short.
Investor sentiment has clearly shifted from concern about continuing losses toward anticipation of a steel-cycle recovery. The next phase requires reported cash flow and debt reduction to confirm that the improvement is reaching the balance sheet.
What evidence could strengthen or weaken the Cleveland-Cliffs investment case?
The first measurable proof point is third-quarter adjusted EBITDA. Delivering approximately $575 million would validate management’s claim that the first half represented the bottom of the current earnings cycle.
The second proof point is free cash flow. Cleveland-Cliffs needs to convert stronger EBITDA into cash after interest, capital expenditure, pension contributions and working-capital movements.
The company continues to expect approximately $700 million of full-year capital expenditure and $125 million of pension and other post-employment-benefit payments. These obligations limit the amount of EBITDA that can be used for debt reduction.
The third proof point is Stelco. Cleveland-Cliffs expects improving Canadian market conditions to restore meaningful earnings from the business, but investors need segment-level evidence that pricing and utilisation are improving.
Management execution is also entering a new phase. Celso Goncalves was promoted from chief financial officer to president and appointed to the board, while Lourenco Goncalves remains chairman and chief executive officer. The transition places more responsibility for day-to-day execution with the new president while preserving strategic continuity.
The investment case would strengthen if Cleveland-Cliffs meets its third-quarter EBITDA target, produces positive free cash flow, reduces borrowings and enters 2027 with higher fixed-price contract resets.
It would weaken if automotive volumes disappoint, steel imports increase, spot prices decline or the company consumes cash despite stronger adjusted EBITDA. The rally has improved sentiment, but the balance sheet means operational progress must now arrive quickly and visibly.
What are the key takeaways for investors tracking Cleveland-Cliffs stock?
- Cleveland-Cliffs shares gained 8.9% on July 24 after rising almost 16% during the previous session.
- Second-quarter adjusted EBITDA tripled sequentially to $286 million, although the company still reported an adjusted loss of $0.20 per share.
- Management expects third-quarter adjusted EBITDA of approximately $575 million and said fourth-quarter performance should be higher.
- Average steel selling prices increased to $1,124 per ton, while shipments declined to approximately 4.03 million tons.
- Cleveland-Cliffs returned to positive second-quarter free cash flow, but first-half estimated free cash flow remained negative by approximately $404 million.
- Long-term debt stood at approximately $7.7 billion, making cash generation and deleveraging central to the equity thesis.
- The next proof points are third-quarter EBITDA, automotive shipments, Stelco profitability, positive free cash flow and measurable debt reduction.
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