Item 2. Management’s Discussion and Analysis
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of Operations is designed to provide a reader of our financial statements with a narrative from the perspective of management on our financial condition, results of operations, liquidity and other factors that may affect our future results. We believe it is important to read our Management's Discussion and Analysis of Financial Condition and Results of Operations in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2024, as well as other publicly available information. During the third quarter of 2025, we identified an immaterial error related to our accrual for certain employment costs, resulting in an understatement of Costs of goods sold in prior periods. Prior periods affected include the interim periods ended March 31, 2025 and June 30, 2025, and the interim and annual periods during the years 2022, 2023 and 2024. Refer to NOTE 1 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES for further information.
OVERVIEW
We are a leading North America-based steel producer with focus on value-added sheet products, particularly for the automotive industry. We are vertically integrated from the mining of iron ore, production of pellets and direct reduced iron, and processing of ferrous scrap through primary steelmaking and downstream finishing, stamping, tooling, and tubing. Headquartered in Cleveland, Ohio, we employ approximately 30,000 people across our operations in the United States and Canada.
FINANCIAL SUMMARY
The following is a summary of our consolidated results for the three and nine months ended September 30, 2025 and 2024 (in millions, except for diluted EPS):
Total Revenue Net Income (loss) Adjusted EBITDA Diluted EPS
See "— Non-GAAP Financial Measures" below for a reconciliation of our Net loss to Adjusted EBITDA.
ECONOMIC OVERVIEW
STEEL MARKET OVERVIEW
We continued to navigate volatile but improving market conditions throughout the third quarter of 2025. Steel market conditions in the third quarter of 2025 benefited from higher than historical HRC pricing and lower import levels, but demand remained impacted by inconsistent buying behavior from weaker non-automotive demand. The price for domestic HRC, the most significant index impacting our revenues and profitability, averaged $843 per net ton during the third quarter of 2025, 24% higher than the third quarter of 2024. Finished steel import levels continued to decline in the third quarter of 2025 after being elevated in early 2025 in anticipation of the recently implemented steel tariffs, which helped support domestic steel pricing. Looking forward, we expect domestic steel demand to grow, as recently implemented steel and automotive tariffs support demand for domestically produced steel, other end-user demand improves, interest rates continue to decline, and incremental steel demand stimulated by recent government legislation and manufacturing on-shoring is realized. Steel and light vehicles remain at the top of the Trump administration's trade agenda, and we are at the intersection of both of these industries.
We believe that steel tariffs play a crucial role in protecting the U.S. economy, national security and industrial base from violators of fair trade. The steel industry has long faced significant challenges due to overcapacity and overproduction of steel beyond certain countries' domestic needs, along with other unfair trade practices. The overproduction by certain countries results in dumping of steel in the U.S. at below market value. The U.S. remains the only major steel-producing country that produces less steel than it consumes. Additionally, foreign steel producers often take advantage of government subsidies, currency manipulation and weak environmental regulations. Furthermore, there is an overall lack of foreign countries holding their own steel producers accountable for unfair trade practices. We believe that the steel tariffs recently implemented by President Trump are critical to addressing global overproduction issues, confronting unfair trade practices and supporting a healthy domestic steel market. As a leading domestic steel producer, we expect to benefit for years to come from the recently implemented tariffs, not only for steel but also for the automotive industry.
The Canadian steel industry is also an important market for us. Similar to the U.S. steel market, the Canadian steel market is impacted by global overcapacity and other unfair trade practices, resulting in the dumping of steel in Canada at below market
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value. This has weakened our results for our Canadian operations. We believe it is crucial for Canada to put measures in place to protect its domestic steel industry in order to preserve the Canadian economy and national security.
During 2025, to appropriately respond to market conditions and to optimize our footprint, we made the decision to fully or partially idle or permanently close six of our operations. As a consequence of weak automotive production, we made the decision to idle our blast furnace, BOF steel shop, and continuous casting facilities at our Dearborn Works facility. We also made the decision to permanently close Steelton, Conshohocken and Riverdale due to financial underperformance at these operations. Additionally, we made the decision to idle the Minorca mine and partially idle the Hibbing Taconite mine in order to consume excess pellet inventory produced in 2024. These operational changes allow us to streamline our operations and enhance efficiency, with minimal expected impact to our flat-rolled steel output.
OTHER KEY DRIVERS
The largest market for our steel products is the automotive industry in North America, which makes light vehicle production a key driver of demand. North American light vehicle production in the third quarter of 2025 was approximately 3.9 million units, up from approximately 3.8 million units in the third quarter of 2024. During the third quarter of 2025, light vehicle sales in the U.S. saw an average seasonally adjusted annualized rate of 16.3 million units sold, representing a 5% increase compared to the third quarter of 2024. The seasonally adjusted annualized rate has averaged 16.3 million units sold during the first nine months of 2025, 5% higher compared to the same period of 2024, indicating healthy consumer demand. Additionally, the average age of light vehicles on the road in the U.S. is at an all-time high of 12.8 years, surpassing the previous record set in 2024, which should support demand as older vehicles need to be replaced. Furthermore, we expect the recently implemented 25% tariff on imports of automobiles and certain automobile parts to lead to increased demand for domestically produced vehicles that consume domestically made steel. As a leading supplier of automotive-grade steel in the U.S., we expect to benefit from healthier domestic vehicle production over the coming years as we continue to be an established and reliable supplier.
Since 2021, the price for busheling scrap, a necessary input for flat-rolled steel production in EAFs in the U.S., has continued to average well above the prior annual ten-year average of approximately $400 per long ton. The busheling price averaged $461 per long ton during the third quarter of 2025, representing a 13% increase compared to the third quarter of 2024. We expect the supply of busheling scrap to further tighten due to decreasing prime scrap generation from original equipment manufacturers as they improve their production efficiency, the growth of EAF capacity in the U.S., potential for higher prices as a result of tariffs, and a push for expanded scrap use globally. As we are fully integrated and have primarily a blast furnace footprint, increased prices for busheling scrap in the U.S. bolster our competitive advantage, as we source the majority of our iron feedstock from our stable-cost mining and pelletizing operations in Minnesota and Michigan.
COMPETITIVE STRENGTHS
As a leading North America-based steel producer, we benefit from having the size and scale necessary in a competitive, capital intensive business. We have a unique vertically integrated profile from mined raw materials, direct reduced iron, and ferrous scrap to primary steelmaking and downstream finishing, stamping, tooling and tubing. This positioning gives us more predictable costs throughout our supply chain and more control over both our manufacturing inputs and our end-product destination.
One of our most critical strengths that differentiates us from others in our industry is a unique and powerful partnership with our unionized workforce, particularly the USW. With over 20,000 employees subject to collective bargaining agreements, our strong and productive labor relationships are key to our long-term success and allow us to work together in achieving our goals. A clear example of the strength of our relationship is how we partner together to fight against dumped and illegally subsidized imported steel products. Our deep alignment with our represented employees is also recognized by our political leaders, who often publicly support us as a significant employer of a unionized workforce with a track record of working to maintain and increase middle class jobs.
Our primary competitive strength lies within our automotive steel business. We are a leading supplier of automotive-grade steel in the U.S. Compared to other steel end markets, automotive steel is generally higher quality, more operationally and technologically intensive to produce, and requires significantly more devotion to customer service than other steel end markets. This dedication to service and the infrastructure in place to meet our automotive customers’ demanding needs took decades to develop. We have continued to invest capital and resources to meet the requirements needed to serve the automotive industry. We continue to be an established and reliable supplier of automotive-grade steel and intend to bolster our position as an industry leader going forward.
