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CLF Cleveland-Cliffs

Participants
Tim Flanagan Executive Vice President, Chief Financial Officer and Treasurer
Lourenco Goncalves Chairman, President and Chief Executive Officer
Lucas Pipes FBR Capital Markets
Seth Rosenfeld Jefferies
Matthew Fields Bank of America
Novid Rassouli Cowen and Company
Piyush Sood Morgan Stanley
Nic Jarmoszuk Stifel
Brett Levy Seelaus & Company
Call transcript
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Operator

Good morning, ladies and gentlemen. My name is Jody and I am your conference facilitator today. I would like to welcome everyone to Cleveland-Cliffs’ 2017 Third Quarter Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. Harbor that statements made be of that forward-looking the you will today’s made XXXX. reminds Private within predictive the include are Safe company certain Reform on comments call as Securities The Litigation of Act protections intended to

in in some that Important Although assumptions, could results results differ that materially. cause that on of believes on reports on be conclusion purposes replay. Regulation it broadcast this excluding available Chief being found news call and forth discuss Forms to could for be website. for differ At the XX-K Vice the subject the the company and set President, company and special Please at published to available Financial which forward-looking statements materially would archived was Tim will conference Executive actual are the XX-Q also introduce ahead. based certain G on go I can risks factors The to results cause releases SEC, are its reasonable Treasurer. the will and time, statements morning. are Flanagan, release, and website and Today’s also At Officer Reconciliation earnings is uncertainties to which the this like within filed call, are available items. cleveland-cliffs.com. company

Tim Flanagan

impacts increase improvement high, per XXXX. we XXXX the in still generated it a quarterly Revenue quarter healthier realizations of prices. business, than sales off, and about full negative represent Adjusted company turning million, this morning. from and start and long guidance as drivers Starting XXX% over cost the will quarter all was $XX our before previous benchmark these another more X total $XX volumes $XX us standpoint, expected $XX ton. four price, to From Through call of from EBITDA his long we I QX guided a long year, quarter. QX to result multiyear the basis. for and remarks million, per months have $XXX $XX contracts, of year per USIO as was strong HRC Jody of EBITDA reflecting a adjusted this for core XXXX. year IRR $X ton quarters timing down freight to already ton did a some on margins than everyone the $XXX and third Thanks, the higher Despite joining quarter, thanks Lourenco a the our tracking full with year EBITDA comments. are over for cash on from of end mix, higher we of came on range customer on estimates in to we on lower unfavorable prior

the per the reported prior repair driven year range. are At long $XX of and cost expenses, costs arrangement a at and we these mark relative The such, cost in rising guidance. give Increases of $XX is putting we by providing maintenance cost cash stable energy at us the higher position earned why QX year-to-date. areas As ton this employee-related we time, to the rates. increased end

such, fourth the to in approximately expect costs at As we remain quarter. $XX cash

improvement EBITDA from was $X the which quarter APIO, results. million, for adjusted third As for second was an our quarter

weaker business. this relative a volumes to drove IT flat year-over-year the for performance stronger and However, costs, reduced dollar, discounted despite average heavily increased operational IODEX, higher realizations

both quarter. Driven improvement to million by in a Moving external year-over-year down incentive overhead, expense, spend union XX% showed SG&A and was reduced XXXX services lower of bonus. the which the compensation we $XX inclusive in

any in million QX project. spent about capital $XX HBI towards primarily related USIO spent we our front, $X operations, the CapEx the at total to On million with

HBI on spending As major previously discussed, the begin will XXXX. in

a we unsecured August, debt bonds a due the we high in secured X.XX% the our completed than while X with XXXX. a making notes hold XXXX, refinancing and coupon for those them first of capital three of ago, notes progress had months due replacing layers successful level, being less structure, or lien To in X.XX% Now, billion our high in almost at power now recap recent secured in X maturity that XXXX. most into we of with $XXX than previous transaction Post sits tower all years billion. this million of lower and pushed about interest XXXX $X.X nearly out It just retired maturity less reduced outright year, the at a tower by looming have notes. $X.X

structure commodity environment. our expense have financial our reduced the been addition, more annualized $XX course, has million of flexibility In capital just year. point simplified which hovered to to we one around million navigate at And leaving much with us $XXX cyclical per vastly always interest

points over community, in investment the year ore multiple iron picture the of in given hot-rolled certain calculations outlook, and for indices. our the movements As we data and these have fashion a past providing sensitivity price two provided on plus, based scenarios. We that EBITDA to better believe these coil

outset, pricing late other prices. of our these to assumptions our than is the business outlook assumptions sensitivity illustrative constant, can HRC clear view assumptions but commodity expected performance on changes to this to reflect affect just and not in our based XX-month on rather a Because more requirement unfortunately of of the these changes changing nature case related this This have having necessarily hold This the methodology the year. all especially major views pricing with an from the does formulas, on in changes iron is will we comes where As made other sits. average impact cloud based on pricing prices.

have revenue that related to and were and related sales exchange rates. the customer prices. shifted of the these assumptions operating rate, include changes to some USIO commodity those directly past nominations Asia-Pacific the dollars example, discounting over U.S. quarter, the For Aussie and mix, None related cost APIO

as year’s will of some on because we the our worth it year the data, having we sensitivities. of skews As sufficient such, future in to full on data Based calculation, these well feel factors sense XX% it points results to no estimated commodity elaborating provide over investors have provided as be longer for price makes his performance. real an remarks. model our of Lourenco year-to-date

that, I it to turn with will So over him.

