CLF - Earnings call transcript Q2 2019

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Operator

Good morning, ladies and gentlemen. My name is Mariama [ph] and I am your conference facilitator today. I would like to welcome everyone to the Cleveland-Cliffs’ 2019 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

such materially that Important Although assumptions, differ could SEC, results set results differ that the materially. cause on that reports XX-K on believes to could on to company subject company are which news and forward-looking statements actual are the based forth in XX-Q risks website. factors available cause the are releases are its reasonable statements and uncertainties Forms with filed to and

it is being excluding the available earnings and on Regulation release, which call replay. At website found broadcast and conference published can available the morning. items. the company special also G results be the discuss will purposes will also be this for archived cleveland-cliffs.com. Today’s for call, Reconciliation The certain at conclusion was of in

time, this President introduce Keith Officer. like I to Vice Financial Chief and Koci, Executive would At

Keith Koci

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

into the in getting transaction briefly outlook, to I completed the highlight sheet. results our improve discussion wanted quarter Before second earlier our to the and quarter we balance financial of

Shortly debt in coming unsecured of $XXX maturity size new after issue notes us and issued notes we allowed largest a legacy we reported handle years XXXX in our due This coupon. tower last both reduce by due million our at $XXX quarter results, million. five in XXXX two to in the retire

previous was pushed to another cut the tower due XXXX in half year have years we closed, $X.X no nearly the With coming debt two in until XXXX, maturity our billion XXXX. and out also, transaction

make opportunities we it annual be to expense. for in on the shape, debt We material lookout of though to sheet balance already without a Even excellent like and service was will are our this our stronger. change these accomplished all always

Now to results. our financial

in quarter we dramatic total is it first our for the pre-HBI. typical of adjusted million, as $XX company reported of QX, EBITDA $XXX which business a today is seasonality For million increase from the

Mining million million customers by tons, in impressive shipping $XXX for than driven volumes an long healthy result stronger Our X.X quarter. appetite maintained the expected as segment Pelletizing adjusted of pellets a and generating EBITDA, our throughout

For the and our forecast. our forecast coupled pellets, long overall client, pricing with market to sales tons. our allow nominations of in some and full reasons we to tonnage year, ability reduction were us able export better grade enough accomplished XX DR and million pellet one Despite the produce from to seaborne maintain of meaningful maintain major newly for were

fourth of Lourenco will will later discuss up when usually the expected that XXXX stock The back volumes quarter, call. loaded our more to detail in winter mills this the the before in annual more remainder be shipping freeze.

pellets true of quarter, of low the sold falling coil $XXX year, during During $XXX quarter. of we the high, make periods. the negative was per increase pricing ton net domestic to was offset prior prices the and adjustment effect more rolled With up reaching have we pellet back had to long had price HRC than per by this in throughout negative second index six a driven good average a prices rapid ore ton. which sizable a That to with realization, of short the iron hot selling second we seen an year quarter, price enough revalue

realizations of and as some utilize year full just benefited contracts our pricing iron the contracts from yet. lag Conversely, fully have averages because price sales indices, have we quarter levels provisions, our and not latest ore

subject to trajectory, future. our continue prices to upward even we continues recent ups pellets longer on the for can true recovery the assuming in ore steel negative its prices be and in current prices average iron As higher and would expect up selling no

per with the consistent profit the was primarily royalties our expected outlook higher Our for high quarter costs we sharing. $XX be the end long range last guidance cash of to due at ton, quarter and to we where higher gave

a cost including and remained whole, labor, recoveries forecast. with materials energy, As stripping, all have major other consistent original our components

We the expect of level at cash during the year. half costs to QX remain steady back the

second anticipated on were our Northshore Another transferring completion upgrade North we the to this due the positive ahead segment. for the was to project more pellets the we of and record the of ahead and Because small DR coupled of grade volume a budgeted. our of Shore Toledo year of startup able that, our item plant to previously pellets to than quarter intercompany schedule, early schedule with the plant, of completion plan now facility metallic

immediately for tons the sales intercompany increasing commercial We they DR grade of use, recognized expectation sale long from when long of third all in are all are to quarter. explaining recognized pellets the be unlike third to after these our pellet which instead sales arrangements, are as produced party in our intercompany third will delivered XXX,XXX these quarter. XXX,XXX why Because place are XXX,XXX tons take

industry The wise, we grade rest by selling of the roughly be pellets Accounting grade of how high to can merchant you DR the our should begin average the see sales will are treated to financials. DR being margin margins to our in comparable intercompany ourselves generate pellets.

