CLF - Earnings call transcript Q2 2018

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Operator

Good morning, ladies and gentlemen. My name is Liandra, and I am your conference facilitator today. I would like to welcome everyone to Cleveland-Cliffs’ 2018 Second 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

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

Tim Flanagan

and second for results this start Lourenco the I’ll quarter morning. before call over and us discussion Thank joining Liandra, the of everyone remarks. you, our to thanks turning his with to outlook it

since best performance in quarter. year representing adjusted of million, EBITDA than reported XXXX. It quarterly more doubling second company we of prior total result EBITDA QX, was our For the $XXX

U.S. had corporate/other. a EBITDA only iron in decade, time over two first the ore, For adjusted components,

year the until consolidated being watermark discontinued comes Pacific assets historical this for With the was increased volume prices higher pay due improvement a those for USIO quarter. pellets. as year the of prices our EBITDA the This million demand COGS more prior in advantageous as the to This XXXX. which higher results our leaves no market $XXX both for conditions in from IODEX sole announced the actual direct strong remarkable the a have and in and of as time USIO generated of steel our business $XXX current online pellet EBITDA. we contract for plant high impact of Toledo the sales are prices. segment longer influence or and These the million premium generating moved result to pellets quarter, are as improved well in customers, deemphasizes EBITDA the five result HBI to revenue, adjusted and adjusted been the compared for pellet metric of the for implement, the included magnifies operations structure a in domestic June customers sale Asia

previous Great third long typically quarter, about pace demand the in increase certain our doesn’t stride expectation are pellets selling hit shipping its tons later Lake X the with due slightly ahead quarter, from While we for QX, to appetite million the pleased during of customers. during until the

this winter. full-year long customers our we million the of pellets, at have fourth sales elected for and strong light in volume were year demand some reduce increased to their recall million from XX expectation of time, of inventory quarter You nominations last for XX.X end the therefore the again tons. this light our to at of In

quarter. third the that sold the sell to quarter and long in X million ton to in balance the million expect XX million tons be remaining with total between We X.X to fourth

rolled higher due to over the number true expectation. coil long your our steel realization much in range, This the from in guidance higher the ton XX% represented current price per year. pellet than to guidance with required hot and QX came adjustment the full-year prior associated Our pricing largely amount up improvement of $XXX significant previous also increase

We a higher a customer for slightly and pricing customer also quarter year price ton during for IODEX $XX the ton saw a the positive by favorable on full ton HRC; offset $XXX metric $XX per we and mix per per favorable the of of lower HRC Atlantic freight relevant premium. impact quarter. The and average basis. the what in pellet mix are; IODEX; metric rates relative metrics averages the Year-to-date our to short were for higher expect

realization $XXX of full averages the per these be from our Assuming long carry ton on range. to USIO long approximately representing of revenue would year, guidance end the $X increase ton, our year per forward would each $XXX rest previous for the a

was QX original figures per margin compared percentage originally As and pricing Cash we our shift not rates. higher energy, to was last higher we expected. pellet the cash to favorable for to on cost, in the in reflect a cost past, $XX with of $XX royalty Cost the demand, remain mainly internal cost And cost also these ton year, higher was cost $XX are of is $XX impacted consistent driven long considered labor Due Mustang noted should but producing comparable not cash customer therefore we product also, mix. higher This wise, long per and by ton increase said, we ton long quarter. be do cost expect back cash guidance by unchanged. the in view increased guidance. than cash our performance. our reasonably of to half year's The per our in

the As that heavier working half With favorable inventory around in flow invest capital built we of the year. of the with release, into expenditures, this million back we after finish begin to the half all just project, the in work monies free we half this we’ll HBI cash year. we’ll $XXX the including generate in off in expect first to the season, shipping of the enter

well from With our our on have the severance, of majority we losses from recorded loss operating the a recorded shipments during final as nearly sales made closure been charges Pacific and all for related that, up our remaining for the income closure charges As Asia quarter, statement. discontinued terminations shown in million related actual operations sale, contract June. $XX and as

sales to the to Mineral operations, our expect with of the to excess primarily adjustment, of $XXX Resources and a of which should in quarter be which the closing translation of of million, the positive on currency reversal $XXX due Next positive approximately is effects contribution discontinued currently we books book for the million.