Lourenco Goncalves

Thank you, us this morning. to joining for thanks everyone and Tim

into Before the discussion the would Tim busy that I items made another one quarter that a get events of highlight few mentioned, to for us. I this like

our of August, in we returned Cleveland-Cliffs. name First, to historical

represented company focused diversification new XXX on Our products under the ignoring management before starting in great of changing the Cliffs in name team The Resources business geographies, and misguidance over strength different of XXXX. of this Directors Natural Cleveland-Cliffs and was actually for is. a Natural into to Board years name a a Cliffs what XXXX Resources in company true

and both Corporation business was capacity approach customized U.S. the is million with with Mine real logical to and adds in of This major on shift reshaped need the synonymous X.X electrical and the the in simply Cleveland-Cliffs units focused mentality name is blast in core XXXXs tons along Now the the Great the for the the in we production change pioneer this furnaces methodologies company Lakes we we well quarter purchase cannot is by expanding marketplace. of that furnaces of iron the protecting million. U.S. This something high-quality event the back steel-making Lakes to customer Also minority Cliffs with was these Tilden base interest reserves. HBI exactly in $XXX Great to during introducing XX from pioneering our our portfolio provide the name business the tons our anniversary Steel ore ignore. our other million that what next long as EAFs, to distributors to the pellets our to from XXXth as acquisition the step. long for pellet to the as lines,

we sense only market States strong command, we place does the Given acquisition complete also our the to standpoint, what the value United from in but supply enhance contracts in position. and this pure it not a made further for have margins

mines need to transaction. our at mine pellets also pellet of tons would the current needs have within that Starting blast needs capacity of facility with ourselves HBI customers, rigorous we in to furnace of capacity of HBI to in became a we to a well-managed growing priority possibility States grade fully alternative. and the facility and million so increased pleased us will meet a own plant pellet very the Ohio, organically also has looked operational be portfolio. As our XXX% to of coming supply clear that production ownership very both XXXX. United our business became it not gives our expanding in We Cleveland-Cliffs. has a organic the opted new in a this study, only The by great newly XX the XXXX, After to I a the transaction our DR our add risk-free am and of flexibility friendly in state production gives that acquired place the annual online expensive so long more accommodating do tons been been in from and pellets. us pellet Michigan, our therefore but growth capacity

to our operations on updated outlook. and Now, moving

different at has That are already company care from the company in EBITDA and That’s here been three we one a has found for the year. a just taken As mentioned, XXXX EBITDA. entire been X.Xx ago. year a has X far Tim Adjusted last thus great far. leveraged quarters passed I of Cliffs years now

affect we that However, few events had negatively third quarter. our during will the a quarter, fourth

significant by late customer. a the third pellet First, we quarter unexpectedly, in long-term informed revision somewhat and quarter fourth of their a contract nomination were in downward

Lakes. higher have U.S. have which XXXX sales are that to we realizations climbed on client we House. While the pellets, into normal, largely announced selling margins do within nominations should affect the in the not unforeseen well-known pellets they we as disadvantage seaborne White good not lower but pellets every our enabled will sales sell the up, That returned on we a assuming rates implemented indication by will any we of the the light export lower fourth as the have lack impact but back decisive have this Because prices reduce vastly in well. volume the where nomination negatively month, residual our as seen volume, freight said, commodity exporting replacement expected by from logistics a of realizations Great impact embedded sales to environment action imports not Cliffs show by of negative market, to quarter reduction we impact QX. some partially and account in Taking domestic mix the last when event never also only offset expect on since will. all-in steel Trump came This in

production problem a market, of pretty output. steel With XXXX, as able we with and to their government, it no consumption to the reasonable implemented to steel the the cheap Chinese recently international China own longer imported not due much domestic be will be place, much the the is to steel. restrictions in measures transition U.S. by expect continue flood in restrict market should in domestic that However, significantly steel as to Chinese which largely unabated

than for As a of and an direction price be our potential domestic surging narrow might heading also like report in price the prices of domestic of the for deadline reduced mills of ahead for into nominations spread prices the electrodes higher of the mid-January, between several to XXX foreign the steel Section looks now, customers’ suggest. EAFs by XXXX furnaces recently graphite restock a in already market other and ‘XX and announced fourth blast inputs the hot-rolled at quarter increases different steel, the