and at intercompany revenue level, of sales sold transfer from with the consolidated results. the our cost but the record We these segment goods eliminated are associated

lower shown line this item margin quarter, and our in intercompany the through our sales of will in segment, eliminated mining will the the EBITDA. corporate breakdown that and next segment pelletizing such, and quarter on revenue of run cost consolidated corporate in and be sold As goods than

we HBI is winter. since will business positive This once removing HBI to the Finally, consolidated the the seasonality with our have re-included results and able of will of be the margin sell our in EBITDA. see you pellets these associated will actually in impact some sold, inherent this pellet throughout

for much than generating my remarks, less be we cash done, of anticipated on overwhelming until It but up difficult a may on position. major is And the year the left less flow our that with spend just capital mode HBI at brink we in are on spending wrapping some less XX given be cash. looking is in business of than a see right set up HBI, but are enormous still to we'll throw free peak now months, amounts capital to off

to cash. EBITDA free on cash and than I'd capital, rest disperse are million. the which not I’d adding refunds full like completed for to from and our to future $XXX $XXX AMT future, free NOLs as will have of all pay to of cash $XXX Other service, any free even plant the foreseeable EBITDA the cash million continue cash minus in this of say, with debt are we annualized real our million and the our coming HBI all an be use basis production will number, Since sustaining is know. taxes we and to you

At buybacks to around cash price levels about and comparable primarily free in HBI year increased $X generate an to $XXX shareholders with in, what flow return we billion would this we've expect and million EBITDA stock annualized layered we have would via to in to dividends. that seen meaning

turn it will positive to over that note, On Lourenco. I

Lourenco Goncalves

conference going future pick this for had morning. message of Thank call and right of off the last us current you, demand I'm quarter, supply where Keith. I up exact thanks And joining with to to last the and iron regarding left in I everyone ore. same situation quarterly the

iron nice this The The for seaborne term medium New the have its get I when Cleveland way to profitability mark is of This call to in solution passed up. we told There in markets, Normal it exactly short is the the shortages iron the Welcome us. use Cliffs future the on closely With ore ore to no a Normal. New just ahead had you last term $XX tied IODEX or market. what

the $XXX above commodity and that so-called level and we caused or later financial the of the peak, today benchmark one that the ore desks with institutions more likely XX% price at experts are At three IODEX other than at is have than XX. here higher several months price other number, the after iron that

seaborne one more is term solution there shortages time, the So medium ore in short iron or term the no for market.

Despite to last system, even despite the price how call, normal. would much that. stock Get quarter's and second day after conviction it from had benefit markets or the day if prediction results Welcome ore increasing new quarter use new during to normal. iron about the the our our no actually

eight of As shares always, not increased months since Cliffs of worth we program total amount inception shares spent to did and repurchase to just the bringing quarter, took the back $XXX million the take, program share the we the skepticism. of million instead advantage bought buy ago. second another prevailing size the back the of during $XXX fight We the

did Other per shares, back better than of our -- $XX we a than buying share. XX% dollars dropped after capital of no we there HBI outstanding repurchasing And total was use our just our but thing now shares, the long. XX% ago they own few long term over did more do a a shareholders than having of without stay company to of months which

when spend and through be Soon HBI are producing seen we enough, big no-brainer. nameplate, capital absolute an as these will

very we the the of bought sellers thank shares much all As always, I back.

is forward your the sold new the in temporary. Again, is domestic that drives shares added Cliff's for prices, steel your You the weakness gift iron view thanks to going for market ore moves very the cheap. Besides normal shareholders. that current our

are seeing the recently rolled sticking, States. have bottom the already we hot for the in have we already United and we Actually, that passed prices increases price conviction steel announced steel

IODEX the As to now, the price far our in an a important able low we price as from on pricing the prices, thanks HRC is Despite domestic realizations, contracts, steel six-year high to pellet upward. in formulas trend were part being hit the performance. of

much to Just demand in for or a when we ago, the Cleveland sector. steel to related speed protected domestic bumps we unlike Cliffs reductions pellet new years, intended, as are redesigned contracts better few five now four the years we weather

several minds taking mitigating situation other the had measures against of If in response. blast you and our furnaces ever we at such two to have our Since XXXX forced occurring of possibility were recall, again. their we preventive the then, curtailing customers of and in production actively this problem we

the provide certain the addition These year. of long with of demand times have in at tighten us a and First, three we times ourselves good the for volume, million plant, bad per almost while created margin. tons pellets new healthy it's new with paying our will market, HBI demands

protection. components minimize nomination new providing with pellet or have contracts take our that of Second, us another more pay layer reductions,

grade Third, market, full product with spectrum we blast can now quality of or markets DR have flux, standard, traditional We furnace access the metallic flexibility. optionality flux We needs. in the EAF pellets. both for a the super more and specs can make

outlet for the have And pellets. the new finally, market with another ore margin our iron we pricing, normal high export as in

meet the we first agreements, event While nomination decent local to money. buyers reductions of and make we in supply under continue sell to our the still overseas now obligations can

moved since of the ore of much Although in pellet market are Remember, the premium premium with the the by year, IODEX. increase pellets the sum hasn't beginning the of pellet is virtue pellet more seaborne the the premium. much expensive iron price the

