CLF - Earnings call transcript Q4 2021

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, ladies and gentlemen. My name is Sherry, and I am your conference facilitator today. I would like to welcome everyone to Cleveland-Cliffs Full Year and Fourth Quarter 2021 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 protection intended to

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

Celso Goncalves

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

full accomplishments in financial of XXXX. year Let our me some by start highlighting

acquired the led XX% to XXXX EBITDA XXXX. diluted were we we history. was and in the share of the by that of Our revenues all-time billion, adjusted Company’s delevered that leading record in last processor of we count North sheet scrap business, reinvested $X.X $XX.X conditions America, records achieved reduced our industry good our market generated results cash driver consolidation huge this in The and we in $X.X profitability, billion, income With billion, year. cash that our the $X balance our We annual prime annual outstanding in flow to annual net a free M&A of executed of billion use. put

year cash $X Looking capital that further free predictable share another in including this we the accretive repurchase in ahead, of with we announced of authorization front and have uses XXXX, of billion already us, considerable underway flow morning.

you in of we XXXX quarter far, of January we give idea to adjusted how basis, more going entire the on EBITDA did alone so XXXX Just already an is of year-over-year generated have in a than XXXX. first

shipments, behind X.X only Now, XXXX EBITDA generated quarter, of to QX of tons quarter’s our million X.X the in steel focusing driver this was reduction. history, best previous decline main tons EBITDA billion quarterly EBITDA performance our in from quarter-over-quarter million QX adjusted Last results. the shipped. we shipment The QX $X.X billion $X.X the on adjusted on second on back of company’s

all light the world. we spread the production and levels, of remained Thanksgiving when Omicron normalized to know, year, As the particularly during in around period of automotive the QX end began to the XXXX variant relative COVID between

early disciplined sequential weak several in and clients period in already and less centers crude XXXX. of operational late XXXX originally seeing XXX,XXX are actions and our by tons quarter steel this elected also move These by highest approximately indication is ton. usual ultimately unit this during our renewals price during from our Partially impacting per renewing to not we up the steadfast our QX $XX in quarter-over-quarter in pulled Remaining of only only fixed the XXXX. offsetting and of into in for QX, XXXX. fourth also contract net tons $X,XXX our QX, already in the selling already contracts typically expected year, our This Remember, achieved place volume the majority in from Additionally, portion maintenance were service and planned we our sales Xst supply ton as production renewals than on to have $X,XXX success costs. November year even cost a place were impacts of outages we rebound our January prices of distributors higher of reduced automotive December. this an rose level were of of based per the which strategy, until

and to year we more if be even progresses, prices forward the continue these HRC the going fixed-price selling drop. will renewal continues price demonstrate As index evident report the contracts, quarter every that of successful to this will

the million XXXX. of of flows adjusted of in million in fixed EBITDA to States the million cash million flow our we down to free Cleveland-Cliffs so our For cash fourth to additional steelmakers we context, pay us key been used place would contracts lower quarter have in if we United the and holding and contracts QX gives in XXXX, higher. XXXX. else now acquire $XXX Of nearly level the million, visibility of have used for is This $XXX relative favor applied $XXX inventory of differentiator XXXX build, remaining constant, all other in all into significant or to Despite $XXX and XXXX we the shipments generated this FPT the QX debt. $XXX

of one pay still over to in left acquisition enough cash So, pay quarter’s we quarter only some other had able down and free flow flow, cash in debt. meaningful for words, the a with were worth to

leverage have same to last but are and leverage already overall overall a originally our which speaking than will level, total further be our total leverage improving lot dollar By adjusted on of on metrics. EBITDA at time. a overall a likely end XXXX, debt at total the of expected we X debt our adjusted essentially a basis. LTM adjusted also only EBITDA of to We next EBITDA a keep With close we LTM months even basis, we quarter, our the of debt accomplished will continue reduce eye we at at on XX higher, our more leverage. debt, look our terms levels in Now,

As a in our was XXXX, X reminder, before times leverage and our pre-COVID over transformation.

structure continue replacing ones pursue should reducing we existing flow free extending simplify allow us leverage significant by cash XXXX will dual to debt. goals is we and cheaper capital debt, The our While in to in repurchasing anticipate and debt with bonds the maturities. down shape, great shares paying of overall

of redeemed at to We have tranches we We at two become other XXXX. point callable notes redeem including our in these XXXX. XXXX our secured the pre-negotiated fully already this some notes convertible in and bonds several in intend notes tranches refinance issued year or of prices,

amount should which this throughout last year. worked be As capital, expected, of a year, we down substantial working built

saw potential due or by a meaningful OPEB have base, QX, balance environment OPEB and Given billion current reduction net XX% take during rising and during collateral upsized $X XXXX. leading Also and billion that net were the to ABL we quarter, sheet, our these further $X.X we facility to of reduction this able of level a in and advantage $X.X billion. importantly, gains available actuarial in billion reductions. are primarily our for on pension performance, strong liability today, increased another pension nearly to asset we our liquidity rate asset increasing our On the liabilities very note to $X levels important last

liabilities for equal. million, by all our for going would increase about decline reference things in forward, XX our basis-point Just every $XXX expected discount rate,

even under would per than higher ahead, today’s saw curve, $X,XXX prices HRC in average overall expect selling when we futures Looking HRC in we XXXX XXXX pessimistic averaged ton.