costs. year-over-year and sharing the second major rise workforce, our item to in rates costs been outlook, have USIO impacted we States have in higher higher the impacting higher maintenance and profit for negatively energy United seen As by Australia. paid costs

companies will we conditions, than We affects of on startup Ohio the Cleveland-Cliffs high will pellets impact that such in All ahead project in do original some of said upward as next overall eventually of or help things operational by away our the metric will be in the the has are face and world year that’s the FX of will cash Despite in transparent with and go equal. and in denominated we reflect production currency upgrade either a safe may our basis. nature a Costs business usual. and XXXX, manner grade being responsible Australia full best and in market compliant The well impact there, downward per completed, producing in dollar been pellets productivity the today pellets facility the made of a have DR in by also local start of Australian produced on other environmentally is Combine APIO a rate have facility plan. Aussie traded more Northshore completed since our business production. publicly negatively DR costs us been the moves increased rising sales, to costs hurt our mid-XXXX. margin have HBI up operating moved tweaks some our as the exchange DR hurt grade $X or range once grade all being we as year cost our ton in

Asia-Pacific for is would not piece mandate Not ore been have well-publicized, its acted clear of above Brazil In really third to China their of Asia-Pacific of Fe that, the is but from reducing and fight has months government’s The the winter the Vale offers the buyers that realizations. Chinese totally drastically their to the pollution preference higher ahead Fe capacity by seaborne several contents The and in high-polluting With from by my Australians, been has as cut has ores for we already market do. Fe higher our XX% now. started let with in upon. ores by impacting Chinese higher these updated by understood quality improved the mainly revenue outlook steel times replacing pricing the realizations they said field, demand very SXXD. surprise, in meantime, content has lower content, alone to

the to, content to massive very they which price a of good Fe ore price, XX% offer lower major the premium Fe huge sell at the While over a benchmark with their Australian XX% suppliers XX% content or Brazilians ore, continue produces to tonnages conceding our by relevant these discounts reference, buyers. APIO Cliffs sell the not is market tonnage. when in the XX are Unfortunately, tonnage though by a Australia to as even compared continue discounts also sales SKUs huge affected

better as to have us. some being XX% considered, and limited see much so been not we discounts factor is of breakeven produce market now, or fines we is premiums, continue than the from theirs has playing in currently APIO All content low of Fe content long as achieve And ore. we negative of our lump we have most we our Fe EBITDA important the Our content to only benefit the about in Fe lump improved impact while against for as reach to above until our to far. end continue at life doing decision mine as been

likely of all will within our softer updated factors expected. So with these the forecast, originally QX than be

negative short-term one should this However, last only impact quarter.

of Next year’s in a for source is place should recently of the an XXXX one. intact The from restrictions endless half should time, dirty enough production steel long be country of buyers’ remains China steel implemented affect extended first and that sales steel coming in remain an there the nonstop. that to period forecasts perception strong cheap always

environment for States consequence, most in for to control we the In Chinese the once business said, but a China. a made we away. last goes now pollution, more time always should have much Cleveland-Cliffs. clients Last unfair and great QX the on happening start That’s one advantages of bring least, XXXX what’s rationale deal progress have a right we competitive HBI. As not sum, in our United as of spoke, since their

providers talented of given a Midrex the third-party the opportunity and construction more internal time plan. numerous until to from Cliffs teams team commitments up ample from has the lined the with of outside. some expertise groundbreaking have our and have we The most We begun along staffing employees perfect

the potential are customers. we interest inquiries As have amount demonstrations of from and for we received of with excited demand,

anticipated, their be excited of that fully HBI we imported to Cleveland-Cliffs are geographically. to to units are closer much iron iron source current pig and able As switch high-quality and users as domestic of custom-made

been We HBI by take of project. potential would have our like approached a candidates who also equity in partner to position a number

are our time. not of details nature too to confidential you we this give at the Given discussions, many able

structure through are partners. speak we these sense discussions to each these the potential goal for working of We that create with as makes a

we updated candidates continue discussions balance sheet customer on another shape to and that to been with of course, pretty will we each both intentions. potential HBI of handle is to one. thus XXXX of good status the to up our our of type why shaping has variety diversity speaking look far of is are have better the be and fluctuate been good to project, the the the related at us. quarter top for forward long. This throws everything demand of debt XXXX with dealing can Given I continuing priorities are with, in much To everyone have a and so market has a been our to equity partners. anything including, year up, and and outcome keep we the precisely worse world pleased priority The for wrap reduction

move we we will obstacle of last the just years With as history for that, throughout during have our will able it that as way, X Q&A. forward, back operator the to As done to well Cleveland-Cliffs. any comes I handle be we entire the turn as

Operator

Capital comes [Operator Instructions] question the of Lucas of Your Pipes first Markets. FBR line from

Your line open. is

Lucas Pipes

Hey, good morning everybody.