simple charges math, our and clients. to get doing today's would to and of ship domestic out from to pellet export able freight IODEX the currently current similar on price term we Just the seaborne be in long assuming realizations premium, in market market seaway, enjoy we what the

another of United States. for with Cliffs’ us provides effectively of pellets the alternative source outside demand That accretive

year forward the as result. In this pellet past month, planned of fact, customers pulling saw maintenance lowering nomination into a over one our and we its

by So the offsetting HBI plant. actually accelerated more our pellets sending these their revisions far, date is startup facility, to giving which we of Toledo are necessary

market customers. sales also We a including export furnace to and pellets seaborne are blast both DR few to scheduling of grade the vessels

As accommodate produce to you be complication. and consistent can should nominations revised continue on see we'll quest reliable, environmentally results, friendly without from pellet these pellets manner, our and safe to able

saw one Also, Cliffs’ a portion always we one that served being demand covered we another maker being customer by actually incremental other some client. can the assume not as by demand from -- of this is actually

for IODEX ready of year why robust scenarios EBITDA scarcity prices, heading In fifth an consecutive is pellets offset a we by low domestic the steel in be reason of seaborne even towards our of markets. these with our strategic event, the and foresight growth, the new to are normal

forward addition more with and HBI We our year of going protected portfolio. even will be to the next

ahead push blend our Northshore to second quarter, were earlier initial the of project conclusion the of of of HBI an the in startup. the also grade With conclusion pellets construction and production we to upgrade our schedule, DR Toledo able

two months no HBI aiming June production XXXX of of With the of that, to schedule. ahead we start are later commercial now for than original

work is At their all completion in personally and and the pellet -- a this completion to the the first and the Northshore I hard very for their like of on second, Northshore for Pass batch, delivering possible involved in congratulate I'm in in sorry time, upgrade of and making Toledo. spec startup Filizetti upgrade for puts for the would DR an involved rate thank Craig all earlier Steve

structure. to tall. From tower the next largest finish in for finished tall in now sticky On of tower, that in note, was we this quarter a feet Toledo. reactor stands this few currently us the and accomplishments, on the the of other built using the which to operation and currently be -- months, XXX crane over productive remainder foot currently past the America is we'll which one Among XXX portion complete

construction the of and have of Pass in manager this excited taking Batman Steve we're and Toledo, Toledo, Batman of We very which of construction are Northshore, end of the general Craig general moving Filizetti manager help very care of combination also the to our I with.

completion we a visibility project spend. have on commercial reached less certainty than away, year where have total production spot we and With a and now

the construction We have always which with a of project this usual working standard for continuous a is size. been expectation, XX%

The infrastructure the have labor we facilitate plant this report clarity most need the and more importantly, advanced to planned, as allocate pleased work and necessary schedule. to by originally XX% bigger we Now, that primary additional that only allocation on automated to contingencies. a are driven completion, extra costs additional about than are, up making and stability items to construction we

return. contingency very for calculates internal good the final a Project privately queue consistent the and XX% of forward, allocating scrap environment, equity going at a assuming number After the of two last of bustling price [Indiscernible] years, XX% rate with the a IRR

further is HBI are presently that are States. blast to That's United our already the furnaces not follow number. the that our closely Those profile The of plant emissions aware EAFs financial. view rewards from in our just pristine and environmental transition everything. well industry the This enhances

I to and less like governance Despite companies several a hope accelerate, toward has seen compliance, markets a for Cleveland again, centuries mood current If to consuming that real. do and world the not producing sensible of I in to the case have United capital needs more the steel, only capital allocation the it yet however, also distant the made continues we pollution. be in investors. steel, the to from like pace be environmental, steel viable social the identify while the really proves this that and before States efforts, will countries I'll world needs future, at but replacement that world the deserve and of so compliant ESG Cliffs’ point

for is almost the [Indiscernible] embraced content future finally will iron to high will others to meaning like India, do and be making they China particularly happens, that as able units, iron making The to or When space high now to not continue pollute countries be ore once our Cleveland grade pellets. pleased and this from completely any shortish environment world's in pellets This unchecked, will worldwide. what about, be an trends. core feel a benefiting what is in ore particularly up, we predicated with Cliffs iron explore centered normal, are initiative market, by and in we the metallic. is products, is the undeniable new the on Wrapping we already future

for the overdue the benefit environmentally questions. push should soon to the that, steel making And back worldwide. an over friendly enough, to call turn from I'll we next With trend, operator