$XX the for As $XX quarter, second million the related which we CapEx, in to million of HBI spent project.

year. towards million this $XX spent now have We HBI

does placement of have packages, $XXX timing from negotiations down expected. receive and of our to than we disbursements, earnings to terms benefit statutory recorded The positions expected From NOLs in of the unlimited to tax of to favorable completion last related bit on our in assumption affect outflow position. year up this timing progress previous the tax with the mid-XXXX. of extremely budget least, our NOL our $XXX payment has the the of project million, result but we more plan start of same us we and schedule ability quarter tax and the position. those of the enviable positive second the expected tax $X in we depletion lowered an percentage This reversal million. lapse due for uncertain The put overall a not the reserve remains million is income limitations. And sizable but As deductibility offset we in originally the the a standpoint, use as not our into to an

on cash to to For of this, the AMT net basis expect we a related in and On income the the credits. begin X% we’ll effective starting cash quarter, refunds scenarios. rate both future, receive foreseeable to nearly taxpayer next all be top

to over $X allow will years. $XXX next $XXX the I'll million also and in our years meaningful below it about refunds, Next generating bring the with be billion turn years that, coming return refund robust and These capital cash the debt to that. being following combined put With million to expected quarter’s with to not net ability, phenomenal us beyond another current Lourenco. position shareholders cumulatively our million flow then three our over $XX but only free to approximately over us now a

Lourenco Goncalves

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

has flow generating cash years results we clear has quarter of a this second it us clean, have and picture set thrive over has during States past Manufacturing everything been United renaissance. provide four what and the will simple, Cleveland-Cliffs in become improve up done what evolve Our powerhouse. Company be; a manufacturing to and this to to reestablished continue

sustainable print as the is barriers business ore iron by machine. next will contractual U.S. and Our years as and today geographic money well a is carry us through protected two it

our a mix, the the markets. adding we further Beyond Great core foothold that event have already to we’ll point, that be changer in will strengthen HBI Lakes game

iron Asia five mines, to quarter, During all the projects. including APIO other we Pacific quarter. successful After the Wabush, our ore our all sale second driven strategy sale smaller business of final The announced likely Lake, close of divestitures, Blue the was years nickel coal and asset of four chromite, transformation. this of piece

from the We not from the by with This our these divestiture eliminated reduced gave obligations, accomplish million by minimization said are us surrounding million. obligations retirement the cash asset $XX both. clean liabilities. The expect equipment exit of only in but our and have transaction objectives Australia we away. right beginning allows from door sales We that the to obligations also cash us the $XX of reduced another some uncertainty

we move the there, one of and including centered forward U.S. Lake a of Cleveland-Cliffs of now what Cleveland-Cliffs kind all U.S. With with private of plan, best From the very company component only are we central the APIO publicly among a completely Blue do. reorganization and actually sale sustainable the U.S. the now a is companies. manufacturing recent and business, approval can does and is focused and profitable vital business and sector, traded CWA undistracted. and out we the and Wabush that centric our both court

about QX me per high EBITDA place the and demonstrating not have per EBITDA are foreseeable clear $XX evidence premiums the the averaged EBITDA; ton, pellets that contracts margin, to current our and our clearly these proxy reflect generating revenue a our here way, XX% our will Our just XX% commercial that are repeat we one; are Cleveland-Cliffs’ this steel pellet metric in for profit results power. domestic in continue prices quarter results all future. for IODEX customers; let for long $XXX to were ton with our and of business that our realization; By a that demand $XXX million the achieved in IODEX. margin, future the stay is the

cases substantial is the of forward, market administration, single growth, United doing Regarding in Every The domestic going Section in year-over-year steel steel some taken market growth. business subsector tax have shape. massive mainly Even the impact the showing sustainability great a States actions in reform, is the by the XXX, to positive business, steel well. to would in the be brought the Trump and without economy in general particular.

driving this we of make market thing; base contracts, you we dialogue as can far, I case increase. because this that demand much I on back; from domestic one-time more is and we immediately the Cleveland-Cliffs scenario steel how the industry far can and for role and have in Based bench play have from what rise is the steel manufacturers, continue steel resurgence; for steel price that more As steelmakers re-rated actually tell case strength seen have most than must pricing rise have our the pellets seen benefited to service States constructed in the we with in and year. centers. a and not that in market directly than the Cliffs we downstream be so industry benefits this is United is tax prices reform we concerned, because the manufacturing higher have the current immediately ongoing

what no On tax our tax no is more a large volume With imply us provided increase priorities and number XXXX, lot million a our have generation of As we thanks year. This our our forecast will to flow pricing that, represents leave favorable and sell tons good we the our of top with APIO. XXXX for like allocation are. positive. volume capital to again this will again, of and this investment taxes contracts, impact year. pellets million increased EBITDA. to free quarter, community million forecast allocate XX% next. $XXX ranges once cash outlook with sales we we $XXX the of year both make With did pay, year clear from million have I'd now increased XX This long last both refund actually was and to $XXX to this and north to very EBITDA that Similarly, negative reform, a sales which expect for from