Lourenco Goncalves

Lucas. morning, Good

Lucas Pipes

some that negotiations a you time? regarding that state I in on So, points to HBI your is process, at follow-up have I your of wanted nature Lourenco, with wanted unequivocally going I you and partner to of last point but understand this are partners. can follow-up on what to the

Lourenco Goncalves

Lucas. anything dance. No. it’s We state done, It dance. two It until to takes to cannot takes two

the what At contribute even than so we XXXX. On a likely related equity the having flow flow we not to that have be are to to we’ll partners, on concerns are the are in if are project. going anticipating, generation, this so possibility much position cash other point, cash in keep with your to partnership we of to definitely flow that going more hand, in based majority cash XXXX, generating

way one So I with me we at this is anything fully come so do The But you and than can’t everybody. do. assurance we’re you no yet more I design but an to a agreement committed to way is not only equity not that are give there of good point. is asked what assurance that one to can partner in done for a

Lucas Pipes

then the I helpful the a outlook Okay. And more business. USIO No, that’s for follow-up just fair. That’s wanted to little near-term on perspective. bit

ship to export are you I report mentioned in apples-to-apples where price put the export revenues, USIO to volumes would change the wondered for more tons market? going basis how about? with You should the you into customer thinking we of market on designation. be an And then, due what netback that sort you

Lourenco Goncalves

Before I and because be rot not. apples would doing pellets do concerned apples-to-apples,

very thing. So first that’s the

So that QX the not clients we are to going there. to pellets these are selling be in specific

don’t we to as give long – be they away, QX. in them As going there are for

into Lucas, no the So from seaboard fool’s make mistake, business. market pellets is exporting Great a the Lakes

You it yours away margin that supply logistic side the world to blast before the the the to handling the business. deteriorating market to your furnace, handlers, just goes should at advantage inside your increasing give product of to users end giving other logistics a and that are basically fool’s and be the traders, to

contracts. the have we So

We this the business United have in States.

say, and say, to remember say I what. would B might continue that come people pellets when A what. company so on I me would low so company You be used or to to and And

blown not go Great being Asia, it. is will fool’s pellets exporting one business. tell more clients some I’m long-term, pellets pallets from So, in Lakes the well said, make we to exporting that’s clients got pretty to much you that I full this export but sure to because you going time are that, established

do not I’m that. going So to

are two So options there for QX.

that inventory canceled be their these that clients their QX, our because back low their they translation their will is hungry come also really come got the will the that will or reduced that business. clients’ nomination that back are For in nomination, hungrier clients because competitors

these competitors. sell here nomination happy to we market to or So that their their pellets will the client to the reduced in be domestic

envision a going are we export we not very So pellets good in QX? massively. and be hurt to are QX but going Yes, I to

Lucas Pipes

prepared Okay. one And on were topics it’s then quick very mentioned over got APIO, remarks be the past, maybe your And to switch nonperforming think that you to one to you act EBITDA last breakeven. in assets. in to I

continue that discounts mentioned to you unabated, deteriorate quarter how So continue let’s over say, hypothetically, pull would and fourth the the the IODEX you quickly cord? prices

Lourenco Goncalves

question. as you the you question have own Look, are answering mentioned, – your

when think am to act act. I I’m money. I long to I I too don’t here So and make lose here not to money. need really

have much in liabilities So close we how the to know we business.

know increase, the obligations I the if to used thing lower only will the that about not need – I the for their they one forget know a discounts in follow building we to need be I discounts over now XXx XXX% there competitor we know matter make fulfill my operate Australia going at it. And will as zero. be will I costs we have when I – continue division point, these decide how no problem the will will stuff also you avoid more to there But can’t Metals away. giving we lower. it positive. that The comes. size about We for an longer over be at USA. X peer underlying EBITDA is their are, USA, We if year that that the during look, EBITDA to We was be operate will that irrelevant. It’s XX there, our that there, lot don’t get as low you a be to stuff will their to I like guys years The that’s over they but old me be is another away. where, giving I price years, obligations if USA it a – largely operate. was end running running APIO is when products Metals Metals operate

there. have that’s problem So we the

on the with that to of fast APIO. or what’s going going in we’re So they plug their pull will dictate fate how

the You never Asia-Pacific in a going forward, market. player Cleveland-Cliffs consider, as should guys

We are thing just running EBITDA. to generate the positive

then $X generate As QX, we long ore, $X.X fine which We $X we it’s EBITDA, better as generated on. to EBITDA because we million, generated above to generated million million QX high it’s million. Check That’s commodity, from another, did If million will is APIO so continue zeros low, I because the that zero, still and in but in anything well. your million good. so far a of of price the of generated box, $XX on than – a and be the count so we good. but price not will really bunch of but were $X iron something they is there. the change model, doing to over one we so we from far underlying still Then, APIO plug $XX alive, – of quarter

Lucas Pipes

I Okay. and will it now, good but leave for luck. really appreciate it here Lourenco

Lourenco Goncalves

so much, Thank Lucas. you

Operator

of line Seth of Jefferies. comes the Your from Rosenfeld question next

is Your open. line

Seth Rosenfeld

taking for of questions. Couple Thanks morning. Good my questions.

