CLEVELAND-CLIFFS INC.

How this company captures the theme economics

Competitive position

Largest flat-rolled steel producer in North America and the largest supplier to the North American auto sector; scale was extended by the November 2024 Stelco acquisition (roughly 2.6 million net tons of flat-rolled, adding Canadian capacity and spot-market exposure). Cliffs was named a 2025 GM Supplier of the Year, the only North American steel producer recognized. It competes with Nucor, Steel Dynamics, U.S. Steel (Nippon) and ArcelorMittal; its integrated blast-furnace plus EAF operations and captive iron-ore pellet/HBI supply differentiate it but also carry high fixed costs and pronounced cyclicality.

Scarce assets

Sole US producer of grain-oriented electrical steel (GOES/RGO) at Butler Works (PA) and Zanesville Works (OH); maker of TRAN-COR, described as the only high-permeability electrical steel produced in the US, used in power transformers; and MOTOR-MAX non-oriented electrical steel for motors, generators and EV traction. The uniqueness of the GOES franchise was validated by a sole-source federal award justified precisely because Cliffs is the only qualifying US supplier. It also owns captive iron-ore pellet and HBI capacity. These specialty electrical-steel lines are effectively irreplaceable domestic assets under domestic-content sourcing requirements.

Products, segments, and customers

Steelmaking is the dominant reportable segment. FY2025 steelmaking product mix was approximately 40% hot-rolled, 28% coated, 15% cold-rolled, 5% plate, 3% stainless and electrical, and 9% other (FY2025 results release). FY2025 end-market revenue split: infrastructure and manufacturing USD 5.4 billion (30%), distributors and converters USD 5.2 billion (29%), direct automotive USD 5.0 billion (28%), and steel producers USD 2.3 billion (13%). Steel shipments were 16.2 million net tons. Geography is primarily US, with Canadian operations added via Stelco.

Theme capture

Cliffs captures the transformer/electrical-core value chain both upstream and, increasingly, midstream. It makes the GOES that forms transformer cores (a US monopoly), supplies that steel into military transformers under the July 2026 Defense Logistics Agency sole-source award, and is forward-integrating into transformer assembly through a roughly USD 150 million plant in Weirton, WV that will produce three-phase distribution transformers and pull through demand for its own Butler-made GOES. It also serves motor/EV electrification via MOTOR-MAX non-oriented electrical steel. At the consolidated level, however, this remains a small, enabling share of a diversified steelmaker.

What must be true

1. Automotive production and flat-rolled steel pricing recover in 2026 so consolidated EBITDA and free cash flow turn positive, confirming the FY2025 loss was cyclical rather than structural.
2. The roughly USD 500 million annualized EBITDA benefit management attributes to idled-facility closures, restructuring and slab-contract expiration is realized in 2026 as guided.
3. The Weirton transformer plant commissions on schedule and grid electrification plus federal GOES demand sustain electrical-steel volume and pricing, so the franchise becomes value-additive rather than niche.
4. Balance-sheet liquidity and leverage remain manageable through the trough despite negative free cash flow and low year-end cash.

Identifiable catalysts

• Deliveries and volume draw-down under the five-year Defense Logistics Agency GOES supply agreement (ceiling up to USD 400 million, announced 2 July 2026).
• Start-up of the Weirton, WV distribution-transformer plant (guided to first half of 2026, potentially late 2025) and associated GOES demand pull-through.
• 2026 realization of the roughly USD 500 million annualized EBITDA benefit from restructuring and slab-contract expiration.
• Recovery in North American automotive production and hot-rolled coil pricing; Section 232 steel-tariff and automotive-tariff developments; progress on debt reduction and asset sales.

Where the evidence lands

Cleveland-Cliffs pairs a scarce, policy-protected US electrical-steel and transformer-core franchise — reinforced by a sole-source federal GOES supply agreement — with North America's largest flat-rolled and automotive steel position, but FY2025 was a clear trough (GAAP net loss USD 1.478 billion, adjusted EBITDA USD 37 million, negative free cash flow, USD 57 million cash). The evidence supports a differentiated, hard-to-replicate asset base and real electrification optionality; it does not yet support the electrical-steel/transformer theme as a primary earnings driver, since that exposure is disclosed but not separately material (bundled within roughly 3% of shipments). The investability question hinges on a 2026 cyclical recovery and realization of the guided restructuring benefit; valuation cannot be assessed here without licensed market data. This is analysis of the evidence and its limits, not trading advice.

Next diligence

1. Obtain a segment/product revenue split to size electrical-steel and transformer revenue, which the 10-K bundles into '3% stainless and electrical' of shipments.
2. Pull the FY2025 balance sheet — total and net debt, maturity schedule, liquidity/revolver availability and covenant headroom — none of which were available in the packet extraction.
3. Obtain the Defense Logistics Agency contract terms (SP8000-25-D-0008) — expected annual draw-down, pricing and minimum guaranteed volume versus the USD 400 million ceiling.
4. Track Weirton transformer-plant commissioning and capacity, plus MOTOR-MAX non-oriented steel wins in EV/motor programs.
5. Monitor 2026 North American automotive production, hot-rolled coil pricing, and quarterly progress toward the guided roughly USD 500 million annualized EBITDA benefit; acquire licensed market data for valuation multiples versus Nucor and Steel Dynamics.