Thank you Keith and good morning to everyone. The best way to understand the new Cleveland-Cliffs is by comparing Q2 results with Q1.
Our revenue line increased by $1 billion and our cost of goods sold increased by just $100 million. The seamless and complete integration of both AK Steel and ArcelorMittal USA into Cleveland-Cliffs has generated a new and very efficient business model geared toward value creation. Demand for steel is very strong across all sectors, and strong demand supports strong prices. Q4 2020 was supposed to be the peak for steel prices, then Q1 2021, and then again in Q2. Well, we are in Q3 and the reality is demand is relentless. Most of our customers are experiencing record profits and learning that higher prices are good for pretty much everyone in the supply chain. Actually some of the customers who were complaining earlier this year about rising steel prices then turned around and decided to accept the reality. They cut deals with Cleveland-Cliffs at that time and are now just plain happy. Others probably will be unhappy for a long time. Also as new electric arc furnace capacity continues to be brought to operation in the United States and abroad, the notion that prime scrap is precious metal will be better understood. Iron ore fundamentals are strong as well, keeping the price of pig iron imported by the mini views elevated and also pushing up the pricing of steel offered by foreign sources. Russia is restricting exports of ferrous materials including pig iron, of which they are the largest exporter of to the United States. China continues to say that they want to cut emissions, which they can do by either cutting steel production to reduce sinter usage or using more scrap or both. With all that, the trend on the price of prime scrap is also upward. Separately investments towards decarbonization will need ROI, return on investment, unless you operate in Europe in Japan or in Canada. Steel companies in these countries and continent are being awarded general subsidies and free money like the grants. Canadian and European steel producers are so happy to advertise as they get their gifts and handouts from their respective governments. That's another compelling reason why imports need to be held in check as other countries take advantage of a totally uneven playing field with their much worse environmental performance than ours in major government subsidies that we don't get here in the United States. China is not our only problem; our so-called friends are bad too.
While all of our relevant Q2 figures represent company records revenue, net income adjusted EBITDA, I would add we haven't reached our full potential yet. Due to previously agreed upon sales contracts so far this year, we have sold a significant chunk of our volume well below price levels that would make us comfortable.
Our most important commercial priority through the end of this year will be to improve these contracts. We know the real value we provide to the clients, including but not limited to our ability to manage complex just-in-time requirements in several different highly specified products.
We also know the unique technological capabilities that we have and the limitations of others in the steel industry that cannot match what we do particularly at the massive scale that we do. Simply stated, it's time to be awarded a better return on our capital invested to serve these clients and we are well underway to achieve that. Being the largest supplier of steel by a lot to the automotive industry, we are obviously affected by the supply chain issues they have experienced, all related to things other than steel. Nevertheless, our Q2 results were actually better than our guidance among other reasons because we were able to take advantage of the reduced demand from these customers and managed to divert automotive volume to spot buyers or to other contract clients willing to pay market level prices. When stated like that, it sounds simple. But reorganizing both the melt schedules and deliveries of these materials was a challenge that our team did a great job overcoming during the quarter. Even with all the difficulties in finding available rail cars, trucks and truck drivers during the quarter, we were still able in Q2 to increase our shipment volume in comparison to Q1. One thing that should not be holding up anything any longer is COVID-19. Brilliant scientists have developed not one, but several, truly groundbreaking vaccines that would stop the virus and its tracks and any current variants. But we need enough people taking the vaccines.
With the safety of our workforce always a top priority, earlier this month, we instituted a company-wide vaccination bonus program that offers a cash bonus of $1,500 to each vaccinated employee, if the level of vaccination of their working sites achieves 75%. If the level of vaccination of the site achieves 85%, the cash bonus paid to each employee of the site doubles to $3,000. Upon announcement of the program, we saw an immediate uptick in vaccination rates.