Looking USIO at please. the business

more are change whether front? Should domestic to shipments we mix to kind of contracts XXXX, will this million the potentially the supply align given return back think, on contracts offtake, a early – customer for year-over-year? average? you across just more when expected, the bit should ton XXXX a that you already competitors shift their on how be your be million you, can X.X and evenly A the that in Just then I And your realized distributed your them you customer expect sense logistics of come should that there you you tons with have going significant should not or how on back X.X in various not to sure this confident in assuming return, secondly, know reduced for you client any does will give to that, to uptick or have us customer

Lourenco Goncalves

are let that second to million, to number add I a reply First, one It’s the to not That’s million. Seth. our need numbers, make to output. expecting it’s me the correction your on we because X.X first, total X.X

small it’s it’s numbers So that perspective. we put but relevant the in

going will the businesses will that’s supply of the previous not, slack to – same are contract will but the likely we there. or I where client there. the during really tonnage if one my two These Cliffs yes, will be believe, will sure that a this slack add will pretty question, back on we don’t business explanation we much well. believe not inventory them, pickup will Cleveland-Cliffs. to More question a are go will way client and We our will what pellets in and, that going clients, are ago, be and the names that that disclose question in to that than expect about to It’s could the nomination their We to up with continue pellets. or the one excited that if to am too was not, Tilden QX, a current because of I have that On The But and come that client business contract there. so very we that they long client of because client contract way is very will the don’t another. the the think another It client answered be will answer the for the for buying we I I as be your come client. back come to reduced cover good serve right good come us tonnage for to then pick I back now. first back – by I us to sure am these another,

Seth Rosenfeld

considerations to too one know final line But guess what have when with. red you a equity certain ask lines, past, a it’s stake. I discussions offtake perhaps detail on for might you, you can thinking of partner I for ultimately still If question separate development the there which want exchange are in partners what you. follow-up about red Thank I we that in sorts with? discounted on a HBI just up be that would tie interested you us I didn’t think other development. for in example, that you give for Is real agreement just think the development noted early about partner you in the

Lourenco Goncalves

the at going One And – offtake the Look, in in just to of language, more point, terms redline discounting you if project we way redline clients. another, anything. was are we not, use are have agreements the your with agreements. financed or this much

different including end-users been potential have with types HBI. discussions We in of of partners,

So everything is possible.

deals that it at for mind, cut that partners point. deal and of not We thing of need takes time. dispersing to that trying but we a Keep one related the only in is couple to or are this next us bigger make and massive, time – amounts a Seth, a And will for to start just year. little would project amounts this massive we have money sense

we are mid-October, we have plenty still So in XXXX, time. of

Seth Rosenfeld

Great. Thank you very much.

Lourenco Goncalves

Thank you.

Operator

line comes Matthew America. the of Bank of Your question from Fields of next

Your line is open.

Matthew Fields

to Hey, of questions, for that’s to with you for of on what you stake, but project us on XXXX? who sort CapEx you everyone. is order with some I but it? HBI the think give dependent going of Not this just be in a sort the and do of can associated sort harp partners know of XXXX of CapEx magnitude it’s what to amount – guidance,

Lourenco Goncalves

Matt, we as still I now have partners we financial CapEx XX assumes you using or and point. that a partner financial no are see up $XXX this locked what will in not months over do think XX-Q, partner, and at have because next our million financial we the be

the project, same no $XXX million the in roughly unlikely far as remainder we to So for for partner. the the planning XX% and topic, the spend, and as months, that is is the we XXXX, XXXX are event XX% XXXX. next in in HBI that have number XX At

what or this less more that’s at So we have point.

Matthew Fields

That’s isn’t in the Clark that the it’s about to ultimately X says I I months XXXX. one question month And or low If U.S. St. not ton XXX,XXX as and offtake a tons first real quality were that at of lower the to helpful. thing from was high between he if few Tom has the sort pellets partner whether can million benchmark ore, out Lakes Tom up of iron way XX% we fact think economically, of annual a least mean, Asia. shipments Lawrence secured and Thank Asia. becomes not, cost or and even very a Great in discount – that Cliffs? really, you. Steel even then exporting buyer finds not mentioned, a more sounds export longwinded, but for this I China given really data points, Clark too apologize through good the a advance and finds read you figure

Lourenco Goncalves

no India will If and China will dealing does has of Australia buyer big not. an will the Fiji next pellets, that their becomes Australia have, next because the be Australia be source main of water, tourism Australia Fiji, be island does a income as with but

will India international supplier. have feed coconut climbing fashion in those seem those can trees ore likely finds in and to there, envision our of be market over ore I So because the out the a Australia. guys – of They become lot the will finds next our

views the in than Another data point about the and I iPhones Lakes Bloom only my laugh. of North iron I have send Steve better Great been Jobs, from China. deep place, to Minnesota you Bloom China will to do I logistics you know not the the words, on and ore China are there lot to my better, I would in market say ore iron please here. to logistics If iPhones the to compare another than another this lot In supply Matt, this view. is years tell place, that more other lot and seaboard from business. America, in Lake. ore a name better logistically iron friendly That’s a Lake business pellet you, XX stay steel to for send here will a to

So go and ahead laugh.

care, Okay, message. don’t I you got laugh, didn’t the you

Okay.