Operator

FBR. comes [Operator Riley from Pipes with question Instructions] Lucas Your first B

line open. Your is

Lucas Pipes

very morning quarter. good on good another Hey, congratulations and everyone

Lourenco Goncalves

Thanks, good morning. Lucas

Lucas Pipes

we -- total And expect could what were previously XX% benefit you so Thank mentioned I the see expect contingency pieces side, the kind then could the mean you. Lourenco for morning. would should What I in year. through of on spending? CapEx I you us you where we this increased a ask project, terms it. lower XX% lower good the the XXXX to the maintaining way there contingency? wanted first of capital we moving versus couple of it understood the guidance for Lourenco, of walk CapEx you the just but of

Lourenco Goncalves

we Lucas, thanks. a there few of good a XXX giving continues actually to and good the regarding few number be are but Look, delivering news. Okay [ph] project. We're million news

don't year project, First, the conclusion. we at point, a Based that entire conditions. are we now With the that of estimate less allocate best XX% we of than beginning plan to the from and that, away two a time months, we the with project only this the been startup with fact of the it's at least conclusion anticipate on the have working XX%. need since our

calculate on easy more we're XXX million previously would it this be top So we're that than anticipate year is to that spending out. of talking And this number million you XXX fact the something if we like very the understand. the

year spending this next in to are year. spend money we're We only that supposed

that things now in this year. October in December, was of of year January next November, February or So

need up because to we do of are we to expenses bring So upfront, those schedule. ahead

difference same annual in So the a if contingency -- little you XXXX as And for be a balance, the thing. XXXX XX still completion, the XXXX the as in or far XXXX number more [ph] less no that's little the we're do so matter XXX as in and plus calling the doing cutbacks.

So that’s definitely story. the

Lucas Pipes

Got it.

includes the captured be in you to IRR? that’s And the the prices contracts XX% mining you see that helpful. for of there, have pellet of the the as IRR that on when going Thank sell you're the opportunity some versus you pelletizing intercompany benefit higher would I well. any market would then, mentioned out and for XX% benefit side? Okay, you then So does you that. that capture And tighten

Lourenco Goncalves

no. asking for answer the Thanks is the clarification, Yes. and

but paying pellets We after the IRR the are market from Northshore delivering the we XX% Toledo price. for calculating are that XX, to considering you're DR-grade at

you pellets the ingenious, $XX include million the also DR-grade spending we because way above at If to the execute that DR-grade Lucas, of for $XX pellets benefit of account XX%, or cost. capability. would in you be but create would million in be production DRI Northshore that

I I don't it add be post from that the IRR top the spent combined But projects. I my XX%. the in assume the CapEx as then have was well. But to that head, So, need including XX%, there will

of of profit. CapEx includes cost, Toledo staying price market that So price, with at the I'm the and stock not at the considering paid just fixed

Lucas Pipes

Got you.

helpful. will for luck. it I of very continue. That's over Okay. and Thank turn you. now Best

Lourenco Goncalves

Lucas. Thank,

Operator

question comes next Your from Spence Jefferies. Alan with

open. Your line is

Alan Spence

Hi. and for questions. thanks Good my morning taking

First reaching I'm to you on CapEx, you you wondering quickly production kind reach capacity? think how after of nameplate get can commercial

Lourenco Goncalves

Alan. morning, XXXX, a Good plant. – target finish will we the Nameplate, be we going XXXX. be the we're will to for that

We love of trials do clients lot clients that to happen. the know going continue in discuss with progressively That be would product. The to are with will a the fall first the will that We with. we step.

iron step United pig like they'll The Russia. that countries large exotics are Russia, get rid iron Ukraine, enemy from by in pig States of second of from

these So out of wait market to guys we their can't take very quickly.

we So all we going during plan route to XXXX that's we do point do when to nameplate will that's a already. work a that do we're in to XXXX. the pace be XXXX to Xst, going January and we're that hit the And

will And that nameplate. be. whatever will should be be you it will So XXXX XXXX consider

Alan Spence

quarter think Keith volume a you. being obviously Thank and should we made remainder comments back little term, volume about earlier for weighted. QX? I of verse half, in How more Okay, the And year end sales bit understood. about sales sort of think QX strong this very a back the near of

Lourenco Goncalves

X.X. something between volume above at QX In and expecting let's $X.X or are million QX X more. X, call We the

unknown the the talk Yes, that. they when at the know than any that mentioned So, weather numbers. is same never these right weather do should not And were winter because are [Indiscernible]. because we're staying we expecting hit. will QX, QX away, we better just now is number But always we in

way consider put to Alan, nomination now biggest is think me, the clear that I right dramatic clients on of right, abundantly that dramatic you us any from for good. nomination. point that disclosure drop if another the the far by nomination, client in far, the increase full decrease nomination the decline in so so that client no partially so offset another one – Only by allow

we company the they if have a now above that this the But the sun have so depths was we can much good and now up and line because clients in perspective, boats actually and change are lakes of right are and taking from beyond lake the water in the biggest weather are that – in really that start the the right draft the when with is what the we sky advantage we is before lakes the favoring transportation. dropping nomination load

a we to to Dropping all and going to when past arrangements moving going because we export moving start as commitments to City to the nomination to have minds. comply Quebec fast nomination into pallets all Toledo. not be of now have in pellets as the with going can I'm be and change with just they suicidal go will start that move, clients. I'm back I'm

need lot that's clients the is we might a contracts, but making just nomination. take consideration I within showing change the if nominations to they into that I'm on there decisions explanation, are against in when that and don't the need protected and they in you more you point So at fluctuations follow are their but this problem. wait to know exposed,

Alan Spence

tons And sell very XXX,XXX that you That's is of QX just will clear. inclusive quick the clarification, the internally? number

Lourenco Goncalves

sir. Yes,

Alan Spence

Okay.