Due to its demanding nature, the automotive steel business typically generates higher through-the-cycle margins, making it a desirable end market. Demand for our automotive-grade steel is expected to be healthier in the coming years as a result of government support for domestically produced vehicles, low unemployment rate, declining interest rates and the replacement of older vehicles. As an established and reliable supplier of domestically produced automotive-grade steel, we expect customers to continue to look to us to serve increased demand in the coming years.
Since becoming a steel company in 2020, we have dedicated significant resources to maintain and upgrade our facilities and equipment. The quality of our assets gives us a unique advantage in product offerings and operational efficiencies. After elevated spend in 2022 to perform overdue maintenance work at the facilities acquired as part of our 2020 acquisitions, we resumed normalized levels of maintenance capital and operating expenses in 2023, which continued throughout 2024 and into 2025. The necessary resources that we have invested in our footprint are expected to keep our assets at an automotive-grade level of quality and reliability for years to come.
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Our utilization of annual or multi-year fixed price contracts provides us a competitive advantage, as the steel industry is often viewed as volatile and subject to the market price of steel. Our fixed price contracts mitigate pricing volatility through the cycle. Approximately 30-35% of our volumes are sold under these contracts.
Our ability to source our primary feedstock domestically, and primarily internally, is a competitive strength. This model reduces our exposure to volatile pricing and unreliable global sourcing. The ongoing conflict between Russia and Ukraine and the Trump administration's focus on U.S. manufactured products have displayed the importance of our North American-centric footprint, as our competitors primarily operating EAF facilities rely on imported pig iron to produce flat-rolled steel, the supply of which is expected to be disrupted. Additionally, the outcome of ongoing trade discussions could result in additional tariffs on other raw materials that could further elevate the cost structure for our competitors who import raw materials. The best example is our legacy business of producing iron ore pellets. By internally sourcing the vast majority of our iron ore pellet requirements, our primary steelmaking raw material feedstock can be secured at a stable and predictable cost and not be subject to as many factors outside of our control.
We believe we offer the most comprehensive flat-rolled steel product selection in the industry, along with several complementary products and services. A sampling of our offering includes advanced high-strength steel, hot-dipped galvanized, aluminized, galvalume, electrogalvanized, galvanneal, HRC, cold-rolled coil, plate, GOES, NOES, stainless steels, tool and die, stamped components, slab and cast ingot. Across the quality spectrum and the supply chain, our customers can frequently find the solutions they need from our product selection.
We are a leading producer of electrical steels referred to as GOES and NOES in the U.S., which we believe will be critical for the modernization of the electrical grid and the infrastructure needed to allow for increased electric vehicle adoption, both of which require electrical steels. Distribution transformers are critical to the maintenance and expansion of America’s electric grid. Transformers are in short supply, and that shortage stifles economic growth across the country. The shortage will continue to be exacerbated by the widespread adoption of Artificial Intelligence in virtually all sectors of the economy, which will exponentially increase the consumption of electricity in the U.S. and worldwide. Because of these industry dynamics and our current customer base, our electrical steel business is expected to continue to achieve strong profitability in the coming years.
We are the first and the only producer of HBI in the Great Lakes region. From our Toledo, Ohio facility, we produce a high-quality, low-cost and low-carbon intensive HBI product that can be used in our blast furnaces as a productivity enhancer, or in our BOFs and EAFs as a premium scrap alternative. We use HBI to stretch our hot metal production, lowering carbon intensity and reliance on coke. With increasing tightness in the scrap and metallics markets combined with our own internal needs, we expect our Toledo direct reduction plant to continue to support our operational efficiency going forward. The unique value of our HBI facility is even more evident as recent trade discussions could result in tariffs on pig iron or other imported raw materials for competitors who rely on international suppliers.
STRATEGY
MAXIMIZE OUR COMMERCIAL STRENGTHS
We offer a full suite of flat steel products encompassing effectively all of our customers' needs. We are a leading supplier to the automotive sector, where our portfolio of high-end products delivers a broad range of differentiated solutions for this highly sought after customer base. As an established and reliable supplier of domestically produced automotive-grade steel, we expect to bolster our position as an industry leader going forward.
Our unique capabilities, driven by our portfolio of assets and technical expertise, give us an advantage in our flat-rolled product offering. We offer products that have superior formability, surface quality, strength and corrosion resistance for the automotive industry. In addition, our state-of-the-art Research and Innovation Center in Middletown, Ohio gives us the ability to collaborate with our customers and create new products and develop new and efficient steel manufacturing processes.
Our five-year contract to supply semi-finished steel slabs that was initiated in connection with the closing of the acquisition of ArcelorMittal USA concludes in December 2025. This contract has historically represented approximately 10 percent of our sales volume and has recently become unprofitable as a result of current market conditions. The conclusion of this contract provides a significant opportunity to shift sales and product mix to higher margin business and improve efficiency within our operations.
SUPPORT DOMESTICALLY PRODUCED AUTOMOTIVE SALES
On March 7, 2025, we announced a "Buy American" incentive program for all of our employees in an effort to support President Trump's long-term vision of bringing manufacturing back to the U.S. Under this program, any Cliffs employee who purchases or leases a new American-built vehicle in 2025 with substantial Cliffs steel content will receive a $1,000 cash bonus in connection with the purchase or lease. As the domestic automotive market has long been undermined by excessive imports, we are proud to play a role in encouraging the purchase of domestically produced vehicles. Since the program's inception, feedback has been extremely positive, and employees have been very enthusiastic about the opportunity to support the sale of domestically produced vehicles.
We continue to work with our automotive partners to ensure the availability of domestically produced, automotive-grade steel. With the recently announced automotive tariffs, we expect to see an increase in demand for domestically produced vehicles, which
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should result in an increase in production of vehicles in the U.S. As a leading supplier of automotive-grade steel, we expect to benefit from increased production of vehicles in the U.S. over the coming years.
OPTIMIZE OUR FULLY-INTEGRATED STEELMAKING FOOTPRINT
We are a fully-integrated steel enterprise with an expansive footprint providing the opportunity to achieve healthy margins for flat-rolled steel throughout the business cycle. Our focus remains on realizing our inherent cost advantage in flat-rolled steel while continuing to optimize our footprint. The combination of our ferrous raw materials, including iron ore, scrap and HBI, allows us to do so relative to peers who must rely on more unpredictable and unreliable raw material sourcing strategies.
We have ample access to scrap, along with internally sourced iron ore pellets and HBI. Our ability to optimize use of these raw materials in our blast furnaces and BOFs ultimately boosts liquid steel output, reduces coke needs and lowers carbon emissions from our operations.
During 2025, we made the decision to fully or partially idle or permanently close six of our operations. We made the decision to idle our blast furnace, BOF steel shop, and continuous casting facilities at our Dearborn Works facility. We also made the decision to permanently close Steelton, Conshohocken and Riverdale due to underperformance at these operations. Additionally, we made the decision to idle the Minorca mine and partially idle the Hibbing Taconite mine in order to consume excess pellet inventory produced in 2024. Our recent changes allow us to streamline our operations and enhance efficiency, with minimal impact to our flat-rolled steel output.
