CLF - Earnings call transcript Q2 2020

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Operator

Good morning, ladies and gentlemen. My name is Lashana, and I am your conference facilitator today. I would like to welcome everyone to Cleveland-Cliffs Second Quarter 2020 Earnings 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 broadcast@clevelandcliffs.com. will that that found for are this purposes and Important Reconciliation call, would President release, the forth Although, assumptions, At of items. could being releases results morning. differ conference which also that materially. cause Goncalves, After company conclusion be Executive could that on Lourenco special on believes cause be XX-K factors on to could filed for available and call Today's and SEC, subject differ company forms which results it to important G is forward-looking statements reports set actual are the this replay. based website Chairman, The results risks discuss its factors the -- will are company's Chief the in website. Officer. its Regulation available reasonable time, statements and uncertainties on in and news are XX-Q available to with certain archived to the introduce also published earnings excluding can like I and was

Lourenco Goncalves

and Lashana everyone. morning good Thanks, to

company on in in effectively display, end full time put has the largest the that months, period Over Despite past. sector the highlighted market, the dealing I our was resilience our have few with closed. past which automotive of strong a

we on and mandates and and protect enhance preserve official healthy business. position our period. balance implemented its for we ahead our guidelines, We liquidity as taking safety employees. adjusted our improved of sharp initiatives any of over health X-month strong and then our to both able early Very sheet. the or a are to XX footprint recovery. well By in as demand, and We the down At same then the restarting gradual preserve facilities reduction time, our

to fast all back find resumed our way Cleveland-Cliffs, plants, to In that, with in plant include operation in our other our With beyond we year, timed mini our were to activity, forward by that today track. temporarily our to acting facilities million and we we only Fast executing mines back sector were portfolio as pellet perfectly of new Endo, transaction. we addition, as later liability AK back be except to able our tube, to HBI week. we shore automotive. be HBI automotive $XXX exposure of have equity management for precision in create this and able partners normal production in our sectors on ready more which levels spread add of the idle the And North AK fulfill will Cleveland-Cliffs, at new will vision clients. are our next that Steel, which With the plant. operation mills to And to our

through directly essentially Steel As for to our clients subsidiary our the and third-party pellets. both know, Font automotive Cleveland-Cliffs is through supplier industry, indirectly you a AK Blast

automotive to consequence as we associated assets, sector believe That's to to complete and some results QX. what like happened almost than our unusual production generating place it shutdown would more new I of costs XX% of are the quarter and was. and with in as sales of and a direct other unexpected the While of where already where be companies dedicated our our at automotive, sudden entire second the

fall and back will shipments idle will second progresses, As year the continue expense of the improve half zero. steel to the to

quarter did strategy. change our to second not The related anything

do unique a no steels stainless captive We and steel critical. are footprint of can from in-house. well. industry, have consistency self-sufficient high gives through integrated this in metallurgical other have production and the to and iron is tech and chemical mines us demanding automotive carbon one the supplying Because very own replicated. ore In advantage, we business fully among our technological auto can else iron ore Our parts things

the to materials. We produce specified the also highly have right equipment

capability stainless blast Our carbon the AODs electric soon, state and DOS automotive something for both that. furnaces downstream anytime develop And power cars. skills important, brain furnaces able that's as clients know arc the need, to of not and dedicated for the steels. the be including carbon Equally they and art steel, and indeed well future in market our of will to clients facilities as and have we also accomplish or stainless steels others are this

current past automotive States U.S. automotive is than competitors unique technical sold, car. them of of prevalence accounted the vehicles about United important clients have new to the much sales. our do XX% ever from too. To cars, fleet buyers historically the quick the care been. rental retail In has different more has level all capabilities One of it demand in the about of the industry, costs. not Our do in for been element all Such of quality as clients, it's as which about our

the primary past decade, many carmakers. for costs the over quality, we So value have three not seen American become

just by sales buyer the consequated. are ownership force ton global retail consumer-driven their The steel buy After share of specified Tesla unaffected, have competitors. pandemic the the car car projections. COVID buy would companies price car now late a Knowing market a Due quickly drive. they has wheels, car cool sharply increase to foreign per has cars fleet this this eaten largely their final of theoretically car recognizing to on American have reliable, And would expensive. companies while to price individual becoming the ton pandemic, automotive change $XXX. no American-based consumer best long and to launch theoretical tag to trend, made starting sales The but approach back. a fun car We American period car on American and market of car not States consumers. finally for highly increase down, $XXX again, buyers pre example. competitors, only is a by galvanized would cheap, fight a after car increase now due more innovating fleet minds an whereas the a market. people not United is consumer $XXX one exactly the just steel Maybe gaining because the decades having that fleets to to per buy in as because remained choose price been by are of are the close is However, are $XXX again trendy because cars they is

to other Japan, make new not South decrease price out France. car an hand, of the planning compelling the decide States such be drive in suppliers Germany business tax other On to not and all buy to would Korea a certainly so, or in also qualified $XXX anyone United equivalent do but would of to as that enough countries