and increasing in of with usage the coal offsetting BOS. of percentage and largest by HBI energy cost furnaces side, we materials, increasing increases usage to the charge annual our the of see On we this, in expect coke. coke blast change the and in have our been related to Countering the scrap our

over the year budget the inflation increase additional primarily our environmental Cleveland an blast this for projects, furnaces, is will and due from $XXX to million Our to of also which reline during reliability our $XXX $XX should of FPT million. of previous DD&A year and which one SG&A be onetime year, million, for overhead. an and Exclusive CapEx around million, of Full XXX XXXX be $XXX out includes items, $XXX higher days million be QX expense wages and about should QX.

rate tax With to I book cash over XX% XX%. have that, to we exhausted tax the in effectively at be that our range, rate it tax turn our Now our will with should XX% NOLs, CEO, our Goncalves. Lourenco

Lourenco Goncalves

Thank everyone. you, Celso, good and morning,

our as new was great XX,XXX have employees results done work believe commitment really and calendar XX,XXX the could UAW, and representing that hard success, the could an appreciate the not you. jobs. each We without one to We Cleveland-Cliffs not and them. year Machinists the first we manufacturing all the good-paying of of full accomplished approximately work of the represented and the USW, employees, absolute accomplish unions able without and we in Our the unions. United our We middle-class have by States the in in all other were

we for for was a or cars have some third to inventories million XXXX the realized to Cleveland-Cliffs industry of ended XX four first more the then they sector When up the XXXX. would as That build jobs that performing opportunity at months our great automotive for XXXX. impacted not build QX Cleveland-Cliffs, shortage if [ph] guiding in cut to originally better their we in quarter of the with the The clearly were chain us maintenance them, decision important has our XX million supply correct, still As up decision, the scheduled microchips results. to that problems. units. to And resolved the automotive year XXXX has done level QX clients much we their even were of automotive made albeit move smaller,

the to clients. see of to us, deliveries our we behind Now, first starting with automotive month are XXXX improved

comes were still And a While just year automotive three and January automotive microchip was in improves adjusted months, than need XXXX. point, in still one-month Furthermore, clients of our January deliveries lot shortage October, than Cleveland-Cliffs. XXXX, to previous November it December. during $XXX the data will a each the more companies a as EBITDA primarily million. is in stronger from This this solid the

industry to largest United by margin, States. are, a in huge We the the of the supplier steel automotive

other clear capabilities equipment or and investors. try in ends several are tons we almost the automotive melt typically the replicate steel of Put companies functions. through million spending abundantly to of dollars broadly supplying intermediaries. There also sell is more America by tons and to no this of industry. the only another now capable way, manufacturers all automotive minimal supply our sell technological to galvanizing steel has sales X tonnage the American company, million specs lines. and steel new integrated already all million up make other in that automotive billions directly U.S. shops We new X building half to X of and in the Cleveland-Cliffs to Let’s or all our North another

even to have tried fact, market market share have tons we in we interesting not increased though our Another XXXX, our through resourced deliberately by actually automotive our grow share clients.

billions of in not. to comfortable just will and place taking CapEx clients flows, does share high only us why and the play the That’s announced. to specific $X XXXX, putting Cleveland-Cliffs, this not company program why automotive from While are we tell these in these that industry’s Cleveland-Cliffs not several buyback spend very other companies catch-up. billion cash steel have low are competitors are confidence in have meeting the another needs money away With item steel and order they can dollars to to our reassigning do not strong our relatively this the of probably assume we standards. invest type

in Another we which in differentiating eliminates have well. is and volatility. model of This predictable in and feature our the business pricing self-inflicted big doing tinplate sectors with the our that some clients automotive place other as cancer of is future industry, worst select way

currently Real forward, They then same their inventory and by pricing never-ending is caused we of to indexes. harm with highest price altogether the our centers, The in housing leave cyclicality. place, XX% and contracts, Ironically, this service these inventories our by purchases under out triple number who buying, grow. and folks under more create to the model. reliable for need industry who continue values. volatility steel sell adequate, ordering are this suppliers clients prices. annual when to work fair a We in of the damaging perpetuating we supply fixed is are the need ones clients when volatility panic volumes most will and far smaller don’t temporarily first of Going about sales move want tight double

the offered to to are from interest supply it the sales why our also in is limit of that create important concentrating index-free in do to our are steel with make deals of Marrying majority business not only prices We clients, up away moving continue And volatility industry. in with further us. environment up convinced healthier Cleveland-Cliffs being everyone’s much we are on costs smaller larger players, desirable sales. business that’s chain feasible. best for States. already but That’s stable which point, stable to and can the clients the all United At down this a vast

ESG. remarkably of ongoing of XXX additional the more purchase of matter future on automotive FPT of well November with have The tons employees important the prime the of to stamping that our for was made XXX,XXX in scrap scrap evident commitment country. That the integration FPT, Another grateful per prime our for of Since we are XX, This FPT of offtake, Cleveland-Cliffs the closing and national fourth most is notably in the in the completed sources are of employees substantial we has gone alone quarter. now was stamping particular scrap, of which than leader securing plant plant generates largest deal the year. moves, number prime a buy-in Cleveland-Cliffs.