Our at project this team. is with entire returns fully provide than first priority, remains Northshore budget. will the and anything the on possibly do better the HBI can project, our cash the we this focus else project corresponding of HBI time. It’s along funded. Cliffs’ one The The management project time number with upgrade, on

comfort our the with Our four years, it over second lot long billion level $X in refinance on started have three priority, that and level in is of two any cyclicality ago. doesn’t way this we the a it tranches have to because to a like here XXXX. goal balance a net what can sense to I current first With of long make we of our we coming gives the that what cash from bring company expect sheet, the us. reach market we in throws in said XXXX We when $X combined at debt maturing, hand, years notes us the navigate billion, our that one

is Our outright, all bias this to retire notes. these point at

our dividend, on Our shareholders. the not The considered market HBI, we buyback be or each to decide would the meeting my in It’s making want share my step And any interest and our we we far unexpected. on could on to closer return cash happened of our return I priority, more will be Michigan, start too to Empire proposals purchases return capital Minnesota. that respective and ultimately cash Nashwauk the shareholders. in how mines evaluated week strategic start to progress to to special third Tilden to it-self with to one the opportunities plan shareholders, the distance. next land as present in capital be forward. recurring take That at three get our dividend well minority times should continue will our and in to that will This a make mention board depend will more and starting time as last we to said, move year to in for day to when board bring in route the

would a we down we high we have the enticing built lot if last the strong any opportunities a out record of whole project. At return and ready. logical point, But one, future capital approach there. discipline. that, priority be will do an four the one to deployment we drill track with somehow of same I not up, During years, number will With like see opportunities HBI pops this

to The This several schedule this United in by a projects proving in foundational underground to position continue begin put once the we XXXX. team another The second site, concrete, that everything tower to in We first necessary budget. much an the of other and by installed operators. as the decades was project we other the plan Midrex piling ahead being off-the-shelf finished States, years, staying was begun execute successful quarter plants. us not any a contractor get the the several the utilities employees all a is quarter. in Midrex past will a the are very mostly on move primary in we completed done the environmentally successful to friendly under project, handing third and Furthermore, QX done on to helps out same accomplishment action our charge Cliffs’ of keys one, of Unlike of the the right laying just job for then work during and in undertaking in over corners and This is means. science operations production is the the into Not of team be manner. ensure us construction cutting running safe work.

technology. in and DRI market starters, is For the leader HBI unquestionable Midrex

feasibility by remains a top anticipated. million a $XXX is site year announced schedule upfront was done clearly cash right. friendly It’s budget On ago Our now more than of Cleveland-Cliffs intact. on project study our that outflow completed our and originally over of selection, over since we year this the

construction abundantly seen ore healthy. buchling and feed ore a seeing we scrap DR be that feedstock, with the Cliffs and full to one furnace is the States. a only is because DRI, pig in actually quality grade HBI. the migration higher and original are most everything We and to for to comfort or the blast only is able our extremely most by the and have clear, in Cliffs already like capable desired our a is well. have And space, a environmentally Midrex and In can continue we to to produce control of grade come much build introduction The of contracted. element already contractor the pellets at markets. the plan future is markets that or very this costs, HBI $XXX in DR work has proven higher million customers toward it the conversations very In Lakes. decisive bids in Cleveland-Cliffs do producer of packages on it, plants what expectations. the and the most it something XX% that EAF excitement feedstock is and mean grade are pellets. high-quality similar in company our we point, the continue HBI evident that executing us efficient total compliant and make below world, Great well detailed the At time, about only over going and pellets factor; our is give customers cost-effective the United This the And have with being sinter to important iron let's to that’s needed on

of Great now the overall the will essential. their of to place undependable are share all making into be rely with to Not of just cost up EAFs $XX margin to production point ours Ukraine, steel transport ton, like per sophisticated our grades further not steel metric market source and the currently the of be United in Lakes use. Venezuela, approaching from are upon units forced made Russia, HBI With at advancement to and and our Brazil mention States EAFs like XX% caution higher to the will

in overwhelmingly us, an this considered, both and opportunity for All bad is HBI of accretive markets. good