Just the a the technological home of expertise of steel are few name of needs that industry all automotive the countries of to presence the and to demands the for future. supply and companies with

course value the Cleveland-Cliffs is years. to several loss with of the to new the chain the over goal in recover last able the supply Our be

and around In always steel have must not, these market, prices Cleveland-Cliffs are this the Prices be and if be industry products. steel parallel automotive is the is market of simply as days. are a with universe of steel misinformation, proliferation scrap will always unnecessary and the treated we the away companies products of Well, the soon. flooding unwanted and In else highly we AMMs decades, same value the going guys has included, to that invest the would not the down deliberate and the clients news news HRC fighting, materials. grade been to That's the if down. Or acquired step market automotive. allowed the go to able and anyone support for and steel. investment the world their suppliers, from and carrying energy proxy the And of problem one produce the specified we a and automotive future, in not fine continue to For commodity the market, is with by but as applications in as steel these HRC of we AK defined realize of commodities, nothing One technology to business. go as do the I'm have steel steel of It's to lot influence supply CRUs, skills all pleased like product for many that plants everything true. gossip inform to a since steel to for return on challenges order a attempts Steel, and will.

HRC, about we, at fraction sell. not product Steel, of is and because a rolled we AK much Cleaveland-Cliffs small just the In hot care mix do fact,

And far used products you applications carbon about really other in what steel. care exposed high-end as such parts. As steals, as automotive-grade is galvanized

goal for value Our clients. course very what do will contract over years, it proper the make future the we be our clear the of with and start for to we automotive receiving renewals next

won accomplishing consistently demonstrated from which this next the implementing higher a war. Supplier we time, in for hardest products, the support our General already and margins, translate Because The and is Motors in as of have course. We be battle this on received phase deliver year customers of due row. by to recently awards as we high-quality the ability our Year and love the our third into will

ones in stake recall, the to As was big Ultimately we a in the the enjoyed perpetuity, current every ore below the $XXX metric players a at surprise. all toward appropriate when by market. pricing is iron stay ton Cliffs. ore pricing, with longer out Since Australia number And forecasted XXXX, was above thing reckless metric completely of to you iron back with we have did attitude per per “predictor” same Brazil irrational bottom. rationality we’re and were the then Back $XX a in race called may pricing. and started the such we the prices eclipse, no the ton underlying restored I observant who to

the operation, get or allowed the months. is new restart the to provide but Last the within manufacturing that idle in plant, to Toledo back construction a we mean that locally committed year. the not update us base of finding we rather producing intensified demand end start recent to restart we expected pleased our before another need on over to start like we're workers back assets We despite priority for than the in couple and will we allowed has I announced operation. already four to top with construction synergies least, COVID able later, complete acquired sourced we most of of year. metallics our of are bring HBI had We restrictions AK brief however March. to months when million sooner exciting last come for but a to HBI demand Steel construction to these last this the temporarily recovery related of us The Due to away activity that in the a one on-site, on $XXX realize and of the to quarter restrictions up solution the achievements the synergies in that set would number motion

it Cleveland-Cliffs. announce million. from before needs four Q&A. I today final opening the of into of and a by by our have giving to Steel of These and to original operational pleased in come in Keith $XX synergies understanding my our and over overhead Koci quarterly on Keith. $XXX levels, that the pass results we at set the months As will for remarks of for now acquisition discussion total deeper call AK synergies have real exceeding motion identified our million a additional a I'm target

Keith Koci

Thanks Lourenco.

due As of segment. by you results cost positive impacted demand the second for volume we not and noted a our full we to was value-added both the the contracts of reflected ore overall nature in side On each place products have and of what iron note, pandemic the impact supply environment. steel COVID-XX on pricing the quarter and the business our

than well that and manufacturing lower were steel on as down the during a quarterly typical idle several XXX,XXX $XX carbon costs that which XX% significant were second year's for most automotive result EBITDA was incurred taken temporarily was $XXX of side, loss about compared million our were facilities from impact cash Our shipments, million by as tons the In consolidated of the quarter. steel expected in quarter, the adjusted down as the last as segment to shipments quarter. driven