CAPTURE SYNERGIES FROM RECENT ACQUISITIONS
On November 1, 2024, we completed the Stelco Acquisition. The Stelco Acquisition confirms our commitment and leadership in integrated steel production in North America and strengthens our cost position by incorporating one of the lowest cost flat-rolled steelmaking assets in North America within our footprint. The Stelco Acquisition expands our existing presence in Canada and diversifies our customer base in Canada across service centers, construction and other industrial end markets with higher volumes of spot sales. As a result of the Stelco Acquisition, our exposure to the North American spot market has doubled, giving us further insight into spot market dynamics and diversifying our customer base toward spot customers.
We have demonstrated a consistent track record of exceeding our initial synergy estimates associated with value-enhancing transactions through mergers and acquisitions. Significant synergy opportunities from the Stelco Acquisition have been identified, including asset and capital expenditure optimization, procurement savings, selling, general and administrative expenses, duplicative public company costs and other opportunities. With our proven ability to integrate acquired assets and capture synergies, along with our powerful partnership with our union and non-union employees, we are confident in our ability to achieve identified synergies related to the Stelco Acquisition.
EXPLORE STRATEGIC OPPORTUNITIES
During the third quarter of 2025, we announced that we engaged J.P.Morgan as our advisor and launched sell-side processes to explore the potential sale of certain non-core operating assets. As an American-based company with desirable assets, we are favorably positioned to potentially benefit from asset sales. In addition to non-core operating assets, we have received inbound inquiries for us to sell recently idled facilities and certain other inactive sites. We expect the net proceeds of any potential transaction would be used to pay down debt.
Also, during the third quarter of 2025, we signed a Memorandum of Understanding (the "Memorandum of Understanding") with a major global steel producer who seeks to leverage our unmatched U.S. footprint and trade-compliant operations. The Memorandum of Understanding reflects rising interest in Cliffs amid the resurgence of U.S. manufacturing and should enable smooth onboarding for downstream industrial customers moving production from the party’s home country to the United States. The potential transaction with this party is expected to be highly accretive to Cliffs shareholders. UBS is acting as financial advisor to Cliffs for the potential transaction.
Beyond steelmaking, the renewed importance of rare earths in the United States has driven us to re-focus on this potential opportunity at our upstream mining assets. We have begun to explore rare earths at our ore bodies and tailings basins and have identified two sites with key geological indicators for rare earth extraction potential. If successful, it would align Cleveland-Cliffs with the broader national strategy for critical material independence. Before we can determine the economic potential for rare-earth extraction at our properties, we will need to conduct additional technical and economic studies. There can be no assurance that rare-earth extraction at our properties will be economical.
ENHANCE OUR ENVIRONMENTAL SUSTAINABILITY
We remain committed to operating our business in a more sustainable manner. In May 2024, we announced our commitment to achieve new GHG emissions reduction targets after we successfully achieved our prior commitment set in 2021 to reduce Scope 1 (direct emissions) and Scope 2 (indirect emissions from purchased electricity or other forms of energy) GHG emissions by 25% by 2030, relative to 2017 levels, well ahead of our 2030 target year. Our new goals set forth below, relative to 2023 levels, include:
• A target to reduce Scope 1 and 2 GHG emissions intensity per metric ton of crude steel by 30% by 2035;
• A target to reduce material upstream Scope 3 GHG emissions intensity per metric ton of crude steel by 20% by 2035; and
• A long-term target aligned with the Paris Agreement’s 1.5 degrees Celsius scenario to reduce Scope 1, 2 and material upstream 3 emissions intensity per metric ton of crude steel to near net zero by 2050.
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We have made significant progress in reducing our emissions on a per ton basis. Since 2020, we have reduced our average Scope 1 and 2 emissions of integrated mills from 1.82 to 1.58 metric tons of CO 2 e per metric ton of crude steel produced in 2024, which is 27% lower than the global industry average.
MAINTAIN FINANCIAL FLEXIBILITY
Given the cyclicality of our business, it is important to us to be in the financial position to easily withstand economic cycles and be opportunistic when attractive strategic opportunities arise. Since becoming a steel company in 2020, we have demonstrated our ability to generate healthy free cash flow and use it to reduce substantial amounts of debt, return capital to shareholders through share repurchases and make investments to both improve and grow our business.
We have a track record of demonstrating that we can quickly deleverage our balance sheet and have also historically shown our ability to take advantage of volatility in the debt markets and repurchase notes at a discount. We expect to generate healthy free cash flow in the coming years and intend to utilize it to deleverage our balance sheet. We also maintain a long maturity runway with our outstanding debt, with our nearest senior notes maturities coming in 2029 (after redeeming in October 2025 all senior notes that had a maturity date in 2027), have healthy liquidity, and have approximately $3.2 billion of secured debt capacity, which supports our flexibility to navigate varied economic environments for extended periods of time.
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STEELMAKING RESULTS
The following is a summary of our Steelmaking segment operating results, net of intersegment eliminations, for the three and nine months ended September 30, 2025 and 2024 (dollars in millions, except for average selling price, and shipments in thousands of net tons):
Total Revenue Gross Margin Adjusted EBITDA Steel Shipments (nt)
Q3 2025 Q3 2024 YTD 2025 YTD 2024 Q3 2025 Q3 2024 YTD 2025 YTD 2024 Q3 2025 Q3 2024 YTD 2025 YTD 2024 Q3 2025 Q3 2024 YTD 2025 YTD 2024
STEEL PRODUCT REVENUE: GROSS MARGIN %: ADJUSTED EBITDA %: AVERAGE SELLING PRICE PER TON OF STEEL PRODUCTS:
$4,156 $4,013 $12,566 $13,129 (1)% (3)% (5)% 2% 3% 3% —% 6% $1,032 $1,045 $1,009 $1,116
REVENUES
The following tables represent our steel shipments by product and total revenues by market:
Three Months Ended
September 30, Nine Months Ended
September 30,
(In thousands of net tons) 2025 2024 % Change 2025 2024 % Change
Steel shipments by product:
Hot-rolled steel 1,484 1,400 6 % 4,904 4,059 21 %
Cold-rolled steel 611 635 (4) % 1,846 1,930 (4) %
Coated steel 1,178 1,078 9 % 3,443 3,465 (1) %
Stainless and electrical steel 149 140 6 % 426 436 (2) %
Plate 232 173 34 % 652 581 12 %
Slab and other steel products 375 414 (9) % 1,188 1,298 (8) %
Total steel shipments by product 4,029 3,840 5 % 12,459 11,769 6 %
Three Months Ended
September 30, Nine Months Ended
September 30,
(In millions) 2025 2024 % Change 2025 2024 % Change
Steelmaking revenues by market:
Direct automotive $ 1,356 $ 1,334 2 % $ 3,902 $ 4,411 (12) %
Infrastructure and manufacturing 1,326 1,160 14 % 4,169 3,973 5 %
Distributors and converters 1,288 1,317 (2) % 3,949 4,131 (4) %
Steel producers 591 608 (3) % 1,779 1,846 (4) %
Total Steelmaking revenues by market $ 4,561 $ 4,419 3 % $ 13,799 $ 14,361 (4) %
Revenues increased by $142 million, or 3%, during the three months ended September 30, 2025, as compared to the prior-year period, primarily due to:
• An increase in revenues related to incremental tons sold attributed to the addition of Stelco (approximately $400 million); which is partially offset by
• A decrease in revenue driven by inconsistent buying behavior from service centers and other customers resulting in lower tons sold, excluding Stelco (approximately $150 million); and
• A decrease in revenue driven by the decision to indefinitely idle the Riverdale and Steelton operations due to financial underperformance at these operations (approximately $150 million).