Our scrap stamping by for was before this an minimill several years a plant even servicing company this agreement incumbent acquired has been ago. company, who replaced scrap decades,

own compelling Our scrap is feed our deal with making proposition. as strategy a and Cleveland-Cliffs, It’s at key as automotive piece their piece was our key directly This not steel to loop primarily a environmental shops. loop. steel. made automotive from environmental is clients’ of back recycling buys we a now our manufacturer closed strategy the can just Cleveland-Cliffs. steel, of a possible closed A real This well

HBI part continue of a coke carbon our of On to burden of we as blast coal by usage the side, emission the our lower furnaces. the significant in and increasing utilization

used to reduction coke central EAFs COX is supply within flagship Toledo. vast working rate Toledo, currently lowering playing Cleveland-Cliffs. third gases we largest plant now with in-house our our the of HBI of originally parties emissions. utilization furnaces, in exclusively was implement both in supplier majority in in role HPI, are built a While this and Linde, direct hydrogen our with blast Furthermore, The industrial to being our our

built direct our with of may you the possibility XX% reduction to originally as state-of-the-art As hydrogen was the gas. know, of using plant in and designed mix up reductant

another primarily of HBI the of goes on usage foreign and in expect iron of that production XXXX. pellets, have reduced due and driver feed first relatively key our ore in We hydrogen we hydrogen to same report for their competitive the the blast uses is to a sinter advantage The ore lower emissions competition furnaces.

Going will is it cost sell the pellets ore life parties. extend we ore mine Iron finite takes and of limiting we resource, the of permits a is third be and iron tonnage to incredibly and forward, cumbersome. time get to

as accounted care enough emissions iron at in seems for Scope for Scope X anyone’s producing addition, emissions. one have Unfortunately, mainly X our are first the are the ridiculous Scope reduction pellets targets they Minorca therefore, cost our royalty In Trust. and of able our longer Scope automatically to. at pellets we because sell produce not concern. determined due structure before, now Mesabi for least of to them are emission mines the really topic emissions to high ore to X are X is not not X no iron in need as use our us, for, at place production, ore with our no Scope X the additional look a scrap are adjust When least our Also, needs Cleveland-Cliffs, about structure BOFs, the but counted pellets, for we in of becomes to at to fewer now, where DR-grade we emissions, with tons until that’s run and And reduce good and Scope we surprisingly, throughout. clients

and the maybe idling our fall the payments. We shipments, mine, least royal spring, to period through Northshore, at no starting production will be no all production, Northshore At at in beyond. no carrying

well. stretch our amounts tonnage in adding metal also BOFs, hot scrap working steel. more that We produce liquid need fewer With hot extremely to BOFs acknowledge we metal tons the of to is the same to increased scrap strategy the by of of

idle go the a than As Northshore currently consequence, longer could planned.

of already have another needs stretching, strategy metal consequence We at lowered Middletown. our and announced our last for of we hot that our As burning coal. idled we dramatically coke quarter coke

CapEx Carbon will jobs will State piece Now in carbon for next we Carbon, the plant. that can On we further within XXXX, furnaces. ensure to improve approximately of close been job our few be have State we are facility we nearby over at good our our And years. quarter $XXX employees this environmental but how operate also have other second our last action though Mountain coke needs eliminated also that all will in of footprint opportunities million our not will blast going more, relates reduced even originally Even This save the coal other strategy us permanently planned facilities. Cleveland-Cliffs have to company. enough the note, at X openings Mountain employment only our

don’t Our in the low BOFs. That’s the produce United establish furnaces, minimills continue our worldwide emissions. why a spectrum benchmark suppliers with automotive sinter, here to countries enabling located and blast of Austria, in relevant main States, Europe we particularly in pellets the This from like necessitates materials, a our here rates we Belgium major and can among and not furnaces States. Cleveland-Cliffs steel other in are exposed the and only And automotive their in compete do HBI the to Japan, They automotive well-known be presence grade us lie. car others. the clients, like presence, the in with use entire Korea, the compare Korea, when coke not new demanded manufacturing reason integrated held steel of the are of strong steel is by blast world in low areas. with Germany, demonstrate and presence in is South against parts, that furnaces. all blast particularly countries suppliers all in United the Cleveland-Cliffs unable specs South operating or EAFs use they mills one automotive to France, highly-specified manufacturers. use Numbers Japan,