That out is And second quarter rate an However XXX,XXX has XXX,XXX momentum went pick expect auto shipments by the to in tons anomaly. the shipments truly of in the carbon began that auto further July of evidence in up we end and as recorded over that or QX. record accelerated June tons. quarter was we carbon XX% about to into the

the the in In substantially furnace QX for cost this addition operations. be last as recorded reduced will week from idled idle Dearborn bulk blast resumed temporarily which have the all of the quarter segment facilities came including

for volumes were the need we X.X due offset have As our premiums. IODEX tons of the strong to and weaker mining replenish performance during depleted take-or-pay pelletizing and solid inventories and to arrangements held prices Pricing long per the customers long million also the pellet sales that HRC in place winter. in ton mid-XXs as remains

are restart to quarters furnaces Most week. of million by that through to them acquisition. EBITDA million idle end segment. of per Northshore long in the of working intercompany Tilden negative and was ton Quarterly pellet now prior Net our expenses will our flowed eliminated sold which Our impacted $XX show to which to in our Because be released third cost $XX resumed mitigated about tons $XX one corporate EBITDA operations corporate still blast and margin inventory of some were through the still slated expense, future most is sales million translating eliminated through margin. has next be from though steel year. manufacturing inventory the and the begin we remainder of through million were quarter in SG&A the will to will

about expectation $XXX a which synergy reduction clear would as has A to have reported the by about down million, Lourenco. Our substantially what from represents illustration achievement full company year XX% last year. combined of SG&A XXXX the described come

quarter during capitalized of payments million were CapEx $XX the work On in done the remainder and side capital interest. our The HBI million sustaining spend was $XXX cap in QX. about for

the HBI year would half than the free our cash in This $XXX exit $XXX factors cash in of allow end currently $XX pandemic business QX. pandemic maintain liquidity most we $X.X liquidity second million a which remainder related between which related us $XXX billion the us actions position, our through us well In for that above have the anticipation million have the million tax the our HBI. the July as million we maintained year healthy received another ABL of of to about expect the positive completion throughout expect of desired the spend inflows, generate XX. strong to and our year taken our year to the We project. flow at the capital to second with where at we of on of closing, comfort allowed balance Based We capital the We in higher to HBI current cash available preserve of necessary projections the over the stressful in the AMT periods and weathered restart CapEx. financial level our on as availability. refund Toledo and necessary of we working to to were

half advance strong which history of a quarter as and amount pandemic second expect of recovery. the ultimately blip to to Lourenco? viewed a year, fairly should be results in a our second driven We robust in

Lourenco Goncalves

Thank you, Keith.

like the changed lot Just The discerning high-end the an our things, increasingly proven. has products our marketplace. economy already It's pandemic for company but need American of and has not non-resilient. a

the competitive into past to and turn With advantage impact look for of look We I'll over to future present. it are questions that, where the back our ready please. shutdowns Lashana always customer we

Operator

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

Lucas Pipes

Good everyone. morning, Hey.

Lourenco Goncalves

Lucas. morning, Good

Lucas Pipes

steel carbon highly in see price in guess, your products. commodity soon. to your So second the Lourenco quarter? pretty the steel you prices we I able But would us And the quarter much. steel them on would grade through very be and you to expect I where carbon walk versus second costs the half in Thank you second year? appreciated XX-Q specialized will your your And of go comments

Lourenco Goncalves

Well, we as prices selling our days. pricing contracts one-year of therefore, Lucas lot to because clients And stone we plus. talking of basically have you a I'm two-thirds that are our And know are do the in automotive frames. the of time to type these set exposure commodity not for business

in a price a environment. set place a time it's ago different lot. So long Were in

any going still to the doing automotive all War but happened are what in not demand price happened industry idea. related to something last they similar the was you half we're had second good. of the The shut forecast So prices time towards was What that, World just II year, an to give we in are down. still numbers shape. the The QX in good

a It anticipation So it – was a shutdown. without complete advice. was of or came it lot

past quarter are the June, were positive. we second that. of last So month

We stainless very was The have effective. stainless in the not mix.

We have the electrical in Electrical not steels very effective. are steels mix.

things, lot positive but We automotive bad. of have was a really

forward, very were levels will are three half in normal dramatically in and the levels And to that will shifts are big automotive we change second normal. production be Going the seeing back in footprint. close to common factors

to going We’re power to of the be able of show combination Cleveland-Cliffs. the

Lucas Pipes

July, we should And that, of hear for to that Are this at I kind that we this of to half less half, on the second items number? some that the Thank you. free XX ballpark? believe will mentioned, a there kind positive And for you cash in rough any year sort flow great flow of you the ATM than cash than discreet to second provide consider Keith was more refinance to get of other Thank obtained million that to talking be range? positive. point Lourenco. Are able cash hone-in

Lourenco Goncalves

let Keith, will Keith answer that. I please.