Matthew Fields

We got Lourenco. very Thanks much, it.

Lourenco Goncalves

you. Thank

Operator

of Your Novid comes from from and Company. next question Cowen Rassouli the line

line Your is open.

Novid Rassouli

Good morning, guys.

drill bit Just USIO more. price down wanted to a on realization little

move could if wondering you saw move of So, of my us that I guys kind $X we parse breakdown first question. a decrease. lower. the into was drivers primary about sequential That’s the helping buckets

Lourenco Goncalves

Novid. Tim handle let morning, Good one. will Tim, please? I Flanagan this

Tim Flanagan

freight, annual of component while here market, most U.S. are the on export into have have timing, the of appreciate our freight for do all you second quarter. we big we to bit a is four out are higher to a than contracts buckets: that this lag the talked reported about, a contracts; Thanks, Really, benchmark referring the quarter mix, we some moving more XX customer tons XX our Novid. anticipated the of some customer We in price of average down And pricing, on it. realization store little putting

downward others four of than of a last IO HRC. for a So, just impact maybe Mix as about $X.XX we if the then you probably of And little the is outlook certainly Those timing. evenly. board. is slight split it across piece the a revision just even higher up had and our result bit are an

Novid Rassouli

That’s catalyst sure far additional us it. for nominations? can Thanks. in on unexpected And very how reduction much you helpful. as have if just insight then there. the I’m as details Got not wondering details the additional guys give you

was get Just that? of just something a a it of really sense a trying repeatability this, to get of to like better trying sense one-off,

Lourenco Goncalves

Well, we but in we also clients. supplying have the confidential clause with color, our have our arrangements do

have will decline about I answering to that. So,

any one by been think time. As production. – given QX effect that, in effect inventory of affect far possession but I at have already do the lasting not affect debts not inventory Nominations I of or ground. the care the it taken time. explained lasting I will more has on client already in of Nominations Production any as do

announce hot-rolled, are of saying would less picture Well, optimistic. for into themselves, et of are what QX? here What’s of price price talking feedstock. minimum reducing steel you their Otherwise, going So that demand inventories or mills increase the or more ground, is reestablishing $XX why they a the are they on inventories cetera.

way, So that case. an Novid, production, I XX% believe feeling not steel they even do importer though in would are China is their of XX%, the and that’s not by The China because make good. output, in the cuts fact controlling

math doubt the So, make no needs cutting to are about add definitely to sense, up, output, that. they need the but numbers

to cut, the Malaysia, going output States, has these Taiwan. going this steel with going to only interrupted. whack-a-mole United and well-known not then steel States United So of to Korea, effect the having but to all going And been going to Japan, the outside going Chinese to guys being sending

the the So, it’s trends not in is or going in the the going market on seeing to in Korean an short of of South in an Chinese Taiwanese we market, being of well. on the situation. South trends than Korean market on or market. market, are type not behaving only of Peninsula Peninsula that’s the mills a already war Chinese the Japanese itself combat able current Even But war positive expansion in Korean more the a Korean the going open to that, export, other

lack currency point, They of to looking strong even out at undercut good is we we steel their and R&D willing affected this top prices, are this care at are the of Chinese surplus because for no to are in Chinese longer, before to be longer of are weak away currency. On Chinese, by going of a taking are their we point. export that, give everybody the the So market the real that and positively seeing no destroy seeing else’s Novid, and that.

not desperate motivation exists real longer a in that’s It’s been the export competitiveness. the no So, lot. cheap, for reduced currency has to or hard China need

the Korea don’t made are going in is strong some other there to matter they the one North Korea. be North real Korea, this concerned tag currency, this in that cheap country at coil So that say point, North United States, of what the place, They export Cambodia, Vietnam, coil and saying not was when no needs buyers because in about, steel absolutely you the kind made is will coil see should know. I have,

like you in steel thing, North United and in one have coil their to still you are the United got if And in could steel, if service if center are been have produced cheap to that one a States, access they the don’t you So tie buyer that Korea. day, have States a a you you got a steel know you your you in guys receive they from two dark believe to have saying because at are guy and this, North shows a from the up black FBI, door Korea. buying you it, suit have and

So, that’s why I be confident lot a will reason that better. am the XXXX so

Novid Rassouli

Lourenco. Helpful,

we is Steel seen of have move So, you have just said of then, not you disconnect last to think that prices question in internationally? U.S. begs the the what as what one been do question kind participating the why up