Lourenco Goncalves

physically that's equipment, fleet, port, Because the correct. handling the the used yes we same same to same so

Alan Spence

Okay. much. very you Thank

Lourenco Goncalves

Thank you.

Operator

next Your of Matthew comes with America. from Bank question Fields

is open. line Your

Matthew Fields

again on Keith, Lourenco, progress hey, the on Hey, Toledo. congratulations

Lourenco Goncalves

Thank Matt. you very much,

Matthew Fields

exporting few both of net and you're on ask I I'm at Quebec but math City. regular sort your just back anti-Europe? a of DR-grade pellets pellets What pellets want all sort jump to gain sorry, over, so – about

Lourenco Goncalves

wise same favorable less so If of freight, very extra thing condition we similar back the we can we price or range, domestic in the into the current export freight. do – to market. we if the the – current pricing more the current net to factored That's because is

Matthew Fields

you're or or or your about is is to ore iron the net realization? one-twelve you, XX pellets XXX, if and freight premiums on So, give back your getting or back netting take XX take one-ten give for X

Lourenco Goncalves

portion regardless everything or The stands range selling selling that export. of domestically Yes. we've provided a

Matthew Fields

allocation Okay, kind -- to primarily And of billion beyond, of dividend where capital you value you XXXX current debt going your buyback. do debt that great. your is for Is current and debt of Thank it be once roughly? and nameplate capital is which you. the a is then up and level see $X.X kind share be our lower? Cliffs running? mentioned for will that that in once Does or and want mean level of the higher Toledo right forward going to Or allocation

Lourenco Goncalves

another two operations buyback, spend of are at XXX Keith This the The in you X.X to, million billion when I And that. we of of million And I the explained.. debt target balance if out really a buying we buying with billion my got matter spend got to sheet kind of past Okay. we things, -- is, because up a land fact tricky. I the but to which moving also of recall a right is level Nashville, and and do it’s the share so very what had clean thing now we $XXX target. was a partners put of in

cash through up free running, do shareholder the EBITDA $XXX what Cliffs? free we and back a give And with HBI increased share We extremely like You million our we it as dividends, comfortable in as minus have buyback, special through are the point to through cash. dividends. at this is because company soon

here. heading So that's we're what to

HBI spend a We $XXX to plant running. needs mind. up more HBI cut pelletizing HBI in after are concentrating remember –the CapEx and million backs the and we And year have less in going and lot pellets than needs are not done a

different as far it’s CapEx. maintenance anymore So a as

a Remember, is have to consider And pretty don't XXXX. $XXX foreseeable we till for But in $XXX future. have I then So, let's the it and much million million interest million. expense year anything $XXX that's address rich. actually

back minus pretty EBITDA the that money So, every have that's to we give shareholders to available XXX, year. the much

Matthew Fields

other line? you allocate on the And M&A would or cash there's top plans no that of expansion the

Lourenco Goncalves

I today. never. not can Well, say,

always between. at to are of far far few [Indiscernible] opportunities. We Remember, our that difficult – exceed started. and I very the explained are stock. this before was these That we returns It's point. decision I looking for and that share to opportunities – buyback But made purchased

we analyzing possibilities. So M&A always M&A things, are this

always more I'm are basis against I'm bigger. and grow the going not to just industrial analyze are comfortable be to producing size. super soon about what HBI. of We I'm going use doing. to with my very with with alternative I'm We're excited going we that comfortable than to the capital. comfortable I'm fact be

operating massive money not XXX research very way. buyback for the today analyst don't lot, And But the strong returning a million. that will shareholders a good for even bigger So $XXX $XXX debt is need in company we to size and He of stock anyway returning I But us. better. huge for I a even feel another calls acquired million that more much $XXX the execution, I feel buying We're start way if was strong are. I is selling is feel execution. better me buyback the stock. million. execution. called did a I than back execution They miraculous I execution. know company if

lot a their money returning shareholders are that. we of for So on

stock and $XX lot than stock may Our corrected, they and prevailing well, that try the it’s say, was better a but dividend are price finally just XX%. XX. They It's to only $X.XX, to is are $X.XX, low, a dismiss increased correct dividend. that number our some very too

use is Our X.X%.