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Revenues decreased by $562 million, or 4%, during the nine months ended September 30, 2025, as compared to the prior-year period, primarily due to:
• A decrease in revenues driven by lower realized revenue rates (approximately $550 million); and
• A decrease in revenue driven by inconsistent buying behavior from automotive, service centers and other customers resulting in lower tons sold (approximately $900 million); and
• A decrease in revenue driven by the decision to indefinitely idle the Weirton, Riverdale and Steelton operations due to financial underperformance at these operations (approximately $250 million); which was partially offset by
• An increase in revenues related to incremental tons sold related to the addition of Stelco (approximately $1.2 billion).
GROSS MARGIN
Gross margin increased by $60 million during the three months ended September 30, 2025, as compared to the prior-year period, primarily due to:
• Higher steel margins driven by product mix and lower maintenance spend, partially offset by lower realized revenue rates and higher energy costs (approximately $20 million); and
• The unfavorable arbitration decision related to iron ore mining royalties that was realized in the third quarter of 2024 (approximately $70 million), which was partially offset by
• An increase in depreciation, depletion, and amortization (approximately $30 million).
Gross margin decreased by $983 million during the nine months ended September 30, 2025, as compared to the prior-year period, primarily due to:
• Lower realized revenue rates (approximately $670 million);
• An increase in depreciation and amortization expense as a result of the indefinite idling of our Conshohocken and Riverdale facilities and acquisition of Stelco (approximately $220 million); and
• An increase in idled facilities charges as a result of the operational adjustments related to our Hibbing, Minorca and Dearborn facilities (approximately $60 million).
ADJUSTED EBITDA
Adjusted EBITDA from our Steelmaking segment for the three months ended September 30, 2025, increased by $20 million, as compared to the three months ended September 30, 2024, primarily due to the increased gross margin from our Steelmaking operations. Additionally, our Steelmaking Adjusted EBITDA included $123 million and $105 million of Selling, general and administrative expenses for the three months ended September 30, 2025 and 2024, respectively.
Adjusted EBITDA from our Steelmaking segment for the nine months ended September 30, 2025, decreased by $787 million, as compared to the nine months ended September 30, 2024, primarily due to the decreased gross margin from our Steelmaking operations. Additionally, our Steelmaking Adjusted EBITDA included $378 million and $326 million of Selling, general and administrative expenses for the nine months ended September 30, 2025 and 2024, respectively.
RESULTS OF OPERATIONS
REVENUES & GROSS MARGIN
During the three and nine months ended September 30, 2025, our consolidated Revenues increased by $165 million and decreased by $563 million, respectively, and our consolidated gross margin increased by $60 million and decreased by $990 million, respectively, as compared to the prior-year periods. See "— Steelmaking Results" above for further detail on our operating results.
RESTRUCTURING AND OTHER CHARGES AND ASSET IMPAIRMENT
As a result of the announcements to indefinitely idle two of our non-core Steelmaking operations, we recorded both Restructuring and other charges and Asset impairment . The indefinite idling of our Steelton rail production facility occurred in the second quarter of 2025, while the idling of our Weirton tinplate production facility was announced in the first quarter of 2024.
In connection with these decisions, we recorded $3 million and $92 million of Restructuring and other charges during the three and nine months ended September 30, 2025, respectively, compared to $2 million and $131 million for the three and nine months ended September 30, 2024, respectively. Additionally, Asset impairment of $39 million was recorded for the nine months ended September 30, 2025, compared to $79 million for the nine months ended September 30, 2024.
MISCELLANEOUS - NET
During the three and nine months ended September 30, 2025, Miscellaneous – net remained relatively consistent as compared to the prior-year periods. Included within Miscellaneous – net for the nine months ended September 30, 2025 is an increase of approximately $40 million of charges related to the idled facilities and severance charges, as compared to the prior-year period. This was largely offset by a decrease in currency exchange expense and various other items not individually significant.
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LOSS ON EXTINGUISHMENT OF DEBT
During the nine months ended September 30, 2024, we used a portion of the net proceeds from the issuance of the 7.000% 2032 Senior Notes to repurchase $829 million in aggregate principal amount of our 6.750% 2026 Secured Senior Notes, resulting in a $27 million of Loss on extinguishment of debt for the nine months ended September 30, 2024. During the three and nine months ended September 30, 2025, we did not repurchase any outstanding senior notes. Refer to NOTE 8 - DEBT AND CREDIT FACILITIES for further information.
INTEREST EXPENSE, NET
During the three and nine months ended September 30, 2025, our consolidated Interest expense, net increased by $51 million and $207 million, respectively, as compared to the prior-year periods. This increase is primarily due to an increase in our outstanding borrowings.
INCOME TAXES
Our effective tax rate is impacted by state and foreign income taxes as well as permanent items, such as depletion. It also is affected by discrete items that may occur in any given period but are not consistent from period to period.
During the three and nine months ended September 30, 2025, our consolidated Income tax benefit increased by $2 million and $275 million, respectively, as compared to the prior-year periods. This increase is primarily due to an increase in Loss from continuing operations before income taxes and the impact of immaterial discrete items relative to those losses.
LIQUIDITY, CASH FLOWS AND CAPITAL RESOURCES
OVERVIEW
Our capital allocation decision-making process is focused on preserving healthy liquidity levels, strengthening our balance sheet, and creating financial flexibility to manage through the cyclical demand for our products and volatility in commodity prices. We are focused on maximizing the cash generation of our operations, reducing debt, and aligning capital investments with our strategic priorities and the requirements of our business plan, including regulatory and permission-to-operate related projects.
The following table provides a summary of our cash flow:
Nine Months Ended
September 30,
(In millions) 2025 2024
Cash flows provided (used) by:
Operating activities $ (449) $ 577
Investing activities (394) (477)
Financing activities 853 (259)
Net increase (decrease) in cash, cash equivalents and restricted cash $ 10 $ (159)
Free cash flow 1
$ (870) $ 87
1 See "— Non-GAAP Financial Measures" for a reconciliation of our free cash flow.
CASH FLOWS
OPERATING ACTIVITIES
Nine Months Ended
September 30,
(In millions) 2025 2024 Variance
Net loss $ (1,193) $ (280) $ (913)
Non-cash adjustments to net loss 709 838 (129)
Working capital:
Accounts receivable, net (215) 258 (473)
Inventories 399 190 209
Income taxes 15 (46) 61
Pension and OPEB payments and contributions (121) (162) 41
Payables, accrued employment and accrued expenses (31) (210) 179
Other, net (12) (11) (1)
Total working capital 35 19 16
Net cash provided (used) by operating activities $ (449) $ 577 $ (1,026)
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The variance was primarily driven by:
• A $1.0 billion decrease in net loss after adjustments for non-cash items primarily due to lower gross margins resulting from a decrease in selling prices for our steel products as compared to the prior-year period. See "— Steelmaking Results" above for further detail on our operating results; and
• A $473 million decrease in cash primarily as a result of volatility in average selling price. Lower average selling prices at the end of 2024, which increased throughout the first three quarters of 2025, led to higher outstanding accounts receivable balances at September 30, 2025. In contrast, higher average selling prices at the end of 2023, which decreased throughout the first three quarters of 2024, led to lower outstanding accounts receivable balances at September 30, 2024. Such decrease in cash was partially offset by
• A $209 million increase in cash primarily related to a reduction in raw material inventories, including iron ore pellets and coke, during the first three quarters of 2025; and
• A $179 million increase in cash primarily as a result of lower incentive-based compensation paid in the first three quarters of 2025, as compared to the prior-year period.