Lourenco Goncalves

entire always setters we I States, not are always, we been XXXX a were limited unfairly the the the been steel. massive price we, thing, were have United of a with believe amounts in case steel. world. with disagree I dumping only with that flooded now have in always, the disconnect. And we for We here success were situation Obama during the that We traded with we the flooded administration. litigated that had trade it’s

the most that two the at all a that there bad will you these these having time guy, bad of all And to will centers over not national perceptions, golden fact that clients guys all that. but not behaviors, just a they dance. unfairly they centers the domestic United good especially are a exposed. have component Did war? security It of big cheap anything the have is it’s client, the picture insist goose, for that in buyers, in the States inside, service other kill of in world seeing I not particularly not States with are as is believe We steel. as perpetrator of good service business. flooded one and takes world, know America real, the steel, the side they if look be the culprits relevant traded the the fight will United and It’s States United that the my these of even then have here disguising perpetrator a also to All being right disguising

Novid Rassouli

Thanks for taking questions. my

Lourenco Goncalves

are very You welcome.

Operator

Your of Stanley. of Morgan Sood next Piyush question line comes the from

is line Your open.

Piyush Sood

Act some repealed. After Thanks was fully question. media, guys. should recent the that Rico, the for saw Rico in be it discussion taking the for we a Puerto days. for Hi, disaster the And few waived Jones in there Puerto is

how the of unlikely, to for were, benefit to the that you unlikely U.S., I just all much of I it much that Coast? scenario is as wanted Gulf say, will you of that said very repealed freight – the but shipping how a in it very let’s if – So explore give

Lourenco Goncalves

or other it Jones or ago You mean that look, fixed. an in moment It fixed. years XX – ago Act, this in Jones not something fish place other time, the spending Act time. would fry. being be is put a years I issue and to have believe the too Act from resolve Their Piyush. thinking will that. absurd, have spend taking never I The any of people that back point it I And in to ‘XXs don’t should is I log but the said, like big. almost second was don’t I the be that. transaction priorities is would that at at this is about, XXX very something Jones abberation. And an other be be care

Piyush Sood

you, Thank Lourenco. Alright.

Lourenco Goncalves

you. Thank

Operator

Jarmoszuk Nic Your the next question of comes from line Stifel. of

open. is line Your

Nic Jarmoszuk

Good morning, Lourenco.

Lourenco Goncalves

Nic. morning, Good

Nic Jarmoszuk

point bringing would terms an to ahead And balance have at then and you partner? you its identify go for of with partner, yourself equity you own doing it to of sheet? question A itself decide in sort a in timeline internal Cliffs for set what what

Lourenco Goncalves

have to hard Look, we spend mentioned first foremost. XX money I we and have have to next don’t in a much going deadline, months. already the are how

of our terms CapEx. We also in other know needs

that to an we fully place APIO do all ever cash and at The But will the put anything then artificial at We to don’t this believe should create APIO, this count not consideration. our position we company tend I’m possibilities this USIO generation without will of never positive going I not at the and for gauging point. investors is know that over on capacity we in totally deadline ourselves community understand but and on in one – our bondholders distress. the cash truly also open, company. that as big the We act on take there. we And put of extremely I’m involved long shareholders a to business. same flow of a position am we a those. be the that outcome believe I bondholder we have Asia-Pacific that am based and business of parameters of company. into I generation in are a EBITDA a I’m can as expecting. with shareholder

from Friday so point. is So the they than most Other that continue weather hear relax great, at this today’s that’s and probably here Cleveland stock Cliffs, to me that, comfort can care the and and investment same in thing Board I’m of have you my have management I full in the and of taking your my confidence should buy the life. team and sell or Bitcoin. and enjoy go

proponent a know guys big am I of that. You

Nic Jarmoszuk

in XXXX Toledo sense CapEx breakout the the quarter-by-quarter? for can for with And the a plant, us you give

Lourenco Goncalves

one more say sorry, am I time?

Nic Jarmoszuk

the CapEx, the breakout by give For Toledo could you us quarter?

Lourenco Goncalves

answer Nic. I’ll that, Yes, Flanagan have Tim

Tim Flanagan

Yes.

weighted. of QX. year As about back XX% end we some have are the majority is of the in guided vast to spending previously, towards XX% the half ‘XX. The be There of of will total that

amount really, the quarters So year of HBI do next can first with we minimal spending. a two of

Nic Jarmoszuk

Okay.

Tim Flanagan

it’s from throughout point the project. the forward of that And steady then duration pretty

Nic Jarmoszuk

Okay, later, if last question Thank sense then were cash to than the And exit you the sooner give for that helps. you APIO, a could exit us on costs? business you.