Keith Koci

your also cash We're not second we're free and the year. upside that automotive some for the That's cash be but things what anticipating to is We'll the second half $XXX during Yes, free right to release part market of the contributor It's probably looking $XX flow. disclose $XXX definitely go. going now out amount million $XX going to the about positive flow some about to this a see for inventory the we're half. exact as to it. Lucas. to potential million right million on how is too of of positive Yeah And at there's wait million recovers.

Lucas Pipes

you. I very best luck. That's helpful. and that Thank of appreciate

Lourenco Goncalves

Thanks, Lucas.

Operator

Your next Clarksons. Schier with question from of line Scott comes the

Scott Schier

Hi. Good morning, everyone.

Lourenco Goncalves

morning, Good Scott.

Scott Schier

kind or color of any is Following a Could and questions. XXXX you any how for expectations few up talks contracts shaping around on up? early Lucas’s of your kind commentary or auto provide of

Lourenco Goncalves

AK because in not much automotive that are or We an detail of automotive. an we ongoing on endeavors The and any clients. process, ongoing are clients process not so less we positive. with as supply more, that do we a taking from color supply of with getting you do commercial Scott, clients of know our and it for always understand it's are The to for are course negotiating overall, Steel. care position. very not in doing We But asking more

through the provide can can produce PPHC, one-stop We no Precision through indirectly to and AK steels steels, We shop. We great Steel electro-galvanized, parts. Tube. exposed carbon AK Partners. auto parts – directly provide parts we expose We are can not structural galvanized

like lot. they So that a

far and with are It's So as in traditional adding we great new. ones. our just great shape not we the are clients, as conversations

also new Ford Nikolai others We being are to coming and base direction. the Volkswagen with other that traditional and several and like customer and and going General and of same we happy very very the are Tesla names that and very entertain and Xare our likes have and in conversations and upfront Toyota Motors open Rivian deals

times be is And we in a And we go money that driven. the are car to stock marketplace survive, that will. over all I we They in basis. to need tell we they really want strategic. not of America. the some the the to not one are quarter-by-quarter AK looking make ones And partner Lightly money. Scott, The future. as if So States far month-by-month that the with we at. or understand are need all price imposing make Cleveland-Cliffs That's to price with and decrease manufacturers steel and will where they to it's to particularly thing of that will going will are compete Steel are This ones not these folks thing but from to need mills as you there win us. United

are that through business. want go don't to mills of We and business same to the going out out Steel. We not going Cleveland-Cliffs in several happen are Europe of allow going with to to like are thing not car do new ourselves. momentum the AK We're have this But that news mindset. the are who we That's the here starting exactly the States. to good gain United builders wave where that They technological are. wave new cars in coming of is of in

Scott Schier

you volumes EBITDA, the that Specifically of able Okay. That's appreciate steel gears, on AK second in half kind to second expectations very helpful. for I the terms Switching color. provide especially around are of side? any half.

year? Now a that some of return auto three back getting volumes end manufacturers more shifts a rate to you're the by or to expecting normal are the of run

Lourenco Goncalves

Yes. lot Look Keith, semester, provide happening second want elaborate number. on what's you I in to regarding a of think the bit little we color but a the

Keith Koci

automotive we're that of will looking got normal on assumption. by disclose cash forecast, Sure. Yes. and in QX free We to what an in flow terms counting of we've we -- of XXX% for baked QX. about XX% we volume are but won't normal That's EBITDA

Scott Schier

Okay. Great. thanks that. I appreciate my for taking questions. And

seeing year. to rest the forward of Looking

Lourenco Goncalves

you Thank so much, Scott.

Keith Koci

Thanks, Scott.

Operator

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

Matthew Fields

and able Lorenzo How your overall to of does to of problems with their interesting sort Hertz trying we're picture? fleet Hey, had big on the Keith. buying earlier out reject comments the up this a remarks. year contracts for lack not they’re consumer that make maybe the year? rental and issue fleets you the into Obviously, prepared were their of to restructuring. or kind with How Lorenzo has do view through cars the and your SAR play able next in seeing

Lourenco Goncalves

Yes.

is because despite trends demand to there full in as new already of see full the are that us a play capacity a has suppliers positive, seeing. overall Matt, because much to consequence or so in capacity have few capacity the so all things full will close how steel add cases They at running been you're We full for capacity. these several these kits

supply are automotive we so unaffected So far. they industry. not the one are And only the

only perspective I of milestone the view you point lifts give So the this equivalent AK from can of Steel. of of year

far things ones So That's are asking to they more about buying and thing. not are because good. my and are up good. for I The selling are picking more so competition know. we they're and buying I'm not so sure don't

We at right are brought -- the we capacity back time.