INVESTING ACTIVITIES
Nine Months Ended
September 30,
(In millions) 2025 2024 Variance
Purchase of property, plant and equipment $ (421) $ (490) $ 69
Other investing activities 27 13 14
Net cash used by investing activities $ (394) $ (477) $ 83
Our cash used for capital expenditures during the nine months ended September 30, 2025 was $69 million less as compared to the prior-year period. Our cash used for capital expenditures primarily relates to sustaining capital spend, which includes infrastructure, mobile equipment, fixed equipment, product quality, environmental, and health and safety spend. Included within cash used for capital expenditures was $3 million related to our non-owned SunCoke Middletown VIE for the nine months ended September 30, 2025, compared to $20 million for the nine months ended September 30, 2024.
We anticipate total cash used for capital expenditures during the next 12 months to be approximately $700 million, which primarily consists of sustaining capital spend.
FINANCING ACTIVITIES
Nine Months Ended
September 30,
(In millions) 2025 2024 Variance
Net proceeds of senior notes $ 1,700 $ 576 $ 1,124
Net borrowings (repayments) under credit facilities (713) 47 (760)
Repurchase of common shares — (733) 733
Other financing activities (134) (149) 15
Net cash provided (used) by financing activities $ 853 $ (259) $ 1,112
The variance was primarily driven by:
• An increase in proceeds from senior notes offerings of $1.1 billion during the nine months ended September 30, 2025 related to the issuance of an aggregate principal amount of $1.7 billion of our 7.500% Senior Notes due 2031 and 7.625% Senior Notes due 2034; and
• The repurchase of 37.9 million common shares during the nine months ended September 30, 2024, while no shares were repurchased during the nine months ended September 30, 2025; which was partially offset by
• An increase in repayments under our credit facilities primarily as a result of temporarily paying down our ABL Facility with a portion of the net proceeds from the 7.625% 2034 Senior Notes issuance in September 2025, prior to redeeming in October 2025 all $685 million aggregate principal amount of our senior notes that had maturity dates in 2027 with the remaining net proceeds from the 7.625% 2034 Senior Notes issuance in September 2025.
LIQUIDITY AND CAPITAL RESOURCES
Our primary sources of liquidity are Cash and cash equivalents, cash generated from our operations, availability under the ABL Facility and access to capital markets. Cash and cash equivalents, which totaled $66 million as of September 30, 2025, include cash on hand and on deposit, as well as short-term securities held for the primary purpose of general liquidity. The combination of cash and availability under our ABL Facility equated to $3.1 billion in liquidity as of September 30, 2025.
On February 6, 2025, we issued $850 million aggregate principal amount of 7.500% Senior Notes due 2031 at par. The net proceeds from this offering were used for general corporate purposes, including repayment of borrowings under our ABL Facility.
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On September 8, 2025, we issued $850 million aggregate principal amount of 7.625% Senior Notes due 2034 at par. On October 3, 2025, a portion of the net proceeds from this offering, which were initially utilized to pay down our ABL Facility, was used to redeem all $685 million in aggregate principal amount of our 5.875% 2027 Senior Notes, 7.000% 2027 Senior Notes and 7.000% 2027 AK Senior Notes. The remaining net proceeds from this offering were used to repay borrowings under our ABL Facility.
On October 10, 2025, we issued an additional $275 million aggregate principal amount of our 7.625% Senior Notes due 2034 at 102.750% of their principal amount. The net proceeds of this offering were used to repay borrowings under our ABL Facility.
Our ABL Facility, which matures in June 2028, has a maximum borrowing base of $4.75 billion, including a $500 million multicurrency sub-facility, a $555 million sublimit for the issuance of letters of credit and a $200 million sublimit for swingline loans. The available borrowing base is determined by applying customary advance rates to eligible accounts receivable, inventory and certain mobile equipment. As of September 30, 2025, outstanding letters of credit totaled $63 million, which reduced availability. We issue standby letters of credit with certain financial institutions in order to support business obligations, including, but not limited to, workers' compensation, operating agreements, employee severance, environmental obligations and insurance. Our ABL Facility agreement contains various financial and other covenants. As of September 30, 2025, we were in compliance with all of our ABL Facility covenants.
We have the capability to issue additional unsecured notes and, subject to the limitations set forth in our existing senior notes indentures and ABL Facility, additional secured debt, if we elect to access the debt capital markets. We currently have approximately $3.2 billion of secured debt capacity. We believe our liquidity and access to capital markets will be adequate to fund our cash requirements for the next 12 months and for the foreseeable future. However, our ability in the future to issue additional debt could be limited by market conditions. We intend from time to time to seek to redeem or repurchase our outstanding senior notes with cash on hand, borrowings from existing credit sources or new debt financings and/or exchanges for debt or equity securities, in open market purchases, privately negotiated transactions or otherwise. Such redemptions or repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors, and the amounts involved may be material. We also have the potential to generate liquidity from the sale of non-core assets. In addition to non-core operating assets, we have received inbound inquiries for us to sell recently idled facilities and certain other inactive sites.
Refer to NOTE 8 - DEBT AND CREDIT FACILITIES for more information on our ABL Facility and debt.
NON-GAAP FINANCIAL MEASURES
The following provides a description and reconciliation of each of our non-GAAP financial measures to its most directly comparable respective GAAP measure. The presentation of these measures is not intended to be considered in isolation from, as a substitute for, or as superior to, the financial information prepared and presented in accordance with GAAP. The presentation of these measures may be different from non-GAAP financial measures used by other companies.
ADJUSTED EBITDA
We evaluate performance on an operating segment basis, as well as a consolidated basis, based on Adjusted EBITDA, which is a non-GAAP measure. This measure is used by management, investors, lenders and other external users of our financial statements to assess our operating performance and to compare operating performance to other companies in the steel industry. In addition, management believes Adjusted EBITDA is a useful measure to assess the earnings power of the business without the impact of capital structure and can be used to assess our ability to service debt and fund future capital expenditures in the business.
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The following table provides a reconciliation of our Net loss to Adjusted EBITDA:
Three Months Ended
September 30, Nine Months Ended
September 30,
(In millions) 2025 2024 2025 2024
Net loss $ (234) $ (232) $ (1,193) $ (280)
Less:
Interest expense, net (153) (102) (442) (235)
Income tax benefit 78 76 375 100
Depreciation, depletion and amortization (288) (235) (963) (693)
Total EBITDA 129 29 (163) 548
Less:
EBITDA from noncontrolling interests 1
23 20 61 56
Idled facilities charges 3 (2) (245) (219)
Acquisition-related costs — (14) (1) (14)
Changes in fair value of derivatives, net (10) (7) (34) (7)
Currency exchange (20) — 26 —
Loss on extinguishment of debt — — — (27)
Arbitration decision — (71) — (71)
Severance (5) (10) (25) (13)
Other, net (5) (9) (3) (11)
Total Adjusted EBITDA $ 143 $ 122 $ 58 $ 854
1 EBITDA from noncontrolling interests includes the following:
Net income attributable to noncontrolling interests $ 17 $ 12 42 33
Depreciation, depletion and amortization 6 8 19 23
EBITDA from noncontrolling interests $ 23 $ 20 $ 61 $ 56
2 Refer to NOTE 2 - SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION for further information.
The following table provides a summary of our Adjusted EBITDA by segment:
Three Months Ended
September 30, Nine Months Ended
September 30,
(In millions) 2025 2024 2025 2024
Adjusted EBITDA:
Steelmaking $ 129 $ 111 $ 20 $ 807
Other Businesses 12 8 38 43
Intersegment Eliminations 2 3 — 4
Total Adjusted EBITDA $ 143 $ 122 $ 58 $ 854
FREE CASH FLOW
Free cash flow is a non-GAAP measure defined as operating cash flow less purchase of property, plant and equipment. Management believes it is an important measure to assess the cash generation available to service debt, strategic initiatives or other financing activities.