yes. So

this to sheet balance share had boil And it's low right day bankrupts of delivers like five already from huge bath. of with one to we dividend. on ours, how So to source shareholders. of of This They gosh, continue X.X% ago, the company or money problem I will don't things probably realized, zero years free And belongs a frogs like as it’s our It's pan risk many in the there. this shorts. especially them a I pool in companies And space one having they million money water. growing. is full chance XX oh This the that. don't growth. and death realized continue that my but their short, It's have but like not like

Matthew Fields

please, One back Are premium XXX you push to XXX sessions, to enough. ton paying really just from furnaces? in sort When are they like me bigger in IODEX pellets? XXX, of really they making of one start said last idle demanding or a XX.X, pellet European for picture. steel kind blast do the Fair at even up what

Lourenco Goncalves

Look, answer on I I time. to maker have for pellets you Europeans don't long that. sold steel a in haven't an

So know. export I They And playground is Matt, Europe the even actually opportunities are not don't at Europe. right for are believe trade. that China. next that free honestly love They traders. envisioning I they now the we're free

China exist should that believe the bad tariffs they So market domestic protect to others. like and against player not the

a a So in apparently the Europe continues love they the here because needs home Chinese grow now continues and and increase that we output have they steel a to are home place protection free United trade. finding that Chinese to States, right

steel to Chinese seeing going I'm Europe. So enjoying

answer your So I don't the know question. to

Matthew Fields

much and very Okay. congratulations Thanks again.

Lourenco Goncalves

Matt. All right. Thanks

Operator

from Schier question Scott Your Clarkson. with comes next

Your open. line is

Scott Schier

to could you premium Good recently. hear and to will more level? a Lourenco, the this your a compression, on going normal congratulations interested We've thoughts be pellet a morning return seen such outlook spread very little a your bit when about forward? I'd quarter. the quality strong on everyone for more talk

Lourenco Goncalves

is of premium. the price never we a price lose to the way Yes. question. or good XX% The XX of the with plus price price no matter The it's iron -- the our the context very not for sum here for sum is plus XX% Look, the you track the or content our fact that's price. that's that should premium. if pellet the the of pellet the IODEX premium, ore benchmark IODEX pellet is Look, pellet envision pellet in correction plus the

bucks. to So, XX call my the just if XXX, XXX, XXX, IODEX XX facilitate so calculation, from appreciated let's appreciated it

didn't premium spot. go The and go premium And bucks. could down XX pellet XX the three the The down of course, bucks. premium theoretically pellet went still pellet in down same I'm bucks

three, So, a plus minus plus it's XX. XX

So we're good.

stuck thing. for their always the are premium pellets Japan, must other. Kraft with they'll pay Canada and the to get At and use like these comply not like always pellet here always regulations the everybody than that. in a details in that's them that these and in pellets not other always more calculated in China, United end other a And like the States, how else lying, polluting feedstock, of few buy countries [ph] do pretending, lot that's people because of to as allow it's So really faking, day they like prices environmental

So more. I they are paying Did your question? answer

Scott Schier

Yes. helpful. very That Thank was you.

do demand in that ore to or lower and you supply as see from pricing ton general expect move to pricing to here you up Normal? do on Just $XXX follow level iron conditions ease the the New

Lourenco Goncalves

life call that need really one kind what New time. to I what for surprised makes I I'm accordingly say and say. executing have to because this easy to been still my I only just Normal to of have the according some I I execute Yes. a I am that

go we back -- right four months, July five look months, So in we're now.

should can going get don't are a Then great. what steel four I way control, back a the in thing or months. I find control, increase of make iron But time steel go not prices prices. the and to to that is make know our my control, must with have okay. should aim I I and stuck say, reckoning what I oh they prefer cannot ore they we gosh, prices to So control moment up world of At that my are

to to New So to New inability the to And forward the own Normal, reality. get going are now welcome used see going QX Normal. in your enjoy you

to going any not are We do Amazon day. Prime

to are for full We going continue to charge that price pellets.

are if a That's more to my clients politically message are lot squeezed. correct to going they their the So that's your iron They to because you don't to than clients conversation. But different like of clients you other a talk miners my increase that. me. ore anyway prices be and don't

Scott Schier

Good Lourenco. luck very you Thank going Great. much, forward.

Lourenco Goncalves

much. very you Thank

Operator

Your from question with Nick Jarmoszuk comes Stifel. next

open. is line Your

Nick Jarmoszuk

Hi. Good morning Lourenco, Keith.

