CLEVELAND-CLIFFS INC. (CLF)

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. The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and related notes that appear in Part 1 — Item 1 - Financial Statements and Supplementary Data of this Quarterly Report on Form 10-Q and with our Annual Report on Form 10-K for the year ended December 31, 2025, 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 25,000 people across our operations in the United States and Canada.

ECONOMIC OVERVIEW

STEEL MARKET OVERVIEW

Steel market conditions continued to improve throughout the second quarter of 2026 driven by higher than historical HRC pricing, continued subdued import levels, extending lead times and increasing demand. The price for domestic HRC, the most significant index impacting our revenues and profitability, averaged $1,079 per net ton during the second quarter of 2026, representing a 19% increase compared to the second quarter of 2025, and the highest quarterly average per net ton since the second quarter of 2022. Finished steel import levels remained significantly below historical levels during the second quarter of 2026, which helped support domestic steel pricing. Looking forward, we expect domestic steel demand to grow, as implemented tariffs support demand for domestically produced steel, steel imports remain unattractive, and other end-user demand continues to improve. Additionally, the war with Iran, along with other global tensions, has led to rising global steel costs and increased freight rates, making imports less attractive and supporting higher domestic steel demand and HRC pricing. Steel and light vehicles remain at the top of the trade agenda of President Trump's administration, and we operate at the intersection of both of these industries.

We believe steel tariffs play a crucial role in protecting the U.S. economy, national security and the industrial base from violators of fair trade. The American steel industry has long faced significant challenges resulting from global overcapacity and overproduction of steel, as well as other unfair trade practices. The overproduction by certain countries has led to 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 cheaper labor, government subsidies, currency manipulation and weak environmental and safety regulations. During 2025, President Trump signed a Presidential proclamation to implement 50% tariffs on steel imports originating from all major steel producing countries. In early April 2026, President Trump issued a proclamation adjusting the Section 232 tariffs on steel and steel derivative products. The proclamation maintained 50% tariff coverage on steel products and expanded the 50% tariff rate coverage to the full value of articles of iron and steel, including pipe and tube products. This proclamation also added new steel derivative products, including certain types of transformers, while simplifying the steel derivative product tariff regime. The strong commitment of President Trump's Administration to the resilience of the Section 232 national security tariffs is helping the competitive landscape by reducing the prevalence of dumped steel in the U.S. market, ultimately leading to increased domestic demand. Year-to-date total steel imports through April 2026 declined 29% as compared to the same period in 2025. As a leading American steel producer, we expect to benefit for years to come from President Trump's pro-manufacturing and America-first agenda, along with the implemented Section 232 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 value. This contributed to weakened results for our Canadian operations in 2025. In the second half of 2025, Canada imposed tariff-rate quotas on steel imports to protect their domestic steel industry. During the second quarter of 2026, the Department of Finance Canada announced the extension of the tariff-rate quota regime through June 2027. We expect these tariff-rate quotas to help support a healthier Canadian steel industry and allow Stelco to generate improved margins throughout 2026 and beyond. During the first half of 2026, the Canadian steel industry experienced lower than historical import levels, indicating an improving Canadian steel market. We believe it is crucial for Canada to strengthen measures in place to protect its domestic steel industry in order to preserve the Canadian economy and national security.

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 second quarter of 2026 was approximately 3.9 million units, down from approximately 4.0 million units in the second quarter of 2025. During the second quarter of 2026, light vehicle sales in the

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U.S. saw an average seasonally adjusted annualized rate of 16.2 million units sold, representing a more than 500 thousand unit improvement compared to the first quarter of 2026. 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 25% tariff on imports of automobiles and certain automobile parts, which were implemented during 2025, 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 improved domestic vehicle production over the coming years as we continue to be an established and reliable supplier.

The current war between the United States and Iran, along with other global tensions, could result in certain implications to the domestic and global steel industry. In the U.S., the steel industry could see increased costs from elevated freight rates, electricity, gas, and other utilities. However, rising global steel costs, along with elevated freight rates, are expected to make imported steel in the U.S. less attractive. Additionally, certain foreign aluminum and steel facilities have experienced disruptions in production as a result of the war with Iran, which could impact the global supply of aluminum and steel. As the U.S. is heavily reliant on imported aluminum, a negative impact to the global aluminum supply chain, along with higher aluminum costs, could result in customers pursuing steel as an alternative material. We expect rising domestic steel demand, along with lower imports, to support higher steel prices, which should mitigate any inflationary costs we experience as a result of the war with Iran.

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 $458 per long ton during the second quarter of 2026. We expect the supply of busheling scrap to further tighten due to decreasing prime scrap generation from original equipment manufacturers and the growth of EAF capacity in the U.S., reduced metallics import availability, supply chain disruptions from global tensions, 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 Michigan and Minnesota.

We have made significant progress in our cost-cutting efforts and have continuously reduced our year-over-year cost per ton since 2023. We have been able to capture cost reductions as a result of optimizing our integrated footprint, reducing overhead and fixed costs, improving efficiencies, working through higher cost inventory, and benefiting from lower coal and alloy costs, which has helped mitigate elevated utility costs and any inflationary cost increases we have experienced. Our steel unit costs in the second quarter of 2026 were impacted by the timing of routine maintenance and outages, a further shift in mix from semi-finished slabs to value-add flat-rolled steel products and elevated diesel costs, driven by a temporary spike in diesel prices due to the impact from the war with Iran.

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.