ore pellets represent the the to EAF take number that in to more One the just as avoidance an supply mines. of generated requirements final steel to to But That produce in goes well replacement States, With that creates a of that, to steel worldwide. might piece favor our the Cleveland-Cliffs, of This Our the a full in in of into United upgrades blast most energy the point just X%. the control States just hot also A the as replicate upstream new other X% is we most supply end The steel in users. XX%. production the projections. as out here time, to impossible blast capital furnace future. is consideration capital Cleveland-Cliffs differentiation rolling over our note. in importance while when a United Meanwhile, our one industry X%. X%. prime in could all on some particularly XX%, CapEx-heavy steel the significant lot emissions cases, to come iron environmental One is in wash of X% it have the furnace Asia If for USA Under total. States, to reline pipe is made scrap, or another chain, affected reinvesting from of the related a in life consider is is we related emissions close to the happens, extending expected is or compared wash, of already chain Of of transportation, at COX end HBI capabilities to we EAF a a for in also reline world. tail the we again, entire albeit said, because particularly undertaking, in associated where and huge the very responsible the is China footprint less emissions, the this the evaluation better, a and process, This to all XX% intensive to place. multiyear its mine totally coating as that quality Europe. environmentally-friendly by small of in just in the responsible and reline is and blast emissions United entire automotive a

We than emissions United improving will role combined, for all responsible two which States. emissions COX XX% in the sectors, of are critical play of a more in these

the For XXXX. XX% EV’s the the transition of one, Cleveland-Cliffs vehicles rapid has to necessary electric adoption to been target before And we prepared have long ICE meet for EV adoption. steels automotive from right industry by

renewables On Infrastructure United side, under solar are the in intensive. which producer States the more electrical needed grid, Cliffs and received modernization funding both need the the steels $XX in recently-passed of energy wind, the and electrical we is billion the Bill. like steel only for of the

we of stations, of them into non-oriented company-wide North XXXX, concrete, motors to all not we grain-oriented other producer community, have all million Each NOES, at Our saying and tie undeniable Cleveland-Cliffs. by doing transformers the both Cleveland-Cliffs electric used much I reduce amount are more we EV Bill now believe charging than will includes billion America charging about have pounds and the full just more we charger Infrastructure all emissions, XX call of no emissions, that, for measures being are we can’t X.X XXXX. steels, stations the to steel, companies BEVs. of other a be many in by stations grid. also And NOES What GOES Cleveland-Cliffs, electrical carbon investment for is $X.X are uses related for pass plus they or beginning hybrids for the free equivalent these talking and in book just vehicles. doing are revolution, to another a electrical of I With earmarked charging approximately implementing that’s down than are XXXX. than progress order certainly GOES, The laid here the in real, so and steels. which and despite just With will at between carbon-neutral electrical given out it

and meaningful should trucks. appreciation affecting of Cleveland-Cliffs to advantage is pent-up any take how cars will the we In Cleveland-Cliffs. we and our United in for will other progress We lot a remains steel all And demand for That lack benefit full loyal has the able now actually will others United stock, over meantime, watch here XXXX clearly benefit lack more will abroad. be regarding infrastructure-related electrical than much continue of of market’s States. the our do company operator the or of specifically, in it to shortage started, business in I will to And has begun XXXX, the our track future, XXXX, of buying to by beyond. XXXX, Underlying Q&A. States our and the turn automotive The and chip bright strong, demand steels. understanding spending particularly back to to ease, shareholders. leading the for

Operator

Lucas with Riley [Operator is Instructions] Securities. first from B. Our question Pipes

Lucas Pipes

everyone. really morning, Good on Hey. And a XXXX. terrific congratulations

Lourenco Goncalves

I Lucas. it. Thanks, appreciate

Lucas Pipes

net Celso, back call, debt mentioned a quarter bit forward. Kind to capital go the conference -- of about and to you going when year. zero a sometime I wanted ask next you what Lourenco I structure second XXXX

side. leverage debt this investors forward? sounded -- net you’re for as relative and EBITDA targets, the of kind versus interpret leverage more I the And was prepared So, remarks about on today’s it aiming like. target going this think an that should How year, it absolute

Lourenco Goncalves

can’t are Yes. the in environment Lucas, our that like all, rates, inserted to first ability are any net debt think control, like target be way I an a interest company would zero of because that for you refi. beyond

So, debt or going zero sure start fresh accounting. net because debt the going to file whatever, for we’re or to really to bankruptcy no is start debt then it’s be with zero that only XXX% way

we XXXX, So, that’s at a there. back we here and something right. get that not considered well Cleveland-Cliffs you And in know proved that’s ourselves way that to

bought this spent that easily I given ended So, million. I could with and have buy them billion being in XXXX, $XXX out also $X.X to $XXX up that for preferred, said, million cash, stock. the ArcelorMittal I used could FPT being

necessary talking usage $X reduce as we we about So, cash future. the was said are I that than for you of hope absolutely work use to what our billion in I emission. more understood scrap

building not EAFs. reduce You emissions,

emissions melting with doing our steelmaking instead scrap, that. FPT And carbon melting key X% what content. reduce in that’s of iron big shops. You is we’re for