First, prices pig are, With contribution of $XXX a pellets. our benefit for grade above isn’t million HBI buchling per market both margin with easily where DR of iron cash have and $XXX from major for HBI natural margin be north and cheap HBI. ton. tons of paying metric X.X we’ll gas, and the available But price would

Second, our paying price, currently business furnace HBI market blast unit money DR more conventional grade segment our for. USIO what pellets will pellets than for be sell we

on be to now a USIO furnace contribution blast have remaining change, not pellets, In centers support highest DR margin we by business our solid some more not that is to So should Investors all EBITDA with we some the United letter lag well a healthy stay. this steel huge sales all that notice mills the we while of compliant, is Furthermore, all margins efficient, our will expand the served getting four comparable blast continue we States. all will margins service commend competing to the place, grade are will safe ago; Cleveland-Cliffs of and will based higher a not pellets environmentally among and envisioned will here the HBI balance With other pellet furnace own will summary, and contracts with it includes investments mills only in Cliffs simple, plant U.S. take years of businesses I but further our in facility. mills, itself, sheet. and integrated replacing focused, and the from based behind. all do mills integrated company scenario that by

highs while are even price selling in hitting sets. multiyear ore iron the We IODEX price

a margin volatile the And over benefits rip turn to the segment, by enhance certainly of while higher healthy XXXX business with it will to HBI the And less operator is We the further new market case lasts. and the will the and XXXX, rest for that, have for With I questions. XXXX. that of a that we entire it steel will will power. our sales earnings continue

Operator

comes line FBR. Riley [Operator Lucas from with B. And of the Instructions] question your first Pipes

Your open. line is now

Lucas Pipes

progress everybody, congrats morning fantastic and on good and Australia the in very nicely; quarter; executing the then HBI. Good that on news

maybe environment. versus to this your you're first question great more wanted that little able guidance, sell production I see to bit on to a in a So ask sales

close the Thank of you you the would can I figure demand adding questions in maybe be some XX words, currently million to put a In ton And on production XXXX you. increase that? is given think multiple the able is other that to there.

Lourenco Goncalves

reduce at versus by clients As far of them. fourth to within last because the we sales, of we contracts were last of if the decided cup their sales of quarter guidance, as end caught basically year, -- increasing allowance are give nominations our the the their clients recall surprise production when you In a year.

So knew It good that of not year. anything the just XXXX was because in they be business out a not I would that will the do something everybody was expecting, ordinary.

thing to anyway, am do. their nominations originally. complaining about like I be they would themselves Maybe right questioning decided that. their were what pellets bought But than they feel planning what’s they for decision. or to thought the not preparing I they and reduce they So does fewer to Everybody

came XXXX producers, for pellets. So when the came needed way it more came they and the domestic

the of So same selling we and we XXXX XXXX them QX charging are that pellets in prices. basically would then be selling

is so to am going hindsight that that get mistake So not last sure they year. same XXXX, I they are the make for could more are same paying the pellets for they But again.

are supply see with really will at to them everything nomination see XXXX XXXX little to coming that then how on all going We and all how possibly pellets then can of So and and a how for happy much on will the the we’ll in our we’re clients year how and It do. QX but end be wait behave nominations to depends matter they what At point, depends will to we be. are the we no it good sell. we’ll see QX. this a will more play it need

Lucas Pipes

if just the continue -- be indefinitely maybe point, sell really say follow-up let’s this nominations you you to than And to strong, quickly produce. on cannot more you

So the out squeeze from ability mines? do you have more to your tons

Lourenco Goncalves

more. We associated. always to have have comes to produce costs planned this always produce and with We ability more the

If a business Empire it matter both Nashwauk. we Empire last in recall, land have you a of year, state, care going consideration with lot what that people giving that a an will time, the At to the now. of new in the one And be we that or has republican operational, in and new now right are better will does control taking no we Tilden to serious a to know that. extremely the October-November, new governor Empire already will acquired be investment. Tilden the to same better, coming be in the so full operations, bring the we Minnesota minority government acquired democrat than helpful there positions at we’re have I because is is terms is Tilden and mines. and back been Michigan government

decision make that put not to land this we it sense. with make but a I'm -- use, do going anything over to there governor that to So cannot bought

new sides. will both the to I for already talking one am wait and So

are So ourselves. preparing we

care will market. of the mistake take no make So we

Lucas Pipes

and us budget. project mid pathways, maybe is point, your But commercial when critical then And on for me. HBI commercial wrap-up, ‘XX, your And share as on prepared think enter later that said just -- a you, only contract you remind good was confirm on those from ahead in your can in remarks year you to secondly, into strategy thoughts first Maybe and does me of it schedule to in Thank HBI? you two then you the quickly. that occur can that the I prepared ‘XX Lourenco, you some about time for early And as maybe well. remarks that’s maybe? addressed to could