Tim Flanagan

Yes.

a we a stated EBITDA on to continue do times, as have Lourenco million reclamation mean, exit I today. We $XX liability to plan will the no business now, couple a run right of So positive so basis, recorded.

that one to but reclamation kind the at take-or-pays obligation. we rest we So is have minimum on known of big that got meet in right continue those now, time. recorded a The contracts, we that’s this point – volumes the will

Nic Jarmoszuk

Okay, alright. you. Thank

Lourenco Goncalves

Thank you.

Operator

line of Company. & Brett from Seelaus comes question Levy of the next Your

is Your open. line

Brett Levy

Lourenco, Paul line think know green. of Ohio is well. I a I to that is not field Toledo, be the hey, on as Tim, Hey, going

Steel out little Big Obviously, be River, Tilden. all from another from share $XXX You years investment gotten years going going in sense Toledo? guys. be vision have the over are short your for X at bit either Ohio. it’s to the you potential got function Have imports $XXX you Dynamics, HBI a decided about to XX plant have But Nucor, automotive million support, supply million demand to point, years that’s American million customers taking to Toledo, to metals, you a of it $XXX kind plus these to this have X as years to spent potential Talk that of market of kind a list. is XX a replacing from next out X or XX about the able big

Lourenco Goncalves

but this question. very That’s to we answer will call, left question, squeeze it’s Brett. a a good that time have the very good I in try little an in

analyst Cliffs, With have language like far and we well, So, Cleveland-Cliffs EBITDA are use is Cleveland-Cliffs. say, all the victory very time. at let use yourself been to have XXx a a everything saved and so longer still could company, the no we X.Xx thoughtful bond try. EBITDA it’s that I lap sitting here taking me company, done that

the any We our extended don’t short-term debt concerns. we point maturities have to have of a that

in about the to Nobody business, idea have care export pellets have taken. been alternative place pellet domestic We good, or the take why long-term about an the of has that very they very We because brilliant else alternative because does contracts profitable they market. that. else in has. don’t anything That’s the talks everybody have

the much than this dollars have the more this made went And stock Cliffs’ stock for Armco in be when as lot more buy I’m after-tax a more unfortunately, my can saw in went disappeared. company disappeared. next names there Wheeling-Pitt, we LTV long keep have XX open the I’m because down, what investing money, after that next have and I’m All will joined United buying steel February. I’m quarter. will So debt big years, with dollars. not be I suppliers Wellington investing enjoying for market already investing I down. happens so tax these time, in steel really XX be hard-earned Cliffs in in long national the two ago for of down, spent is the here went company I with because particularly still balance in that, the down I of my for States XX term. in years company years I long-term over businesses, going. the the in the look term. I than XX I the next since and that’s next money could will use, life. this consumers stock these dollars, generation old I sheet reason went

wave going to the probably We years. in another XX, are see next XX

know is started they to They point. clients feedstock strong automotive for they sheet. They mini partner having they of would mini They going are the that I have eventually that the have example, the like at don’t we this what with – feedstock the mini, they forward. are that nothing And ones balance but So don’t have the else enormous. full mills or are scale. process the in have

not enabling sure well our are small. in type to are successful, order that. our is is only with outsiders the by do we them to developing we starting And these partnership That’s but understood of also, make the We XXX% that clients. move are move

million Midwest, already buys X the just with We tons. in in starting tons are X.X market million that, a

stealing kid. it’s So from a like

We are no take going absolutely to problem. with this business

You Cleveland-Cliffs? They from or to prefer And ask will any buy The would or other Cleveland-Cliffs say, then Venezuela? from say one buy you and from guy from prefer to Russia the to Cleveland-Cliffs. potential do buyer, go Cleveland-Cliffs. say, will you you

We the we are will for this grow. Dynamics are we supplying news, to before. gone, And of strong And that’s did continue are going more And and we or, the And like to will weaker and to envision years. we EAFs will stop. into we but So good the Rivers good then Star ‘XXs they when supply had mills XX did exactly we names after Big keep ones are between blast compete that fight integrated away. They the And integrated are that with and North away likely, be to with will and we going that’s the continue we the and and both. going during business supply that business. BlueScope, all going way continue ones split this Steel strong can furnaces evolve. And with going take strong and those Nucors way we business. fight and will great business going now, the Cleveland-Cliffs I back, we evolving I all that’s the structuring X business, we continue to the going. to mentioned They weaker will and to towards not care ISG how names. other Algoma both were this

continue to money lot going me, and here, We gone. will be will of for and Cleveland-Cliffs view, next the will to after doing here, generation evolve. good making wave we’re same you are next business lot one that here playing be And because of long-term we with thing a a long-term the Levy, the Mr. supplying are the of mentality. this creating same be management steel,

Lourenco Goncalves

will Okay. With for we the thank time that, you today.

the and will to you they way continue for We and competitors deserve. we hard the continue for treat work will ourselves to

Bye have So now. great will X months. and we in you guys weekend a talk

Operator

today’s conference call. This concludes

You may disconnect. now