Dearborn with people back in from bring people the years. of able from media technological at uneventful fantastic instance, XX For were is very platforms in jobs our furnaces our Dearborn back process, blast help a account. team We including it and to

idling technological blast the furnace already that in Dearborn. strip definitive changes point like great hot footprint at the to So, made the Dearborn. But off bring capability, so guys hats back of for our in we smoothly

have we integrated company. Now, only one

hot have long Middletown We second the at we for -- capacity hasn't capacity capacity to long, a in are full nominal at going in full run run time. strip nominal -- half that

So, I deals in some we is not market shape. have. supply But already by adjust know hurt. AKC market others far integrated alone, other as participate. that footprint as good we care we're the overall But are the really to taken our And

Matthew Fields

that the big bucket? able were of a of -- kind that to $XXX you companies. you of find? little us that big are All right. million chunks Thanks. by from guess combined SG&A number? of down is of synergies breakdown about can What of Or additional I part the synergies you mentioned kind those way of give sort And are the then a levels the Keith that

Keith Koci

$XXX The is in Matt. you've that million sure cost of $XX sold. now right be would $XX million goods about SG&A Yes category. got the million

in and dramatic. in it the coming so -- duplicate the million actual million really optimization, in company $XX for The supply are for reductions -- million total like down, breaking another from So, $XX $XX overheads, chain. SG&A asset public

You're classification the about the some piece probably have factors couple going changes that. on is There's seeing it do only are it. of half synergy side. other accounting We really of of that into expense a

the inventory chunk SG&A last under goods of SG&A now to So, sold. a run are X-K Cliffs and by that sizable of year methodology costs are some being being the were through cost charged

that reasons. permanent So, that then you're other also factor are The third obviously fact just the what factor. costs cost And synergies consider are for seeing the reductions. down is we as a

The other come cost a having of are just where reductions down lower. that year the a are ones profits result we're as

So, you've compensation. got lower incentive

You've because of COVID. cost got lower travel the

number you there's factors well. Did it So, as of a hitting help other Matt? that

Matthew Fields

And any through Or great. that's Yes, still then come? that yet there number? included is in is that additional pull-through precision partners to

Lourenco Goncalves

back. was you QX to give Is and in shut a first that with see the partner both parts down are the traditional Matt precision one Actually the end not the know movement was But client was with the we us come in shut to one been past. to precision the done. Yes, as because working still. starting first has not not -- to market direction. an example. that down. I'll But case some to Tesla AK was definitely and the moment execute work of well that the on

working all There's So together. parcel we're no the of panel. part

So we manufacturers it's other because mentioning but lot things well. happening and in with are is interested as Tesla I'm of doing a Tesla, everybody

period these believe. we time are executing delivering than shorter on we to lot people a So, are of put for And we together combined with that very this be plan company. going results the excited

Matthew Fields

Okay, one great. Thank last then And me. for you.

AMT half plan if no there's or the in of if any have the you the more back What's at some Assuming strategy have being on debt half capital secured any unsecured back to capacity working you or from target that. of there's or a some you more on which for can you confirm of in coming Do kind think discount outlook release? debt reductions the XXXX? back hopefully buy year able the cash

Lourenco Goncalves

the we one despite continue cash down First ABL. first you'll the That's generated market. necessarily cash. in to able allows any that so thing. thing ABL debt And of debt QX. sure pay flow we us Despite were buying on far the of pay -- to That's all reduce now excess down to in will place the the down difficulties paid ABL in of without that primarily have notice QX, continue the used to with I'm to back ABL. we all, be

Second to at be very to mind to you that the close us start mentioned, that available redeem is that XXX.X. as par keep secured security as for thing January far XXXX come capacity in will in

that's our our next the address So of portfolio in treasury to target not outside ABL.

to have a a and we -- with the -- I X-year will now Cliffs we do, going we with with continue plan. Cliffs. the in discussion the companies. cushion new -- that the Deal plan and We've created my do execute normally have plan metals We normally

continue will The the that's insist on is where the a the again, down And of we right up. primary plan have we would cash off paying So take inducing the we'll And restore the capacity done that. to will time. go. like the lined execute. that 'XX to we as source But now be at right right security and I ABL the will it as Everything soon is time. at

Matthew Fields

helpful. very you That’s the luck and back in guys. half, good Alright. Thank

Lourenco Goncalves

Matt. Thanks lot, a

Keith Koci

Matt. Thanks,

Operator

from comes of Hacking question next Your Alex the line Citi. with

Alex Hacking

you remind expectations have kind morning. also Good Could Toledo. year? where I in Yes. of there you sales us And remind us questions for you. on in discussions discussions of you with of then pricing a next stand then your couple also of terms previous of potential I those a lot have and had how of offtake know the of evolved Thank structure? terms in terms customers?