Lourenco Goncalves

I good. Those questions. memory Lucas, my try if are very is comprehensive will

this so patting First of ahead budget. want on and and all, on budget, don’t ourselves start than say we we haven’t we much below and are number. of said We but we more below And the on budget, are a schedule because schedule of done, budget conservative at because very ahead the year, of after we well changed back our to point. ahead and too budget was schedule

We more than complicate the so with orders anything it’s to looks of this haven't placed, tell done cash And at all it point of disbursements, the change. will can like in. you budget outcome this not XX% I that

are at finish schedule we and budget of ahead ahead least. So schedule on of budget to the and very below this

speak. my As far as foundation response, and all the concluded we as infrastructural work is being

commissioning schedule. start erecting plant are in of of the and QX should ahead going We steel start we to

to our being to tower eager buying confident we And start sometime that are very product. year. We with later be to going the market see the this so started erected are

environment; ahead surrounding care of taking are correctly; finish original happy the of care working and manner; to in HBI towns; But to Toledo everything than the the schedule We have all incentives earlier doing to the of in hard everybody August taking a safe XXXX. area. of little be a able we making start schedule; everything delivering

is in is negotiations feedstock, and steel high-strength commercial conversations this Lakes, are quality extremely particularly the I for as and the keeping been a Great arriving material no many needed, that also As high shift are commercial Great there most reality. being that because well. it our real and produced can in But to the substitutes Lakes’ do Great things point, Lakes, that the going can’t will mills in of the the to that continue close like in toward iron deep that mills going contracts, have are to I mode and very way important so. And are use they or without enjoy. have at we with far do clear we clients it’s many

going They going are they get. know well. conversations the exactly So are what to

very in also they technical in not our clients. mills a, the discussions, the with people chain. true a future And a us, specs specs going huge it and only only product, from in We for HBI have great working -- pursuing want are that everything big success, we for are higher are event of this are this so But Cleveland-Cliffs. detailing many the commercial, within terms that are will also technological confident to steel call people that get this And people, but with products food good. us operations commercial we not that they huge be going profitable already

Operator

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

is line open. Your

Seth Rosenfeld

on higher quarters. out where I’ll Can please? pressure, to little over attributed costs more higher shipments? obviously you give cash those of specifically creep the be of we’ve Starting to a you’re better how and areas the understand seen start color much for of past mix the cost couple up step can please, there outlook the us seeing Mustang cost costs upward

Lourenco Goncalves

mix And than is second are these more producing have component reasons. higher have Seth, than originally Mustang produced obvious -- we quarter, Mustang a more cost we anticipated. lot the the the related pellets acid to of because are for we costs pellets product pellets a in of that

a it's We pellet. super -- add have to flux

So doing more we are work.

produce said, the is We’re adding the margin being Mustang pellet. pellets This of positive. to the raw material more Mustang

than blast higher much are is furnace. price the costs the but the So higher

as us, Flanagan few elaborate a I’ll day, net-net, on the Tim but of end let positive the things. other very at So for

Tim Flanagan

rates. sharing diesel other royalty labor production our realized with mix based the rates, our beyond Mustang, particular and rates specifically higher revenue oil on the of pieces seeing around increasing, Seth, you’re profit in prices higher then the

up higher that on customer the royalty don’t are of certain rate. comment sales the a I diesel higher PPIs. So Outside price our make one tied of would as that, go to front, that forget profits drives contracts

so was some related benefit side And we the cost inflation. offsetting see that well, that revenue of a steel increases on as

Lourenco Goncalves

the more world. success point, in about best entire market, the at Mustang pellet, probably the one pellet pellet big Seth, the considered thing the this in a it’s Mustang is

of pellets original That’s why the commercially, selling was the producing Mustang designed other customer we and not we’re were the more So are designed pellets outside that reason to also pellets. trying -- Mustang selling trying for. only pellets, customers Mustang but Mustang

flagship blast the the best it’s one the limited it’s really available ones a only entire one by client to sell anymore, world. pellet to that So not now in of product want furnace the

Seth Rosenfeld

question the And please. separate

think help mentioned a us in QX, price earlier think realized you up derivative size gain. it’s discussing the Can I understand true just in strength you again on there this? prices. I higher of a is the

mechanics us help Just the understand better there.