The following table provides a reconciliation of our Net cash provided (used) by operating activities to free cash flow:
Nine Months Ended
September 30,
(In millions) 2025 2024
Net cash provided (used) by operating activities $ (449) $ 577
Purchase of property, plant and equipment (421) (490)
Free cash flow $ (870) $ 87
INFORMATION ABOUT OUR GUARANTORS AND THE ISSUER OF OUR GUARANTEED SECURITIES
The accompanying summarized financial information has been prepared and presented pursuant to SEC Regulation S-X, Rule 3-10, “Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered,” and Rule 13-01 "Financial Disclosures about Guarantors and Issuers of Guaranteed Securities and Affiliates Whose Securities Collateralized a Registrant's Securities." Certain of our subsidiaries (the "Guarantor subsidiaries") as of September 30, 2025 have
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fully and unconditionally, and jointly and severally, guaranteed the obligations under the 5.875% 2027 Senior Notes, the 7.000% 2027 Senior Notes, the 4.625% 2029 Senior Notes, the 6.875% 2029 Senior Notes, the 6.750% 2030 Senior Notes, the 4.875% 2031 Senior Notes, the 7.500% 2031 Senior Notes, the 7.000% 2032 Senior Notes, the 7.375% 2033 Senior Notes, and the 7.625% 2034 Senior Notes issued by Cleveland-Cliffs Inc. on a senior unsecured basis. See NOTE 8 - DEBT AND CREDIT FACILITIES for further information.
The following presents the summarized financial information on a combined basis for Cleveland-Cliffs Inc. (parent company and issuer of the guaranteed obligations) and the Guarantor subsidiaries, collectively referred to as the obligated group. Transactions between the obligated group have been eliminated. Information for the non-Guarantor subsidiaries was excluded from the combined summarized financial information of the obligated group.
Each Guarantor subsidiary is consolidated by Cleveland-Cliffs Inc. as of September 30, 2025. Refer to Exhibit 22 , incorporated herein by reference, for the detailed list of entities included within the obligated group as of September 30, 2025.
As of September 30, 2025, the guarantee of a Guarantor subsidiary with respect to the 5.875% 2027 Senior Notes, the 7.000% 2027 Senior Notes, the 4.625% 2029 Senior Notes, the 6.875% 2029 Senior Notes, the 6.750% 2030 Senior Notes, the 4.875% 2031 Senior Notes, the 7.500% 2031 Senior Notes, the 7.000% 2032 Senior Notes, the 7.375% 2033 Senior Notes, and the 7.625% 2034 Senior Notes will be automatically and unconditionally released and discharged, and such Guarantor subsidiary’s obligations under the guarantee and the related indentures (the “Indentures”) will be automatically and unconditionally released and discharged, upon the occurrence of any of the following, along with the delivery to the trustee of an officer’s certificate and an opinion of counsel, each stating that all conditions precedent provided for in the applicable Indenture relating to the release and discharge of such Guarantor subsidiary’s guarantee have been complied with:
(a) any sale, exchange, transfer or disposition of such Guarantor subsidiary (by merger, consolidation, or the sale of) or the capital stock of such Guarantor subsidiary after which the applicable Guarantor subsidiary is no longer a subsidiary of the Company or the sale of all or substantially all of such Guarantor subsidiary’s assets (other than by lease), whether or not such Guarantor subsidiary is the surviving entity in such transaction, to a person which is not the Company or a subsidiary of the Company; provided that (i) such sale, exchange, transfer or disposition is made in compliance with the applicable Indenture, including the covenants regarding consolidation, merger and sale of assets and, as applicable, dispositions of assets that constitute notes collateral, and (ii) all the obligations of such Guarantor subsidiary under all debt of the Company or its subsidiaries terminate upon consummation of such transaction;
(b) designation of any Guarantor subsidiary as an “excluded subsidiary” (as defined in the Indentures); or
(c) defeasance or satisfaction and discharge of the Indentures.
Each entity in the summarized combined financial information follows the same accounting policies as described in the consolidated financial statements. The accompanying summarized combined financial information does not reflect investments of the obligated group in non-Guarantor subsidiaries. The financial information of the obligated group is presented on a combined basis; intercompany balances and transactions within the obligated group have been eliminated. The obligated group's amounts due from, amounts due to, and transactions with, non-Guarantor subsidiaries and related parties have been presented in separate line items.
SUMMARIZED COMBINED FINANCIAL INFORMATION OF THE ISSUER AND GUARANTOR SUBSIDIARIES
The following table is summarized combined financial information from the Statements of Unaudited Condensed Consolidated Financial Position of the obligated group:
(In millions) September 30, 2025 December 31, 2024
Current assets $ 6,370 $ 6,463
Non-current assets 11,562 11,856
Current liabilities (3,876) (4,160)
Non-current liabilities (9,829) (9,232)
The following table is summarized combined financial information from the Statements of Unaudited Condensed Consolidated Operations of the obligated group:
Nine Months Ended
(In millions) September 30, 2025
Revenues $ 12,973
Cost of goods sold (13,569)
Loss from continuing operations (980)
Net loss (980)
Net loss attributable to Cliffs shareholders (980)
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The obligated group had the following balances with non-Guarantor subsidiaries and other related parties:
(In millions) September 30, 2025 December 31, 2024
Balances with non-Guarantor subsidiaries:
Accounts receivable, net $ 741 $ 755
Accounts payable (1,049) (1,279)
Balances with other related parties:
Accounts receivable, net $ 11 $ 9
Accounts payable (13) (20)
Additionally, for the nine months ended September 30, 2025, the obligated group had Revenues of $64 million and Cost of goods sold of $56 million, in each case, with other related parties.
MARKET RISKS
We are subject to a variety of risks, including those caused by changes in commodity prices, foreign currency exchange rates, and interest rates. We have established policies and procedures to manage such risks; however, certain risks are beyond our control.
PRICING RISKS
In the ordinary course of business, we are exposed to price fluctuations in both the production and sale of our products. Price fluctuations related to the production of our products are impacted by market prices for natural gas, electricity, ferrous and stainless steel scrap, metallurgical coal, coke, zinc, chrome, nickel and other alloys. Price fluctuations related to the sale of our products are primarily impacted by market prices for HRC and other related spot indices. Our financial results can vary for our operations as a result of these fluctuations.
Our strategy to address the risk of changes in the prices of both energy and raw materials that are purchased and utilized in our operations includes improving efficiency in energy usage, identifying alternative providers, utilizing the lowest cost alternative fuels and making forward physical purchases.