Lourenco Goncalves

Nick. morning, Good

Nick Jarmoszuk

With the the production DR capacity pellet Northshore now? project what is

Lourenco Goncalves

long per tons million year. X.X

Nick Jarmoszuk

of by all the that will And Toledo Okay. plant? consumed be

Lourenco - Goncalves A

pellets million of year. at a is plant X.X we taking million that need And Toledo The long into metric X.X, tons consideration. tons like X.X something No. huge

So we always have.

tons XXX of to relationships. We'll to we we If you XXX,XXX ongoing like DR-grade clients always that produce with have a sell have that to year Northshore pellets a capacity plan DR-grade pellets. select

Nick Jarmoszuk

Okay.

Lourenco Goncalves

We are not going to compete against to HBI supply anyone that we'll produce us.

States So because supply it's in I the any other I we past here problem. in like the that's me companies to supply supply right anyone to in territory, ArcelorMittal that going you United someone not pellets [Indiscernible] to have in are we happen. I'm go so will already supply who another DR-grade will not the going going supplied a to Canada. But sell Midwest, told happen. not [Indiscernible], to I'm put. in going

these for like partnerships Africa, are always East for looking us Anyway ones. term that. like we the North that be are Middle for place good -- So long looking could

Nick Jarmoszuk

Okay.

Lourenco Goncalves

happen our Place the rain in with left basically that in the were Brazil. that problems

Nick Jarmoszuk

Understood.

Lourenco Goncalves

now. right there opportunity an There's

Nick Jarmoszuk

tons the between are And pellets furnace well? us pellets regular as HBI can and there any with the if that the is blast what give in exporting there company volumes are

Lourenco Goncalves

don't because yet moving pellets this we DR-grade. started Quebec just breakdown started moving and We we just to City have

no so this yet, any furnace there just we'll blast So is if cancellation Look, haven't moved to this at in there's pellets see. no point reduction DR-grade, nomination. we

the the then in ourselves shout come stop domestic we will execution. always control to that I was first I But called will and preparing do. come that forward [Indiscernible] what No. cuts nomination do they can't do, can my Going depending the and what stuff be to I I they redirected control I control Well pellets I will like would love and on that do can strategy I just it are the and market Domestic We will that's market. out what here. priority. but not advance can that. control.

Nick Jarmoszuk

today the expecting to what be? volumes are of export you As

Lourenco Goncalves

but if of you today, I tomorrow say me ask might XXX. tons, As XXX,XXX

would don't yet. be week know XXX I or million. one one know You

Nick Jarmoszuk

Quebec Lake degraded are transported quality or are like damaged? pellets from these any As City, the Is Superior through from they handling through no? the all the locks and

Lourenco Goncalves

Pellets handling. don't like

it create So issues. every you you a you pellet unload again generate and time fines, you load

vessel load from the and That's So pellets [ph] I'll they give to then like to not then A like then newborn nature of through the vessel a a new, then this to new. moved in grab you But storage will on go it China it seaport it All actually and pellets the produce closer and to and be beast. we'd again. to and put this point pellet mineralize in storage be it then a will and then thing the and load B market move the pellets Point sold to Brazilian will that's and someone that an a the producer then pellets the that don't port to into the will to lot. move moved port get port do. and example. that at unload they move to

how many was generating and and unloaded So this loaded times fines pellet generating problem.

type more they will So right. that. of a The lot is resist But our don't good deterioration. in not are are like ours this pellets the so pellets to general you that thing But be quality, high different.

Nick Jarmoszuk

you remind over And several Could what AMT last next question refund is refund. the us the years? then schedule on the

Lourenco Goncalves

let Keith that, to Nick. I'll answer

Keith Koci

and broken got three We've out it's over coming $XXX Yes. years. million another the next

see $XX after can you've year like XXXX. like after come $XX that. in then million And following you each that got So million

Nick Jarmoszuk

the Okay. of balance it? That's

Lourenco Goncalves

correct. That's Right.

Nick Jarmoszuk

I had. all That's Okay. you. Thank

Lourenco Goncalves

you. Thank

Operator

Sean from Wondrack with comes question next Deutsche Your Bank.

open. is Your line

Sean Wondrack

Hi, on was timeline to plant. impressed the and you'd there. see quarter that HBI I accelerated Nice

couple a from morning. me this Just

something You mean the Can benefited iron clarify what fully mentioned about ore price not you you from having earlier just by that? realization.

Lourenco Goncalves

is with the contract is Yes. Look, clients Each contract each different different. different.

there's one in example, has client contract. lag that For a their

being price ore June price will so very this hasn't that's on one May, April, March, charged that May has based soon on iron So increase he because huge and this of in And paying so the so any seen back and April, client still lag. be and he client forth. is

So a and to continue that recover. improve all that. there's to have we things help considered, believe from price for us will We should also things still

how that's we see it So

Sean Wondrack

prices offset where there of a weakening Right. steel if price the And is the even just given that bit should steel in help recovery iron are. price ore little

on… a question Just quick

Lourenco Goncalves

you you would Why pricing? expecting weakness on, hold iron that – hold in on. ore expect hold on, Are

Sean Wondrack

not saying very saying an it I'm [ph]? coming about additional low provide you're basically upside, investor when you furnaces blast as off price No. only I'm thinking for that. should that this steel just price

Lourenco Goncalves

you out to in I But ore just time prices, cost you these to prices. that checked marketplace. you, know there the you cheap stock That's could be iron the of price offset in spending on been you because I but Deutsche explaining deck but they know people ahead weakness in agree lot days, have will ore disagree. buy said more with weaker of a desk Bank is I haven't do that commodities we of it me But your there why for have this why call comfortable bank?

