Analysis
October 19, 2026
Cliffs shifts customers to index-linked, take-or-pay contracts
Written by Laura Miller
Cleveland-Cliffs Inc. expects to earn more from the repricing of contract tonnage than it previously projected.
The Cleveland-based steelmaker raised its estimate for the earnings benefit of the repricing to about $850 million from about $500 million.
The company also said negotiations for 2027 contracts are progressing better than expected.
More than half of the 2027 renewal process was complete as of Cliffs’ third-quarter earnings call on Monday morning. Management on the call said no customer had rejected the new structure. The company expects to complete the remaining renewals by Thanksgiving.
Cliffs sells most nonautomotive flat-rolled tons under annual fixed-price or index-linked contracts. Those contracts reset on Jan. 1, 2027. Executives said nearly all customers had contracted for more tons in 2027 than in 2026.
The new contracts include take-or-pay minimum-volume commitments. Customers must pay for committed tons even if they do not take delivery. About 55%-60% of customers had signed the new structure, according to the executives on the call.
Cliffs expects fixed-price contracts to largely give way to index-linked contracts. The company also expects to reduce or eliminate contract discounts. What’s more, Chairman and CEO Lourenco Goncalves said he expects fewer freight concessions and greater ability to pass costs through to customers.
“Very soon, this will be the new norm in the industry,” Lourenco Goncalves said. “It started here with Cleveland-Cliffs. We’re proud of that.”
The changes could give Cliffs greater volume visibility and support production planning, Goncalves added. He linked a lack of new automotive commitments to the company’s decision to keep the C blast furnace at its Dearborn Works in Michigan offline.
Cliffs recorded its highest automotive shipments since the third quarter of 2023, despite lower North American vehicle production than in the second quarter, company President and CFO Celso Goncalves said. Uneven reshoring and just-in-time scheduling at automakers contributed to lower-than-expected shipment growth, he said.
Cliffs executives said upcoming automotive contract renewals are also expected to include take-or-pay provisions.
Executives also said fourth-quarter shipments should remain strong. But the timing of year-end holidays and winter weather could create normal seasonal effects.