Lourenco Goncalves

to please. Flanagan an will Tim Tim you that, give explanation

Tim Flanagan

prices pricing, based all look out as over expected change as year the QX, from the drives taken year contracts and we of full price. year on So realized our average course to have our that annual of up the full HRC are QX step a

but look So the in therefore, we tons sold QX. second at that the not only X.X we that quarter, record sold have million tons for to the we’ve in

up we’re that’s about adjustment talking true that there. So that

Seth Rosenfeld

confirm the that you Can size of QX? in gain

Tim Flanagan

rate. impact about that It’s ton realized $X revenue on

Operator

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

open. is line Your

Matthew Fields

vision on the congratulations realizing company. your progress Lourenco, the in for

Lourenco Goncalves

Thank Matt. you,

Matthew Fields

couple of about picture the the flow you housekeeping I funds a debt questions ones, the repurchase us million you went tranches saw cash statement was what $XX bigger there couple A tell quarter? and in Would after in used on of then quarter. to

Lourenco Goncalves

XXXX, one other in the -- tranches the one we in pursuing in March, XXXX October. matures basically matures are have that March We two in one and

ones. this after we of short-term are So one pay And April that We much at And to of going three out also deal those. we matures XXXX. point, this that we generation. the to with flow generate the XXXX, cash are that the in cash so went going we think tranche as

thing So imagination. this stretch refinance any of is by to transaction there no

calls deal, to to every the But time someone down. the pay in continue good is a offers take and treasure if it. going We’re deal we

So past interest some -- to we’re and the and a revision of saving cash continue it’s debt, that me, to short-term able in bring bag. the the to flow $XX.X we’re chip which another expenses is million generate. and the a down money that for going -- thing It’s away

Matthew Fields

to is price on average that right? revenue $XXX guidance the And of year-to-date per Tim’s based hot $XXX. remark, to just clarify $XXX an ton Is roll

Tim Flanagan

correct. That’s

Matthew Fields

comment not Clark want that bit to comment supposed out? about what might see and you commodities there overlap funding. I it leases was little Tom when is with But looks Riverdale lender, just secured some Minnesota know you there reinstated, that is I personnel lot a of to is because any lot. based the some I read in you able whole really can Switzerland a papers doing that playing SR. at But be to like they for looked mineral Chippewa dynamic a how get

Lourenco Goncalves

thing the the the by With and like this along surprise surprising at I the entire all, me that else a would did money way, ordeal read most saw who finance to came not way Chewbacca. give because -- loser,

So so like there’s can way money no sources, it’ll real something that. he be from get

the that from of what people How is So number anticipating having the Minnesota, going business they that’s Naramore from procrastinate Minnesota, would now not not and said, that’s banned what intriguing. and Minnesota from did they’re record, pretty no that being of did did is from With come was Barb unbelievable. years ban the that’s guy commissioner this that surprising thing DNR, in happen. business doing assistance most That’s money amazing, of for Minnesotans, -- and doing exactly surprise. on from that the stole Essar it saying in I Minnesota, the they the

about even execute of nothing. magnitude product the finance no there’s have for And HBI, And nothing companies, at There’s in no think that do have matters they no they not for for no had, are make our been look of the done. There’s to that it’s at So with how we is what fly nights, even executing amateurs, is for things the scenario And pellets for it’s the and There’s United engineering. there safety. day. end competition there worse, over is to States. plan. doing a if by real not

furnaces any Matt blast Guess the Number everybody industry work. against than back at our context anyone Cliffs, ourselves in our that brought to operations blast without one when sell affect is would not our bringing they’ve Keetac on Great precludes without and come that pellets other our and and own like because doing that business. pellets, would have long Cliffs else of from I use the did that. to pellets end follows to pellets second, there’re that? the And U.S. that at remember because their their Keetac furnaces. steel Lakes. that clients we back them they brought here am pellets Why day, they the sure and compete back You’ll what, believe conviction with

are not of rightfully now but create United the problem and to the And god pellets still likely bless thing, States, right for us. they exporting So they export so outside their fewer back started we United were doing so brought furnace, States. able them, they’re the have blast any pellets to out

thing that not. see money, don't recorded I any we will from it’s that court go we we POP the we someone not, of still accordingly, check, another And coming it. forget consideration am but that’s going clarify. me of I would the If to until I the freezes the happy appeal, until acquired will to cash me judge; I is and to there, if don’t pay is land anything someone that absolutely hell that tells be the am the deal the the not more But the law. So know problems we And than or the mine land tells level by else in deal/ will under I and Nashwauk not was it’s pass there. fight deal county. act don’t if I clear left else That’s we explained, over, is

