CLEVELAND-CLIFFS INC.CLF

CLEVELAND-CLIFFS INC. Fair Value Disclosure

10-KFiled Feb 9, 20263 min read
NOTE 14 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values of certain financial instruments (e.g. Accounts receivable, net, Accounts payable and Other current liabilities) approximate fair value and, therefore, have been excluded from the table below. See NOTE 15 - DERIVATIVE INSTRUMENTS AND HEDGING for information on our derivative instruments, which are accounted for at fair value on a recurring basis.
The following table summarizes the carrying value and fair value of other financial instruments:
December 31, 2025December 31, 2024
(In millions)ClassificationCarrying
Value		Fair ValueCarrying
Value		Fair Value
Senior notesLevel 1$6,801 $7,037 $5,505 $5,496 
ABL Facility - outstanding balanceLevel 2452 452 1,560 1,560 
Total$7,253 $7,489 $7,065 $7,056 
The valuation of financial assets classified in Level 2 was determined using a market approach based upon quoted prices for similar assets in active markets or other inputs that were observable.
EMPLOYEE BENEFIT COMMITMENT
In connection with the Stelco Acquisition, we have acquired funding commitments to employee life and health trusts. These obligations pertain to plans previously sponsored by Stelco prior to its emergence from bankruptcy. The commitments primarily involve fixed scheduled payments that will continue until 2042, with an additional variable component tied to Stelco's standalone operating performance. The financial liability is recorded at fair value on a recurring basis using a discounted cash flow model, which incorporates observable and unobservable inputs for risk-free interest rates and future operating estimates. The liability is classified as a Level 3 within the fair value hierarchy. The current and non-current portions of the employee benefit commitment are classified within Other current liabilities and Other non-current liabilities on the Statements of Consolidated Financial Position, respectively.
The following table summarizes the changes in fair value of the employee benefit commitment:
(In millions)20252024
Beginning balance as of January 1$(188)$— 
Fair value of commitment assumed in connection with Stelco Acquisition5 (197)
Total expense included in earnings(5)(2)
Payments28 5 
Foreign currency translation(9)6 
Ending balance as of December 31$(169)$(188)
MINNTAC OPTION
Stelco is party to an option to purchase a 25% ownership interest in the MinnTac iron ore mine and related infrastructure located in Mt. Iron, Minnesota from U. S. Steel for $500 million. This option is exercisable by Stelco at any time until January 31, 2027. This option is recorded as a derivative instrument at fair value on a recurring basis and included within Other non-current assets on the Statements of Consolidated Financial Position. Any gain or loss recorded in relation to the fair value of this option is presented within Changes in fair value of derivatives, net. The fair value of the derivative asset is estimated using the Black-Scholes option
pricing model, which incorporates observable or unobservable inputs for risk-free interest rates, foreign exchange rates, commodity prices, discount rates, corresponding market volatility levels and other market-based pricing factors. This option is classified as a Level 3 derivative asset within the fair value hierarchy.
The following table summarizes the changes in fair value of the MinnTac option:
(In millions)20252024
Beginning balance as of January 1$95 $— 
Fair value of option acquired in connection with Stelco Acquisition— 110 
Total expense included in earnings(45)(12)
Foreign currency translation4 (3)
Ending balance as of December 31$54 $95 

Historical Timeline

Fiscal YearFiled
2025Feb 9, 2026Showing above
2024Feb 25, 2025
2023Feb 8, 2024
2022Feb 14, 2023
2021Feb 11, 2022
2020Feb 26, 2021
2019Feb 20, 2020
2018Feb 8, 2019
2017Feb 14, 2018
2016Feb 9, 2017
2015Feb 24, 2016

About Fair Value Disclosures

Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.

Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.

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