Lourenco Goncalves

going capacity. be able achieve when we of to to of are to be be by remains and the in we in the were to end second XXXX ramp-up If would that Toledo next start we seen. we'll nominal year planning capacity. year nominal Remember, be the that running June year the achieve half recovered would to knew

year, Now more the going starting to be so of very we're likely end at December. the in

do tonnes sure properly don't we going But a make year. that get assure ourselves, the that at really we can't X.X believe million to we we are going we're So ramp-up close. million, over to we trip be long X.X next that -- everything don't to Because to one. the we we get running be will don't we on if other -- hand and

enough about smooth. knowledge plant ramp-up our be and that have to processes know We our will about the

I I and clients, already too offtake when into elected not issuing that that cut times. route market do the explained finance. the finance. not other market, And scrap-based to financial having addressed into doing metallics of without how project bonds XXXX, with I and we long-term instruments As sells have did the work. far deals issuing I not to clients that that's HBI the as many and project in

EIS sophisticated and use generated in we our that than in at the to coolant use as as and are will that and and be theme also XXX% plant we spec More own will be to sell Alex, Mansfield have material So confident we ramp developed that will and that material. we plants our the HBI use we right in price. going and to already Middletown the highly sell that particularly the Butler procedures product at BOFs that both that the are up the product both procedures off-spec [indiscernible] we

EBITDA. and our off are as can very big contributor work will the So spec it's and even of pricing, levels you'll we melt right the BOF the And to to a in see on procedures way as spec our that. our will far prices when HBI develop it have be we right HBI to very and with but time, EAF going in clients be to successful our on be we profitable

Alex Hacking

And if the consume internally then? Lourenco. Thanks, just I potentially million Thanks X.X How much for could of may. a color. that you Okay. follow-up

Lourenco Goncalves

we would XXX,XXX know a very want year we in it conservative of steady-state scrap. because be you do buyer that not to will number. disappear. And to the as a It's a is make may because still XXX,XXX just material

saving be to So we anything by money ability And not to jeopardize are our we're going doing that. to generate doing be going EBITDA. to

impact that be for but having same HBI steel the a cost -- will I we side, mentioned. the material not side AK of facilities the be going on impact we're have to not positive that the So on

of of in sold cost do in will rest that. the be But the numbers the tons. it's it XXX,XXX to The So marketplace. advantageous ballpark

side, And in are interest give want lot a of we to by we EAF enjoy [indiscernible]. will in the costs have the furnace don't sell advantage competition from not to the usual We because side. coming that consumers using blast the the planning we to our

Alex Hacking

so you Thank perfect. second half. Okay, the much, and luck good in

Lourenco Goncalves

Thanks.

Operator

next Your with Jefferies. question of comes from the Vittorioso line Matt

Matt Vittorioso

that at products commodities. question, you wondering, Steel the about your not some Steel factor Thanks around aluminum color product do the competition? to how thanks and plan steel other AK as does of Novelis of some AK for think into like treating for morning. around pushing on the I'm aluminum at How Good guys the price and there taking your relative equation? the

Lourenco Goncalves

fact trying material with car Well, F-XXX, that anything to car. aluminum long F-XXX the is -- tried. beyond of Consumers never been biggest long, plan that the called know for in really much time. that. never a I except no the for that, pretty for a are the as F-XXX. advanced have don't And And consumer. mainstream evidence so with That's succeeded aluminum of become aluminum the they they there problem have like as for The we has on far

Tesla aluminum. s the of almost fact that of is was X the the example everything. aluminum Another Tesla is dominantly And failure spread the

lot looking be the what talking no are they than outside matter be for better the car So better. say aluminum. to And company make will aluminum about aluminum cat, to any matter want we continue a developments will continue And standpoint the they skin to from be. overall technological No steel cost the how in. will

automotive. have alumina the problems don't on I with any So

Matt Vittorioso

blast freeing of ore and mean, similar was iron the I do market North I any they be their question to close I their America. steel that of contracts some U.S. the think Okay. competition. the the implied comments while you interesting deal would had little lot with valuation you ago guess a ore the just about And then on How thoughts is on relative or suppose that look as Stelco iron side, if that a the announced ore a furnaces iron I of some guess as you work well. did iron great up then of in in pellets market into of the ore on position And to your market? function