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, the further shift away from other metals such as aluminum, low unemployment rate, 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

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ITEM 7. 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. The following discussion should be read in conjunction with the consolidated financial statements and related notes that appear in Part II – Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K. 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.

Management's Discussion and Analysis of Financial Condition and Results of Operations included in this report discusses our financial condition and results of operations as of and for the years ended December 31, 2025 and 2024. A discussion related to our financial condition and results of operations for 2024 as compared to 2023 can be found in Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 25, 2025.

OVERVIEW

Throughout 2025, we continued to position the Company for long-term success and further established ourselves as a leading North America based steel producer, particularly for the automotive industry. We announced a potential strategic partnership with a top-ten global steel producer, optimized our operational footprint, moved away from non-core assets, signed multi-year fixed price contracts with major automotive customers and further reduced unit costs year-over-year. The operational changes to our footprint, along with our commercial and strategic initiatives, further strengthen our position as a North American leader in the steel industry and are expected to create value for all Company stakeholders.

2025 HIGHLIGHTS

•Record safety year since becoming a steel company with lowest Total Recordable Incident Rate (including contractors) of 0.8 per 200,000 hours worked, which represents a 43% decrease since 2021, our first full-year as a steel company.

•President Trump implemented 50% tariffs on imported steel from all major steel producing countries and 25% on imports of automobiles and certain automobile parts.

•Signed Memorandum of Understanding with POSCO, Korea's largest steelmaker, and the world's third largest steelmaker outside of China, to potentially form a strategic partnership as POSCO seeks to leverage our domestic operations.

•Optimized operational footprint and repositioned away from non-core assets, with minimal impact to our flat-rolled steel output.

•Signed multi-year fixed price contracts with major automotive customers, increasing our market share and securing historically high-margin business for years to come.

•Improved balance sheet flexibility and capital structure by extending all senior note maturities to 2029 and beyond.

•Successfully completed a production trial in collaboration with a major automotive OEM, in which our steel was stamped into exposed automotive steel parts with no defects using the customer's existing aluminum-forming equipment.

•Further reduced unit costs year-over-year.

•Announced commissioning of our new state-of-the-art bright anneal line at our Coshocton facility.

•Five-year contract that was initiated in conjunction with the closing of the AM USA Transaction to supply approximately 1.5 million net tons of semi-finished steel slabs annually, which was unprofitable in 2024 and 2025, expired on December 9, 2025 and was not renewed.

•Maintained disciplined capital spend with 19% reduction in capital expenditures year-over-year.

ECONOMIC OVERVIEW

STEEL MARKET OVERVIEW

Steel market conditions in 2025 were driven by higher-than-historical HRC pricing and lower import levels, but subdued demand remained, driven by inconsistent buying behavior as our largest end markets experienced recession-like conditions. The price for domestic HRC, the most significant index impacting our revenues and profitability, averaged $851 per net ton for 2025, which was 10% higher than 2024. Finished steel import levels declined in 2025 after being elevated in early 2025 in anticipation of the implemented steel tariffs, which helped support domestic steel pricing. North American light vehicle production of 15.3 million units in 2025 was down from 15.4 million units in 2024 and remained lower than the five-year pre-COVID level of approximately 17 million units. Looking forward, we expect domestic steel demand to grow as interest rates have started to decline, steel imports are

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currently unattractive, other end-user demand is improving, 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 and safety regulations. Furthermore, there is an overall lack of foreign countries holding their own steel producers accountable for unfair trade practices. During 2025, President Trump signed an executive order to implement 50% tariffs on steel imports originating from all major steel producing countries. We believe that the 50% steel tariffs are critical to leveling the playing field and 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 President Trump's pro-manufacturing and America-first agenda, along with the 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 value. This contributed to weakened results for our Canadian operations in 2025. In the second half of 2025, Canada imposed tariff-rate quotas on steel imports to protect their domestic steel industry. We expect these tariff-rate quotas to help support a healthier Canadian steel industry and allow Stelco to generate healthier margins in 2026. We believe it is crucial for Canada to maintain or improve 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. These operational changes allowed 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. Light vehicle production in 2025 remained below the five-year pre-COVID level of approximately 17 million units. North American light vehicle production in 2025 was 15.3 million units, down from 15.4 million units in 2024. During 2025, there were 16.3 million light vehicles sold in the U.S., representing a 2% increase compared to 2024. 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 25% tariff on imports of automobiles and certain automobile parts, which were implemented during 2025, to lead to increased demand for domestically produced vehicles that consume domestically made steel. We also expect that a declining interest rate environment would increase demand for vehicles in the U.S. as consumers have been cautious due to elevated interest rates. 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 $385 per long ton. The busheling price averaged $424 per long ton during 2025. We expect the supply of busheling scrap to further tighten due to decreasing prime scrap generation from original equipment manufacturers and the growth of EAF capacity in the U.S., reduced metallics import availability, 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 Michigan and Minnesota.

During 2025, we continued our cost-cutting efforts, which began in 2023. We further reduced our year-over-year cost per ton as we worked through higher cost inventory, and we experienced lower coal and alloy costs, which helped mitigate the inflationary cost increases we experienced. We expect to continue our cost-cutting efforts in 2026 and maintain a strong focus on cost discipline for the long term.

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STEELMAKING RESULTS

COMPARISON OF 2025 TO 2024

The following is a summary of the Steelmaking segment operating results, net of intersegment eliminations, for the years ended December 31, 2025 and 2024 (dollars in millions, except for average selling price and shipments in thousands of net tons):

REVENUE

The following tables represent our steel shipments by product and total revenues by market:

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