Matthew Fields

picture shift iron recently they if overdone is one more that and discount signals comment it’s few I higher appreciate indulge nor dynamic thing. I the grade that not expect analysts ore A have me, which expect pellets. maybe, all? quality at color, bigger you’ll written a secular that for towards on low you in necessarily care that reversion mean China Do and to that

Lourenco Goncalves

Tinto cost in first And would I of one Rio had The They XXXX. all March probably, already BHP was of Vale, that that that producer move were Rio to toward let BHP, combined, the March world is and cap billion anticipated ore who on really have was market in the in want since was that that lowest in think engaged. championship in Perth three in they it I grade the that about time year XXXX. low-cost them XXXX producer I championship. $XXX At the Perth, that iron I conversation that I things three, on explained $XXX of went back And destroyed and March Vale going how there contents Australian. work business, time, higher all in spoke they iron Tinto. ore in that billion Perth, of feed only China the know stupidity was and

many continues theory. came Harding CEO driverless from Tinto, Just after trains, And BHP, to value Walsh implement to After volume COO the BHP truck, fired over Andrew driverless Wilson implemented of Tinto higher ore. this fired grade from The toward was driverless that, that, Jim from so shift fired a new Vale suite. -- Rio Sam the create things, coincidently driverless Vale. Rio business was coincident from was Rio Tinto, and [indiscernible] fired was

steel. And produce and world be world to to to continue don’t China super they super powers be So first first continues everywhere. driverless to try pollute power,

Rio story path short, to become shift pellets there to So on is toward The I grade the to stay. next thepath Atlas. next higher are long Fortescue the stay. there is become the And on to Fortescue. already And Tinto and be the is more shift Do need toward clear? to BHP

Matthew Fields

I for you much appreciate good. Lourenco. that’s No, it, pretty think color. very I Thank the

Operator

with from Knauff line Citi. Your comes Daniel of question next the

is open. Your line

Daniel Knauff

couple sustainable ore to wanted I pellet is for some quarters have just ask what maybe been your what’s in for thoughts I the just iron there premiums Obviously, of level level. now, a limit. curious on the very high one I was market. know terms pellets broader more, are premiums?

might are regions be I’d investment? pellets produce on additional if ore? on if do iron price concern bringing your the you current in and what see able that what So think But or capacity terms premium of to come curious water to there's due that thoughts to

Lourenco Goncalves

-- more its like capacity, these steel much and And is and it’s world the big not our terms look by that to demand. half pellets in the United pellets and in UK XXX%, need South in and In of chunks Remember here is the of XXX, BHPs case, and is are XXX% more premiums, Italy, China; the produced Germany ban close than pretty pellet produced the China; you where the market produced in are almost Japan, to -- a world the steel the U.S., steel the of year; than a world tons X.X in places are million a little Taiwan, Belgium and that’s produced China tons billion States XXX a Luxemburg. in a more in in than comprised year the more produced places and favored. these Canada. XXX; than and rest of Korea the half

Imagine the a other that Chinese half pollution. is is the pie. pepperoni pizza side half of the So and

pellet that’s so long now, and well it’s not that’s then then pollution then $XX as in is it China. to becomes going pizza per And And pollution ton went pizza China demand is right will to that’s went premium went established, was increase pepperoni $XX, much. to why $XX, the $XX.X, about change. ago, what too the went to think then the So $XX, to become will not pepperoni, pepperoni,

that will For pepperoni pepperoni well be yet, pepperoni of pizza the size until pizza hasn’t watch. becomes the fun established the -- changed pizza to wait pollution

get it? You

Daniel Knauff

break was one of closing maybe portion quickly wondering of from the versus then cost quarter I if you the in to on and was APIO, cash versus the out portion cost inventory? just the follow-up, sale Just came more remaining non-cash? what And what could severance