We finished our plant. also construction the HBI all of

So, cash we the using Even we our been down and paid have have been still debt. we in paying the business debt. QX, in

the for and cash to delayed But continue down there. use pay get zero, we’ll So, a debt. of but And XXXX. have there’s target might achieving will we debt net no XXXX

we are for with billion, going if revenues to that there. be X of you billion, We our XXXX, cash It’s generate will still that that they flow to believe -- And the we healthy. don’t $X.X going in get then company let’s believe has are put Even will a $X we get very up is the number, leverage. generate that that times EBITDA there a when company. leverage and X time a the ones healthy very end

is within us that the should naysayers generation have sales cash But renegotiation the leverage So to onetime even Lucas, good. the admit refinancing X based our our a refinancing, guess this keep leverage less. what, flow contracts, company on based -- or times of not on

Go Celso. on with we’re I a things. will let other answer my reality. working ahead, complement at the of few that’s So, company a Celso backdrop what with here

Celso Goncalves

today, were deleveraging FPT. put increase at just And $X.X of of in like Lucas. to we Thanks, then that the the EBITDA, saw $XXX aggressive allows the we we be when reported just and So, it look preferreds to right? was just Hey. XXXX of billion, right? million. a it significant another Yes, by of acquisition our with If way, Yes. you adjusted EBITDA XXXX, that it EBITDA accomplishing redemption us lot in

net that So, relevant. debt zero became less target

that’s So, LTM debt total on basis, I as a we’re And at EBITDA look to I think at way to X it. the mentioned, time.

in alone EBITDA higher ‘XX. than XXXX, As going our is stated, QX our January of to be I

So get up But to roll terms leverage our EBITDA, of capital better forward going LTM only the structure. is proactive to in we’re still be cleaning basis. if on metric that going that forward, you going

As bonds, of you this secured know, we those have are those Both year. callable two of two notes. tranches

there’s -- have tranche another callable. We that’s

unsecured year. One We’ve callable already also redeemed of is the this the converts.

to looking net debt a fine-tuning it leverage total a -- as there’s the continual opposed but of are to So, metric capital structure, on be of we more target. basis going at a

Lourenco Goncalves

the number make ArcelorMittal, page, all we we even created have a XXXX. actions and beat are that And dead on there no acquisition without Lucas, industry, for here to you talking we to after more chain about for XXX the of the or throughout long synergies, know a sure several in more others numbers synergies the the made the consolidating the basis are center supply Yes, no this received a money like XXX%. started steel just as synergies. not lot things on about question for that completely, make mill, made than XXX of in the the we numbers to money, until than recognize Because over, analysts horse target that. money States would why? we synergies, our but synergies the Do service We acquired entire industry of targets changed the everybody and United the hell in I freezes same after synergies, haven’t time.

to names, got you this are listening call that. are I you that guys welcome. these you with for So, guided

the we entire synergy implemented, the for ourselves was industry. for that just steel not So, biggest that but

better stop. are things debt to than this this zero, to net for like questions more not business, we about to manage So, BS. in that, continue I’m company that this else full get -- bound lives period, No going anybody

are We really.

love love that the shorts Lucas? to delivered results ones it, continue that shareholders else, and hate that. are the the We the bondholders to it What do

Lucas Pipes

Thank you That ask the wanted to bit clear. side. very much, on Lourenco. I was a cost

QX, of on So, back some and approach that. you maintained there here was fixed disciplined the cost absorption in

of in I’d pressures, the there So, but get QX XXXX, and assume better then some are that inflationary throughout will course. year

you think about versus take if into put these color costs drivers ‘XX? wondered I XXXX So, how in various you some and that when you around account could

Lourenco Goncalves

Yes. Sure.

our happy microchip on and we trying the thing that was QX, of if Let price the market, it two of that to started going things. me like was their saw put We Canadians, theater of QX. was wants these clients producing and came give their biggest they and you saw automotive their that the then inputs. the thing did yelling started as in the we And anticipating the that not being that One, particularly In way. could QX. details. we are in end in market and any one resolved, then, done of sell ones, their macro, because for to and I’m market at on were than informing have to everything industry wise the more happen as fire do us front based will the complement the resolve orders or the shortages. us the I skeptical shortage because the really Celso materialize. to to was middle through And day, price destroyed microchip were beginning automotive more market it maintenance that if folks macro,

up. is theory, goes And do, cap to continue we maintenance. So, ton volumes. fewer because We moving up praised we anticipated we’ll do. thing nobody do. by punished the would cost which called here, goes And be called production is discipline, a is lot right per then, the it’s we -- but to This this knew it that does, in

goes produce less, up. If you it

the items were and the only that rate By because a one affecting coke can have because us, use by I coal. you think if are Cleveland-Cliffs only much, up use It’s to an furnaces. HBI. specifically coke hurting a not reducing in clearly base, that’s us that are way, that using that as lot far we individual we that’s lot the As blast really noticed, in it ones going

in tons. hurting terms but So, using of us we because lot it’s we’re it’s are not as less -- much using per higher ton, a

a any you that’s good complement Celso, thing. So, with record? specific do have

Celso Goncalves

to coal is even coke than XX% it, XX% our into with mean, about high, and it’s expecting. just only total on I Lucas. XX% put basis, I some increase only it, But going an No. a think to on It’s overall call maybe numbers increase seeing costs. it, year-over-year into but that of, probably average you’re baked we’re XXXX. overall even The cost less

good some at helping decreasing rate, we’re Lourenco So, offset I that’s And think which a mentioned, to look coke large increase. it. way is as that of this

Operator

next is Michael from question Our Glick Morgan. with JP

Michael Glick

Hey. Good morning.