Some customer contracts have fixed pricing terms, which increase our exposure to fluctuations in raw material and energy costs. To reduce our exposure, we enter into annual, fixed price agreements for certain raw materials. Some of our existing multi-year raw material supply agreements have required minimum purchase quantities. Under adverse economic conditions, those minimums may exceed our needs. Absent exceptions for force majeure and other circumstances affecting the legal enforceability of the agreements, these minimum purchase requirements may compel us to purchase quantities of raw materials that could significantly exceed our anticipated needs or pay damages to the supplier for shortfalls. In these circumstances, we would attempt to negotiate agreements for new purchase quantities. There is a risk, however, that we would not be successful in reducing purchase quantities, either through negotiation or litigation. If that occurred, we would likely be required to purchase more of a particular raw material in a particular year than we need, negatively affecting our results of operations and cash flows.
Certain of our customer contracts include variable-pricing mechanisms that adjust selling prices in response to changes in the costs of certain raw materials and energy, while other of our customer contracts exclude such mechanisms. We may enter into multi-year purchase agreements for certain raw materials with similar variable-price mechanisms, allowing us to achieve natural hedges between the customer contracts and supplier purchase agreements. Therefore, in some cases, price fluctuations for energy (particularly natural gas and electricity), raw materials (such as scrap, chrome, zinc and nickel) or other commodities may be, in part, passed on to customers rather than absorbed solely by us. There is a risk, however, that the variable-price mechanisms in the sales contracts may not necessarily change in tandem with the variable-price mechanisms in our purchase agreements, negatively affecting our results of operations and cash flows.
If we are unable to align fixed and variable components between customer contracts and supplier purchase agreements, we routinely evaluate the use of derivative instruments to hedge market risk. As a result, we use cash-settled commodity price swaps to hedge a portion of our exposure from our natural gas and electricity requirements. Our hedging strategy is designed to protect us from excessive pricing volatility. However, since we do not typically hedge 100% of our exposure, abnormal price increases in any of these commodity markets might still negatively affect operating costs.
Our strategy to address price fluctuations related to the selling price of our products has generally been to obtain competitive prices for our products and allow operating results to reflect market price movements dictated by supply and demand; however, from time to time, we also utilize sales swaps to manage our exposure to HRC price fluctuations in the average selling price of our products.
The following table summarizes the negative effect of a hypothetical change in the fair value of our derivative instruments outstanding as of September 30, 2025, due to a 10% and 25% change in the market price of each of the hedge contracts:
Contract Type (In millions) 10% Change 25% Change
Natural gas $ 48 $ 120
Electricity 11 28
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Any resulting changes in fair value would be recorded as adjustments to AOCI, net of income taxes, or recognized in net earnings, as appropriate. These hypothetical losses would be partially offset by the benefit of lower prices paid for the related commodities or the benefit of higher selling prices related to the HRC price, respectively.
VALUATION OF GOODWILL AND OTHER LONG-LIVED ASSETS
GOODWILL
We assign goodwill arising from acquired companies to the reporting units that are expected to benefit from the synergies of the acquisition. Goodwill is tested on a qualitative or quantitative basis for impairment at the reporting unit level on an annual basis (October 1) and between annual tests if a triggering event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. We have an unconditional option to bypass the qualitative test for any reporting unit in any period and proceed directly to performing the quantitative test. Should our qualitative test indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying value, we perform a quantitative test to determine the amount of impairment, if any, to the carrying value of the reporting unit and its associated goodwill.
Triggering events could include a significant and sustained change in the business climate, including, among other factors, declines in historical or projected revenue, operating income, Adjusted EBITDA or cash flows, and declines in the stock price or market capitalization, considered both in absolute terms and relative to peers, legal factors, competition, or sale or disposition of a significant portion of a reporting unit. Automotive production and sales are cyclical and sensitive to general economic conditions and other factors, including interest rates, consumer credit, spending and preferences, and supply chain disruptions. Additionally, to the extent that commodity prices, including the HRC price, coated and other specialty steel prices, international steel prices and scrap metal prices, significantly decline for an extended period, we may have to further revise our operating plans. As a result, testing for potential impairment on our goodwill may be adversely affected by uncertain market conditions for the global steel industry, as well as changes in interest rates, inflation, commodity prices and general economic conditions. Changes in general economic and/or industry specific conditions, such as the impacts of significant recent shifts in trade policies, including the imposition of tariffs, retaliatory tariff measures and subsequent modifications or suspensions thereof, and market reactions to such policies and resulting trade disputes, could further impact our impairment assessments. We do not believe the current challenging macroeconomic and industry conditions, or our depressed market capitalization, have significantly changed our assessment of the fair value of our reporting units.
Application of a goodwill impairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units, assignment of goodwill to reporting units, and the determination of the fair value of each reporting unit, if a quantitative assessment is deemed necessary. The fair value of each reporting unit is estimated using the guideline public company method, the discounted cash flow methodology, or a combination of both, which considers forecasted cash flows discounted at an estimated weighted average cost of capital. Assessing the recoverability of our goodwill requires significant assumptions regarding discount rates, market multiples, the estimated future cash flows and other factors to determine the fair value of a reporting unit, including, among other things, estimates related to forecasts of future revenues, Adjusted EBITDA, capital expenditures and working capital requirements, which are based upon our long-range plan estimates. The assumptions used to calculate the fair value of a reporting unit may change based on operating results, market conditions and other factors. Changes in these assumptions could materially affect the determination of fair value for each reporting unit.
OTHER LONG-LIVED ASSETS
Long-lived assets are reviewed for impairment upon the occurrence of events or changes in circumstances that would indicate that the carrying value of the assets may not be recoverable. Such indicators may include: a significant decline in expected future cash flows; a sustained, significant decline in market pricing; a significant adverse change in legal or environmental factors or in the business climate; changes in estimates of our recoverable reserves; and unanticipated competition. Any adverse change in these factors could have a significant impact on the recoverability of our long-lived assets and could have a material impact on our consolidated statements of operations and statements of financial position.
A comparison of each asset group's carrying value to the estimated undiscounted net future cash flows expected to result from the use of the assets, including cost of disposition, is used to determine if an asset is recoverable. Projected future cash flows reflect management's best estimate of economic and market conditions over the projected period, including growth rates in revenues and costs, and estimates of future expected changes in operating margins and capital expenditures. If the carrying value of the asset group is higher than its undiscounted net future cash flows, the asset group is measured at fair value and the difference is recorded as a reduction to the long-lived assets. We estimate fair value using a market approach, an income approach or a cost approach. For the nine months ended September 30, 2025, we concluded that there were no additional triggering events resulting in the need for an impairment assessment except for the announcement of the indefinite idle of our Steelton rail production facility, which resulted in a $34 million impairment charge to Property, plant and equipment, net for the nine months ended September 30, 2025.
The triggering events discussed above related to goodwill additionally apply to testing for potential impairment of other long-lived assets, including property, plant and equipment and/or intangible assets.
FOREIGN CURRENCY EXCHANGE RATE RISK
We are subject to changes in foreign currency exchange rates primarily as a result of our operations in Canada, which could impact our financial condition. Foreign exchange rate risk arises from our exposure to fluctuations in foreign currency exchange rates because our reporting currency is the U.S. dollar, but the functional currency of our Stelco subsidiaries is the Canadian dollar. Specifically, we are primarily exposed to fluctuations in foreign currency rates in relation to an intercompany note with our Stelco subsidiary that is denominated in the Canadian dollar. Changes in the Canadian dollar exchange rate may result in volatility in our
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financial condition due to the routine remeasurement of this note. As of September 30, 2025, a 1% change in the Canadian dollar foreign currency exchange rate would result in a $9 million change in currency exchange income (expense). Additionally, we engage in routine transactions denominated in foreign currencies, such as the purchases of goods and services. However, the potential impact of these transactions to our financial condition is significantly less than the potential impact of the routine remeasurement of the intercompany note.