Lourenco Goncalves

take Tim Tim Flanagan that. please? will

Tim Flanagan

to XX, that again, million related we XX be the XX, quarter, about of that of termination related come had XX there. end that were during ops with And the contract of a and of we saw of APIO, sale the about the of liquidation through made quarter. the severance disc of million gain we the completed by and second of you inventory about Australia, the pieces fleet we associated million would about of was loss shipments So the the XX offset majority for the the mobile to June, other at XX million costs said then

$XX So you during roughly gets come the quarter. saw to that million that through we

Operator

the from Nick with comes question of Stifel. line next Jarmoszuk Your

Your line open. is

Nick Jarmoszuk

see are mills trade you hoping from benefiting whether U.S. in customers downstream risks any from headwinds term, steel the and demand your XXX. was Section to are seeing the arising any Canadian you’d I longer Obviously, the Thanks. comment whether U.S. policies? from XXX

Lourenco Goncalves

excited from our our and so helping of getting far we’re longer sits buying, my standpoint, about to American they them But that, with are me, that current clients, Cleveland-Cliffs course clients Nick, produced the they go fact customers that but this Canadian are to life life new and they them no steel used just will friendly supply extremely we be doesn’t they change will my consequences. cry. are are paying, or I pellets in and produce for where they affected. by From If be suffering, Canadians we not are are a of will they treatment they shoulder more the same if and be a Canada American the to for the point. that’s it’s good; are clients, less beyond or from they this, so at like are them XXX lending to buy, crying, happy

being consumed the we the Great and the Great of not I be can elaborating happens, unaffected here to the So Lakes, same what matter are of will XXX. happen. we thought absolutely be soon will get side going easily Canada the outcome side from we no American much at become you, Lakes too going what’s tell happen to at what’s or matter what pellets no today

Nick Jarmoszuk

downstream elevated demand, with you there seeing And then in steel the risk terms are any of prices?

Lourenco Goncalves

Donald opposite I’m matter. It’s your because it’s concern, Trump, it’s it Downstream, like this the unquestionable American of that don’t at actually you exactly the resurgence like back manufacturing. Trump you Trump doesn’t telling, of not point. brought unquestionable

headlines just I are produced manufactures talk one pace, are that. there; service; working mid-western don’t should that other very a that car sold against that’s never And the drive that running been are jobs people now. don’t be. cab right record car selling Let’s out are The producing vocal about take cars manufactures to see as to any is The or at They in at the are hope there, and it town have need many record at there only about are have everything automotive. by are open, drivers out little again. Toledo drycleaners see selling they restaurants there as you the pace.

Thailand, Wisconsin, despite Malaysia, We in in Taiwan, spineless are them. even jobs we Wisconsin China, these of Instead all generating jobs Pennsylvania, in in of being in are Ohio, from in generated. Indiana, of jobs American politicians in seeing in generating

are supporting thanks Navarro, are in not other tax section States it’s guy has out Midwest, to generating that what to longer President been long of anything not appreciate no Peter of thanks and So there, play States not in expanding as else I jobs we And appreciate overdue. tax report, [indiscernible], we the than trade Republican Trump XXX, Countries reform, the United trade. pure advantage this that. far taking did And United as a thing. book

Trump, a we democrats, Brown, as gets. Ohio, because in speech he set of Sherrod is Donald his have the same he Here understands, exactly

class, my to more retirement then years or bring at in production we’ll I a out toward to prevail to end, not we So geared life more continue of at as problem back risk and be spent any why Cleveland-Cliffs of logic downstream That’s four the supporter the and of are life America. believe strong will last manufacturing, things what steel on. and of here enabler because in believe an in that’s a believe in making believe, as in in going what’s economy U.S. jobs, supplier, I doing a the believe in I as I States, United middle that’s I U.S., I

mark. future. that, have out would been for like so of things And two foreseeable to to we I support are the because me woods am of years. the following the the with along that XXXX. I started along well call of o’clock will analysts well, have the for last beyond on appreciate I first very are forward, very I we to well, during am long-long better the each because four With particularly you going the investors a the plotted August to other our the risks time, minutes here XX going I from zero. be but going the thank research going deal already got from with and day So that well going difficult than to not not very path, will moments stay. here going X, guys,

and me the we because company, accomplished money lot you now. more thank much Bye a have all to stay We in are of come. great for There's a to we is a lot a make very lot going Have together. a more There's in lot the be the equity. to And support. with wells generated this day. upside

Operator

call. This conference concludes today’s

You may now disconnect.

Cleveland-Cliffs (CLF) 20 Jul 182018 Q2 Earnings call transcript