Your contract interesting. pretty mix were comments

level. moving get high the is about beyond talked You to? to XX% you level How that want do

Lourenco Goncalves

lock well, protect purchasing good tonnage Indexes that their and to because Look, they need any have got are real of contracts should price. don’t believe indexes. clients say, and CRU. job the deal believe managers with that back a to we bosses We to go we I’ve the

Okay.

the of that. dictate don’t cash with I CRU agree whatever the flows So of go, the companies. destiny

take just got of job or in or You’ve look ownership what to boss. do. you you you preserve good not, your believe not you and want Do want in to stability your stability front on or

completely, don’t index I I we but So, at believe the all, that have realistic. should am

are else higher believe buy to already way that’s from And make industry So, guys industry. the bigger. the import trying want the because to to percentage smaller they the continue wherewithal higher else the big I guys XXX% than we’ll is buy when they have I it anyone in the in of pretty my anyone not instead don’t bosses. told mills the things to their from than

and go want indexes fixed cancer to because in, be to eradicated. I go So, to needs are

Michael Glick

Understood.

you systematic as how or it? with aggressive the us walk will And you you in do of which of through way more can buyback, that the be nature, it of view guess, on I is Just asking kind drivers decision? another opportunistic

Lourenco Goncalves

Buyback depends. against is It stupidity. medicine a depends. It

buy stock. should believe don’t back stock buying a You because back that you be company

back the to iron of called is be money understand. shareholders tax-efficient to reward then. that allowing returning be ones to instead don’t shareholders. ore of a them should company mercy the opportunistic, now we company the Mike, mercy But way every Our long-term and an the are still of buying stock at of the

name. forgot Sullivan, name, iron need investment to in iron called something when ore because substitute. he’s his So available, a is his and company? The many ore no a substitute people How years they we real based comes -- are I the that a like are guys He I again forgot learn guy, he other decisions day, teacher Cleveland-Cliffs an are an Anyway, longer not at on CNBC. making that. company. He

are buybacks for So, that.

So, don’t don’t because billion over if billion the It’s right market that. decides any to there. dollars now. buy give here, need companies just the We CapEx I for X-point-something $X gift the I’ll of other have that have -- it. of I free committing put are it shares, that’s

less to We’re million, this for it XXXX be the $XXX that. then, going in And be in forward, -- will CapEx. than $XXX million going

flows, cash the buyback, and to have the have we going eventually cash aggressive. but to we’re used something So,

stupid will aggressive is, market will how see that let’s be. how we So the dictate

Operator

Alba question next Carlos is from Our De Morgan with Stanley.

Carlos De Alba

Yes.

Good Celso. Sorry. I was everyone, Lourenco and morning, particularly muted.

Just last a on question -- that on you follow-on just made. the a comment

So, generation mean, your what should on based I and good dividends? your cash about expectations and prices flow be volumes. comments for

have or are I share do the on but You then, views dividends? question What on what share may. of you if end tax another your markets, are would And or have scope like buybacks? I probably obviously, great, you buybacks only don’t both. So, do to prefer situation those,

Lourenco Goncalves

and electric is belongs dividends prefer steel and than steel the the you And the charging institutional that’s all buybacks when the really steel automotive to all that’s our the have engines One the in vehicle the large, needs States, serious like the said. all The supporting steels happen to for Who going And I transformers shareholders, cars, the everybody they and Cleveland-Cliffs. it are tax for States, United dividends. day, revolution Carlos. understands the United shareholders more about on, to electrical for shareholders. emissions better. all efficient, by shareholders are, Cleveland-Cliffs who it’s because stations. It’s tend electrical if money of is in institutional supplier like Retail the

are foundation the the change of this in we there in real right that’s So marketplace. base, the happening

before. really really these stock. I for for buy you So, when should might investors -- you serious not are were the That if institutional. to, ESG, good good day, share understand Cleveland-Cliffs that Because dividends but retail consider are retail, you buybacks about must

some the is base. that no institutional an there. still far, we still but are -- of company, will get They longer to we So ore need them iron learn

Carlos De Alba

comments in you What disciplined Fair there? then, to enough. end market? quarter, and how those fourth that something how of mentioned to of are mean you the you clearly You sales with do volumes with the you XX% improve exposure had by about but this the you is in leverage on made And And say, and will auto that infrastructure sector Infrastructure hearing the Any I much decision Bill? XX%, Infrastructure market, to to manufacturing markets, customers? broadly, the the see to do then expectation underappreciated obviously, a your from would the Bill? your say Maybe have Cliffs sector, going that more entire much it’s year. energy