INTEREST RATE RISK
Interest payable on our senior notes is at fixed rates. Interest payable under our ABL Facility is at a variable rate based upon the applicable base rate plus the applicable base rate margin depending on the excess availability. As of September 30, 2025, we had $847 million of outstanding borrowings under our ABL Facility. An increase in prevailing interest rates would increase interest expense and interest paid for any outstanding borrowings under our ABL Facility. For example, a 100 basis point change to interest rates under our ABL Facility at the September 30, 2025 borrowing level would result in a change of $9 million to interest expense on an annual basis.
SUPPLY CONCENTRATION RISKS
Many of our operations and mines rely on one source each of electric power and natural gas. A significant interruption or change in service or rates from our energy suppliers could materially impact our production costs, margins and profitability.
FORWARD-LOOKING STATEMENTS
This report contains statements that constitute "forward-looking statements" within the meaning of the federal securities laws. As a general matter, forward-looking statements relate to anticipated trends and expectations rather than historical matters. Forward-looking statements are subject to uncertainties and factors relating to our operations and business environment that are difficult to predict and may be beyond our control. Such uncertainties and factors may cause actual results to differ materially from those expressed or implied by the forward-looking statements. These statements speak only as of the date of this report, and we undertake no ongoing obligation, other than that imposed by law, to update these statements. Investors are cautioned not to place undue reliance on forward-looking statements. Uncertainties and risk factors that could affect our future performance and cause results to differ from the forward-looking statements in this report include, but are not limited to:
• continued volatility of steel, scrap metal and iron ore market prices, which directly and indirectly impact the prices of the products that we sell to our customers;
• uncertainties associated with the highly competitive and cyclical steel industry and our reliance on the demand for steel from the automotive industry;
• potential weaknesses and uncertainties in global economic conditions, excess global steelmaking capacity and production, prevalence of steel imports, reduced market demand and oversupply of iron ore;
• severe financial hardship, bankruptcy, temporary or permanent shutdowns or operational challenges of one or more of our major customers, key suppliers or contractors, which, among other adverse effects, could disrupt our operations or lead to reduced demand for our products, increased difficulty collecting receivables, and customers and/or suppliers asserting force majeure or other reasons for not performing their contractual obligations to us;
• risks related to U.S. government actions and other countries' reactions with respect to Section 232, the United States-Mexico-Canada Agreement and/or other trade agreements, tariffs, treaties or policies, as well as the uncertainty of obtaining and maintaining effective antidumping and countervailing duty orders to counteract the harmful effects of unfairly traded imports;
• impacts of existing and changing governmental regulation, including actual and potential environmental regulations relating to climate change and carbon emissions, and related costs and liabilities, including failure to receive or maintain required operating and environmental permits, approvals, modifications or other authorizations of, or from, any governmental or regulatory authority and costs related to implementing improvements to ensure compliance with regulatory changes, including potential financial assurance requirements, and reclamation and remediation obligations;
• potential impacts to the environment or exposure to hazardous substances resulting from our operations;
• our ability to maintain adequate liquidity, our level of indebtedness and the availability of capital could limit our financial flexibility and cash flow necessary to fund working capital, planned capital expenditures, acquisitions, and other general corporate purposes or ongoing needs of our business, or to repurchase our common shares;
• our ability to reduce our indebtedness or return capital to shareholders within the currently expected timeframes or at all;
• adverse changes in credit ratings, interest rates, foreign currency rates and tax laws;
• challenges to successfully implementing our business strategy to achieve operating results in line with our guidance;
• the outcome of, and costs incurred in connection with, lawsuits, claims, arbitrations or governmental proceedings relating to commercial and business disputes, antitrust claims, environmental matters, government investigations, occupational or personal injury claims, property-related matters, labor and employment matters, or suits involving legacy operations and other matters;
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• supply chain disruptions or changes in the cost, quality or availability of energy sources, including electricity, natural gas and diesel fuel, critical raw materials and supplies, including iron ore, industrial gases, graphite electrodes, scrap metal, chrome, zinc, other alloys, coke and metallurgical coal, and critical manufacturing equipment and spare parts;
• problems or disruptions associated with transporting products to our customers, moving manufacturing inputs or products internally among our facilities, or suppliers transporting raw materials to us;
• the risk that the cost or time to implement a strategic or sustaining capital project may prove to be greater than originally anticipated;
• our ability to consummate any public or private acquisition or divestiture transactions and the transactions contemplated by the Memorandum of Understanding and to realize any or all of the anticipated benefits or estimated future synergies, including any expected accretion, as well as to successfully integrate any acquired businesses into our existing businesses;
• uncertainties associated with natural or human-caused disasters, adverse weather conditions, unanticipated geological conditions, critical equipment failures, infectious disease outbreaks, tailings dam failures and other unexpected events;
• cybersecurity incidents relating to, disruptions in, or failures of, information technology systems that are managed by us or third parties that host or have access to our data or systems, including the loss, theft or corruption of our or third parties' sensitive or essential business or personal information and the inability to access or control systems;
• liabilities and costs arising in connection with any business decisions to temporarily or indefinitely idle or permanently close an operating facility or mine, which could adversely impact the carrying value of associated assets, trigger contractual liabilities or termination costs, and give rise to impairment charges or closure and reclamation obligations, as well as uncertainties associated with restarting any previously idled operating facility or mine;
• our ability to realize the anticipated synergies or other expected benefits of the Stelco Acquisition, as well as the impact of additional liabilities and obligations incurred in connection with the Stelco Acquisition;
• our level of self-insurance and our ability to obtain sufficient third-party insurance to adequately cover potential adverse events and business risks;
• uncertainties associated with our ability to meet customers’ and suppliers’ decarbonization goals and reduce our GHG emissions in alignment with our own announced targets;
• challenges to maintaining our social license to operate with our stakeholders, including the impacts of our operations on local communities, reputational impacts of operating in a carbon-intensive industry that produces GHG emissions, and our ability to foster a consistent operational and safety track record;
• our actual economic mineral reserves or reductions in current mineral reserve estimates, and any title defect or loss of any lease, license, option, easement or other possessory interest for any mining property;
• our ability to maintain satisfactory labor relations with unions and employees;
• unanticipated or higher costs associated with pension and OPEB obligations resulting from changes in the value of plan assets or contribution increases required for unfunded obligations;
• uncertain availability or cost of skilled workers to fill critical operational positions and potential labor shortages caused by experienced employee attrition or otherwise, as well as our ability to attract, hire, develop and retain key personnel;
• our ability to complete the requisite technical and economic studies to determine the economic potential for extraction of rare earths at our properties, and the risk that rare-earth extraction at our properties may be uneconomical; and
• potential significant deficiencies or material weaknesses in our internal control over financial reporting.
For additional factors affecting our business, refer to Part II – Item 1A. Risk Factors of this Quarterly Report on Form 10-Q . You are urged to carefully consider these risk factors.
Forward-looking and other statements in this Quarterly Report on Form 10-Q regarding our GHG reduction plans and goals are not an indication that these statements are necessarily material to investors or required to be disclosed in our filings with the SEC. In addition, historical, current and forward-looking GHG-related statements may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve and assumptions that are subject to change in the future.