Lourenco Goncalves

opinion here Cleveland-Cliffs. far the as it not no market exactly plan, deal on on be have the is -- with But I States as we in and the playing Stelco United everything as would we their comment appropriate at that. to pellet

recap. me Let

XXXX. ArcelorMittal with biggest through Our our client, contract goes

for it's happy. Cleveland-Cliffs. well are done. So risk extremely of contract out life happy, The is totally And They good. are we is

emphasize Cleveland-Cliffs. I'll client biggest is AK second I not many consume we And don't are on just The comment rather than to Steel. need that fellows to going that.

by our third let we -- Addendas client Algoma XXXX design HBI the And expire needed because will The to the is by plant. Algoma. to pellets feed

HBI. our happening in planned. the the through will of because is contract Toledo end year profitable a to as will expire plant speeding by have this produce and So use all way contracts, the use more One And through a XXXX. pellet other of continue we better

Wharton. we produce the excess contract find again good pellets extra pellet and that DR company we inform built of already a a the supply good capacity a pleased operator multiyear to good very as HBI have the we which market of would grade you to in that very going plant So a to rest grade for planned. production to DR we I'm Trinidad. And is that thought

that. shape great in we're with So

So we're line. bottom replacing

of replaced our coated one the with we pellets Nucor That's have grade for base new bond of that pellets the trade that’s with to back in in hell us. a Trinidad, Canada supply replacing fantastic. And a good pellets Nucor. Algoma a specified highly We

Matt Vittorioso

we your Okay. broader big how the of market do just picture a lot of and EAFs up coming And your question. and we have the company blast share EAFs the over like steel big X/X any think maybe you I related is, shifts mean picture to one decade. steel have industry last to conversations very seems the shot sort of Do It furnaces in domestic between kind thoughts? of the fairly your aids product HBI you that market plateauing fast, forward? to And -- it's helpful some out thoughts high-level playing the maybe maybe a how see pure high-level they're bit. iron guess but the some on in I thoughts Any think But extent EAF able I to some as inputs. just the for market? to better going extent products produce that be would on with

Lourenco Goncalves

question. answered your already own you Matt

in last well-executed during that market share grab said the right. – to the years did to things they very And lot And they are plan fact – They a let that blast a flexibility, call, was advantage available that did the for fact their the their operation You – job furnace that's of do did that them. of fantastic taking cost. nimble, great. less the a a can lot XX all in they

produce skills them push if to them Now getting last know dynamic doesn't to matters. stretch equipment ability is This that a support landscape, that that's are two we their R&D great beyond attention matters, start are pay identify to find And of companies, and CMC good that, that and that going go you produce, lot when the to The and we shove, we have can is extremely see great we will understand we are might in allow from some confident the But NIC is the to will operators. to everybody a going are are and matters. then to company difficult to we speech what going Because that we do find the you not good educate EAFs that to we that that use even to you explain due the defend you as continue continue price. operators. we so is on my here. And differentiated are technology We to not that. everybody competent a – EAF. to not also

been world, to that? you Japan see to POSCO are look for hand POSCO. Korea, furnace blast at the with by Same of blast are when will thing South Steel a can't. due even is automotive scrap. Steel, in JFE and and the other with JFE question Japan, a I you run entire Nippon a in to AK the though they has migrate On they automotive footprint and Japan going give Why they likely the is Why a doesn't because furnace business the for use the in to EAFs that automotive operators. lot throughout Nippon mill, their steel answer Steel. business? have money large

the simple exactly read not about. what are So gossip back so we press, in take as as and look things of talking steels step let's one you are kind

route. We steels about that talking are cannot produce through EAF the we

participation. do growing with and and absolutely. help HBI good HBI. can they in with or this them. to better yes; efficiently their whatever. never there. will better can Russia have much of are able be they do differential a Yes, will not to our instead be or for more The a But effectively we they are the Will supplier what will yes More then doing a chemical not the that they pig But differential having import will with iron, composition, country be job are from marginally. today they Ukraine Some them? is and But they our doing a limit

EAF, with a development R&D department impressed And the the sector So Cleveland-Cliffs furnace the our business, is called there's the guess comparable business will I we blast blast depth are forward. are continue operator pretty going to supply And departments. in company. and the that at feedstock what, in to pair to what knowledge that absolutely am to cars. in R&D the understands our transition understands we the how much ability found to involved to that top Steel AK Has technology both at to And going leverage of steels I that EAFs go with capability? warrior, produce the that's great to new product furnaces. was the the of for