Lourenco Goncalves

Yes.

billion of portion prepared $XX.X mentioned in -- million billion, Bill remarks, $XX.X Infrastructure sorry, $XX -- dollars. the the million with my I that stay Let’s

Just billion that’s us. related just $X.X it. to about electric and charging $XX Think the vehicles billion, stations, broken improving for electrical grid, into

the that are transforms. into goes producing steels grain-oriented only ones We electrical

that’s So us. for

the only that steels at one go engines. into the We electrical non-oriented producing are this point

for us. So, that’s

by the far, lot. biggest a by supplier far, -- We of by are,

We have supplier X plus been industry. a X as automotive number at number the of

So, are we automotive. big really in

and EVs these So coming serve. which respecifying line there’s the industry redesigning in everything models in going that’s materials on going lot a of in all automotive for we depending are changing on XXXX, on on now, XXXX, right OEM, the terms and that new

It’s We them, as that Cleveland-Cliffs familiar with always so one of supplier, are them we are steel. those all number of that -- the very all suppliers changes. of

Infrastructure this in coming all that’s Bill. So,

galvanized. like do also we in a things, you in wind and produce of If my and And these produce lot galvanized. to prepared do we go mentioned in solar, big I plate lot my plate, of other of consumers -- are remarks, a

their manage they So, they our automotive. you well chains. million supply mistake, XX place been make the could did no And something maybe -- shine where we’re million, going benefit we but year, cars lot. not XX last in not have like have XX they million, reached performing, is But place, a yes, our to

So, ready absolutely which of carrying will soon. we cash them, lot very for transforming are inventory be a

You what’s to produce don’t need produced. already

right. all So it’s

good. We’re

Operator

is next Emily from with Our question Sachs. Goldman Chieng

Emily Chieng

a around future. the is thinking give a what’s one as as to blast perhaps EAF furnace just a line about analysis, the taken you reline replacement to this earlier action sense Perhaps comment here? timeline first on in time potential your an and My to around could us being

Lourenco Goncalves

The on My that Yes. strategy I by is the not you -- morning, you centered hope environment our I Look, on atmosphere X%. strategy knock the transportation that pollutes total Emily, that put COX emissions. United the EAFs. down is understood of The cars the in support the related here to in States. good to the hope industry air only the really steel of the that way. XX% out is environment ones

the integrated entire the you you of if what we steel use shut industry, just X% and So, medium generate. that’s emission reduced down because included,

be to Goldman ESG a industry. that not that. there’s That’s So, for by on the to particularly needs steel Sachs, very lot money is be done to first thing, so understand -- the eager making

You entire not -- down industry, X%. steel if even reduced just you the you shut

for did nothing you environment. the So,

any reduce not did You emissions.

to entire cars, electric not replace you engines going overnight, cars, the fleet vehicles, XX%. of combustion fleet entire of other if but it’s then if happen you hand, the down with On knock you an replace it

So, that’s a good thing.

doing real emissions. the support Sachs from that eager ICEs we’re terms And of because that’s so car a Goldman to in can to lot money make be to So manufacturers EVs will the thing. why go of right

really on not doing. guys what’s all way, I’m like would to it’s I Goldman My lot And bandwagon. the done everything furnace, Sachs when that is a problem, -- So, you but just right blast and thing the it [ph] the to last to shiny jump costs with money. on see ESG work cheer that EAFs work automotive I’m time the of thing with rely address in

lines. in anything of else galvanizing So terms I need do don’t to

lines, electrical wide have galvanizing we have galvanizing lines. We

and also things of that. steel doesn’t galvanized We uses. have sulfur band, also rolled, to preclusions same [ph] of for come hot that have need all And also automotive. the kinds with But level we and spec, other cold of control low take that have we care this have we and

scrap. the And we the So, scrap we we blast lot a EAF because furnace, instead own scrap of a company. put by up relining can way, to the of have build

future. So, When XXXX. we’ll I in that XXXX at Certainly not in will in believe I going happen? know, it the do don’t time, is don’t either. it. that to be

try. will are us a put are different a good It’s to of dollars, we that from just deploy a that that get at. completely point committing So, in of the position lot billions the ones to to

how see to good a is Let’s go. My down, leverage going that’s and thing.