Sean Wondrack

here. XXX% Lourenco, to price sure of don't I what think That's the ore I'm is I'm trying going but, me, not say even iron not down. excuse

Lourenco Goncalves

Okay.

on are page. We the same

Sean Wondrack

I apologize if that was confusing.

Lourenco Goncalves

No, no, apologize. don't need to

Sean Wondrack

new is know think Midwest supplying just could your supplying you other shipping of been Venezuela Okay, the countries when iron have these pig or with them freight about Russia any cool. HBI, or big of of you picture, or now? as to you those customers around that The advantage versus freight what clients advantage, DRI

Lourenco Goncalves

Okay.

advantages Let's with take let's to – BlueScope client, that's understand. one HBI. take big varies will a buyer North the it North depends really but BlueScope, be the our on of Star Star -- easy

are continuously We They Ohio. They are HBI our Ohio. will Toledo, by receiving Delta, truck. be

freight. not they pays much time. in will we pretty that site have their And on just deliver because will are any they inventory going only truck to the So to carry freight

to Ohio. Orleans would be material then they and in New they in Russia to If to and the point unload from ports then be a the sail in or you to the United States, site the of buying production transported freight the Mississippi in have up a then from port and compare truck. City vessel load Quebec were these Russia our adding keep it it them it then things that train to load with a And bring barge from to Delta vessel or

It’s resistance. clients. a going advantage. to the to with the HBI, to exotic pig And historical entire lot competitive; advantage bring HBI. the pay and on to advantage, very not the our We iron mechanical give the the lot price we It so give X% is It the share with freight going competitive. other close freight our has not not huge its more content will share the client to a to is plan iron. have not HBI client but So, pretty from We're going But very places. past. quality hand, their this to to has with be to away, not we it HBI with of share are carbon humongous client, be are

like logistics have just pig iron, So none. study is it'll be a that and will it second advantage to

thing to that as the pellet iron have from And as mine that’s one going we're quality, the have, ore HBI one produced going from Northshore that's far plant. and we're being one the -- Babbit to mine,

of [ph] will producing be Northshore Carson Toledo. only So pellets Paul DR-grade for

that looking quality narrow of type for. the that's are So metallurgists

the don't operators as EAF have something know feedstock the will So of as that they yet. far

of become furnace always about pellets. for same they the blast excited are As furnace blast soon receiving the will our way excited; material they operators trial, start as

Sean Wondrack

guiding for of my only you've you're last that just, helpful. you that's into of question before then strength cash know $XXX very million. explanation, to know needs billion coming roughly against And you never a position you EBITDA of a Thank like seen

have buybacks, in basically whatever share you of terms going cash to do You're debt want dividends to reduction.

iron Given as you of towards in company security and Cliffs’ are the lack for M&A about and Cliffs that months? kind have a you interest supply any candidate the past becoming few the an acquisition of kind seen backdrop U.S. of ore over worried

Lourenco Goncalves

Exchange all of And been there period price, the our day. to extended was I what that stock in Cliffs the theoretically move, an meantime, In the make buy certainly were wise, low Stock could price the has balance involved a selling they sheet for Australian time. to for Brazilian, our an call make of are [Indiscernible]. used offer we could Look, Championship up and every

and was being and first into five and Cliff being cost Samarco few the and low port, Instead disaster the of lots it's of are of and coping are cost are they the have be Vale, that to mines throughout also years all the but made cost fixing that. is interesting based are concerned have money the now cost world, in a business, consequence business they is it’s a so a main the price five like buying problems about paid value a They they looking with cutting by been [ph] focus. very maintain for facilities producer Mining its then the by a at different company explaining. your that its ballgame, using can't of that important, that environment stuff I a not use, focus margin, on

So the answer no. to you is

So pay their taking because despite the are problems the sell of care would the price I point. to opportunity, this they're to that are going busy They not the demand ones own they company, could Cliffs’. buy at that

Sean Wondrack

much That good quarter. next for all you sense. very there luck Great. makes clarity the and Thank

Lourenco Goncalves

Thanks we a the operator are lot. that, I back Thanks the call with and a and touch. turn interest lot. going to appreciate the in we to wrap And will to keep up,

Operator

today. joining for This concludes you us today's Thank call. conference

You may now disconnect.

Cleveland-Cliffs (CLF) 19 Jul 192019 Q2 Earnings call transcript