And some of the locations are already at the first threshold with two locations already at a second threshold of 85%. Protection from the virus is just as important as any other safety mandates we have in any of our locations and we are willing to spend real money to ensure each of our facilities reach herd immunity. In order to meet current market demand, our assets need to be well staffed and well maintained. This process involves preplanned maintenance outages, including the one taking place at Indiana Harbor later in this quarter from September 1 to October 15. Indiana Harbor 7 is the largest blast furnace in North America and for reference produced 33% more hot metal per day than our two blast furnaces at Cleveland works combined. The outage includes repair to two BOF converters in the steel shop and a partial reline in several upgrades to the blast furnace.
Some of these upgrades are related to our ongoing work towards decarbonization such as further enhancements to our ability to use massive amounts of both HPI SP stock and natural gas as supplemental reduction at Indiana Harbor number 7 blast furnace.
Another success story of the past quarter is our Toledo direct reduction plant. We reached our nominal capacity within six months of start-up. And thus far in July, we are producing at a 2.1 million tons annualized rate well above nameplate of 1.9 million tons per year.
Our timing could not be better. Prime scrap is scarce. And every day the price of scrap goes up, our cost savings from HBI becomes more significant. On top of that we have actually used the vast majority of our internally consumed HBI in our blast furnaces enhancing hot metal output and allowing us to capture additional margin on incremental steel tonnage produced and sold to clients. Along with the productivity benefits this action alone, reduced our implied carbon emissions by 163,000 tons during the quarter. Direct reduction and degrade scraps are critical to the future evolution of a clean and environmentally friendly steel industry. Cleveland-Cliffs sees decarbonization as part of our license to continue to exist.
As you can see in our recently published sustainability report, we are well on our way to achieving our targets through the combination of natural gas usage HBI production and internal usage and carbon capture. There's a lot of talk about hydrogen as a reduction in Europe with little recognition that we already use hydrogen in the United States through the use of natural gas. Natural gas composition is 95% CH4 methane and 4% C2H6 ethane. Natural gas is used in our blast furnaces as a partial replacement for coke. That means we emit good old H20, when we reduce our iron ore. And CO2 ambitions are cut by more than half when compared to reduction exclusively by coke or coke plus PCI. Also our direct reduction plant uses 100% of natural gas as a reduction. The total amount of natural gas we currently use in our eight blast furnaces and in our direct reduction plant, eliminates the need for 1.5 million tons of coke per year, the equivalent of two coke batteries. And we continue to explore and increase the use of natural gas throughout the entire footprint. Hydrogen is promising, actually, our direct reduction plant was designed and built to be able to use up to 70% hydrogen. But in order to make hydrogen, a viable reduction, serious cost improvements and breakthrough technical developments are still needed. Europe does not have abundant natural gas other than in Russia.
So they have embraced the hydrogen route even with the current uncertainty surrounding the economical use of hydrogen. That might not take them anywhere as far as emissions control, but is actually a great shortcut for free money and more subsidies from government to companies. And we all know how these things end. Replacing blast furnaces with EAF is not a solution either. There are technical reasons. No major steelmaking nation runs entirely on EAFs. When producing flat-rolled steels EAFs need a significant amount of virgin material like pig iron, prime scrap, DRI, HBI and even oxygen injection just to try to mimic the blast furnace BOF route. In reality even here in the United States soon to achieve 75 participation of EAFs, we may be near a peak, particularly, if further investments in direct reduction are not made.
Just don't count on Cleveland-Cliff for that. This ship has sailed, when we acquired ArcelorMittal USA and AK Steel, and successfully integrated both into a single unit company named Cleveland-Cliffs. At this point, we are very comfortable using our degrade pellets to exclusively supply our plant in Toledo, and our blast furnace great pellets to supply our own blast furnaces. To wrap-up Cleveland-Cliffs is doing well, actually very well.
As of today, our leverage is already below one time EBITDA. And we expect to be at net debt zero sometimes next year. With that, I'll turn it over to Diego for the Q&A. Diego, please.