Matt Vittorioso

you. Thank Lourenco. Helpful,

Lourenco Goncalves

Thank Matt. you,

Operator

Phil line comes final question of Capital. from with Gibbs Your the KeyBanc

Phil Gibbs

morning. Lourenco, good Keith Hey,

Lourenco Goncalves

Phil. morning, Good

Phil Gibbs

$XXX my relative taking achieve second How to that already you on basis much million. did do of have question. think about Thanks this if And you talked of apologize you And that an in I number synergy I was the much to annualized quarter? north number how for go? the that but

Keith Koci

in at rate a of were Yes. run $XX June million. – had We we

million we month of up in alone So June. $X picked the

$XX the $XXX it will call quarter was By talked million. the the be for we that by million about on should and last XXXX. in January about kick at QX, of that So X, full $XXX million we the beginning

Phil Gibbs

to Lourenco. something. to I sorry. something all. That’s Lourenco, You were am thought going say you’re say going I No,

Lourenco Goncalves

No, no.

Phil Gibbs

it and think the that got million we realize expect Is year given what second when realized Keith about full So to million $XXX $XX this around plus minus? somewhere year you've half. what or in you've so a you next and you far gets that

Keith Koci

million $XX or like yes something Phil, somewhere. close pretty that that's year Yes like the for current

Phil Gibbs

Okay.

Lourenco Goncalves

little the $XX to A in million more level. $XX to be that we like million than

Phil Gibbs

to million $XX million. $XX

So of them you're getting that a terms stepping extra juice for them in the having also synergies year next up? then year's full numbers and in

Lourenco Goncalves

That's correct.

Phil Gibbs

find more? Where did you

Lourenco Goncalves

Tube we more AK we the give more inside things. the now was do AK a Steel of was the an treated can separate integrate, as plan. more we Look, and footprint, original and effort AK that I'll do AK the more the XXX% with Tube we part our of way understand, not of the business, is the example develop we company. part commercial

is level Steel these for right of doing the coming that do what AK AK precision department integration thing we that predict can we the mix that of now. But things outside did lag. from things the not the because the precision will the in that's to in not see real point of same partners, are We Tube to with become a process partners,

don't our due still office Another thing actually in back ability to is the office, Cleveland absorb to Cleveland. in our our things home we new have but people offices in that, or in our

reduce same to Chester. West continue things, in We the

the time and very things are of to process corporation make kind a new natural become knowledge exciting coming in of this absorbing the the of thing. synergies a for way. And So

bigger more now give part we and original a Middletown. this contract costs the to this with that, optimizing in scheme not a Another type of company Mill. are I And we're transport, wise. number we But into fact example, a And we not between to with no plant, -- Cleveland-Cliffs, in what created thing. even And are entire serious to from. that coming saving of it's redo of things transportation. much new of our lot a things able that have a of transportation. for have Mirotone portion AK is hot-strip a with lot big an longer And combination -- lot Because were with that that, SG&A the Dearborn able boosted railroad number were that is this is because we point big made and thing the and redo Railroad good we that's to contracts we need our enjoy just big money it of able clarify SG&A the not the money number of also of advantages thing expenditures. Dearborn Steel good for are of and a But a we

Phil Gibbs

then that put the in you Then follow-up does in for terms update well? the was business, I there think assuming pricing and if ore, pellet your in apologize in and XXX a that just Where I this, iron sub-question, of pellet will again shipments back as in as what this current Thanks. XXX be? missed And hot-band premium. an in half the you year of terms

Lourenco Goncalves

you that? Keith, take want do to

Keith Koci

as the see be we up as see QX very had furnaces improved. QX the Yeah. stock out give we see in normally QX put lots for really the should as But what And so before blast we far. on we similar And winter. then, shipments we pellets. to pellet a We should really -- -- the to closed slightly maybe pickup guidance didn't need well should

end stay true-up in that's a year to is the pricing So pellet you output. it see today, of probably price. the in where on QX. might were a If up the that's, volume XXs, kind we'd low And

full So maybe today. bit they QX low out would to little rate, the prices be but if where stay XXs for year average a are would it lower,

Phil Gibbs

appreciate much. I helpful. Very it. Thanks so

Keith Koci

bet. You

Lourenco Goncalves

Thanks, Phil. Operator?

Operator

additional There no time. questions, this are at

Lourenco Goncalves

Appreciate pleasure interest. the you guys for it. for tack. Thanks we it to And And be all Thank phone in you today. very a time right. All exciting on an was It much. with Cleveland-Cliffs. is keep your

Bye day. you. have all great a You now. Thank

Operator

conference your for you participation. Thank conclude today's does gentlemen, and this Ladies call.

You disconnect. may now

Cleveland-Cliffs (CLF) 30 Jul 202020 Q2 Earnings call transcript