Emily Chieng

sense. you average my prices. selling just there. some That like sounds makes around progress made I is follow-up Understood. recontracting XXXX your appreciate there. update And with good It the the mark-to-market

share Just it can curious as that. Thank you if renegotiation leave outstanding contracts what at you. to still? percentage of still I’ll remain for

Lourenco Goncalves

we that we still finalize. need are to with we But X. X done Yes, have

good. pretty it’s So,

I had So because it started I go. complicated done when and zero XX more was to

Now, go. check assume far so X we we I box X X and to the that -- someone, are good, times. renegotiate, X so even can the let’s done

So everybody accepted my terms.

not X So, X these accept. do let’s that assume of

be expedite that help these get them resolving X size on from depending they of can’t even because One to -- renegotiation. us, of -- chip not doesn’t shortage, he my accept will able they to anyone. steel don’t the the We may get want client decide if from

and the totally be at next case. for point. exercise. fine, in believe life marketplace they thing more a just we’re be see in my just be And that renegotiate microchips this will just Emily, we’re we I going welcome, the point, time, at a ones so, as going not And in will this be X theoretical that enforced But the lot And is available is good. this time, okay, I just in to to clients.

next them X for conference to to will that discuss for happen We that’s in another that So, can going call continue the story. we’re not carry months. inventory free. But in

of not a it’s lot time to So wait.

Operator

Paribas from Exane. with Rosenfeld BNP is question next Our Seth

Seth Rosenfeld

a then today. after that with of all the very on a sense kick we I QX of I which questions to QX? I of to guess in guess, in good strong what was for year, back the Is to heard Good little from results. as weak I please think appears discipline trying expect I’m volumes, afternoon. we good yet. Congrats If full for and for please? enough amongst haven’t balance off a us peers taking pointing your going can How of you’re to Thank ahead demand, set of for understand you our a auto volumes. question give should we I recovering that QX, continued particularly QX, bit to mix recovery a about guess, distributors? offset demand extent what what think supply to the to do for on

Lourenco Goncalves

Welcome afternoon, Seth. Good back.

everything heard time. I a with experience haven’t long going you and in your is you. We well, from fine fatherhood hope is

As service far it. normally they center volumes, our buy clients, don’t as

you As center I know, time, guy years. a was long for service for a XX

mindset buy of So I do. the know They never more the how year, or much works. and don’t less between end Thanksgiving the

was and they this distress So, ordering, is students got time under this -- lot was they great. demand of be that that more to done double was underlying But earlier everything. have than The liked done difference at expected. for continues buying were They to demand a the them.

said, is come to on sitting were they and demand, they demand will that like being good, are their and very inventories these working soon. So, direct Demand back. I coming down, is underlying back us --

line to be or lower, would start a this it’s end thinking. volumes year higher, good fine. are reference slightly the And that’s QX volumes up less but QX, of with QX, to going slightly more just a So, we in XXXX, with volume

that a hope it’s I not. not, with paradigm So, ahead is, follow-up. don’t please new believe question. your because If stretch, QX a by go answered any it

Seth Rosenfeld

great. that’s think I No,

guess, Just the correctly? I understanding better perhaps like to to QX QX light clarify, volumes. on but a I Am it confidence QX, on side, that sounds bit still

Lourenco Goncalves

volume takeaway most at than QX the this QX. Yes, relevant probably Yes. point. should most be -- That’s higher

Seth Rosenfeld

separate question, with regards please, a And to DRI.

good a success far. been has so very plant Toledo Your

very So forward, the decarbonization strategy side. in congrats on the that. about your furnaces has When going blast been believe business we your charge on think good I to

capacity I have out, furnaces? you or term, the years DRI for part do enough present, of that blast blast is several growing an furnace your scale DRI And the of expansion interest DRI mix? in guess, you’ve Given input brought now longer at up EAF

Lourenco Goncalves

billion are -- consuming this tons of blast point, we furnace in have million have we do tons At EAFs at our X.X Yes. of this -- or take, EAFs. less or more in HBI We XXX,XXX tons give our X.X tons million -- point. and

on we put at You the we FPT closed we’re scrap, EAFs, know with that. our stamping get If that point, loop including new scrap going are among prime clients. doing more have -- when sources more that continues and automotive to because scrap of to plants a

in and will portion continue will we use even to a our not HBI. for specs. grow lower with scrap, EAFs have Remember, these more EAFs we EAFs, EAFs, when these So, with be HBI our because we we’re going keep can FPT, don’t furnaces, believe that continue we more to to We need HBI. we can selective, our rely on for be blast

The you most very when of steel operation good. type So, in low much is is scrap an it’s EAF for scrap because rebar. emissions It’s environmentally-friendly the melt it. to business rebar produce pretty

you strategy the to in pig peaceful. from are you Ukraine as at this or you that they from a go to have. on count Ukraine, to it’s have very melt that. rebar, to produce Russia, point, scrap, or Russia HBI that chain, you start iron get from good you complicate roll, places And don’t to simple need You When up it start as flat and then food and

forward. be is a is business, So strategize one a going it long-term will fun and I not to This watch quarter This business. multiyear.

how You that, me sell I’ve people? long-term concerned to about remember other contracts you we’re Do for the very said HBI been selling know off right? to HBI, much Zero.

Seth Rosenfeld

Zero.

Lourenco Goncalves

unnecessary. totally were concerns your So,

no leads reason, You for It lost. so.

Seth Rosenfeld

you glad very Thank much, Lourenco. working that I’m [indiscernible] well. very

Lourenco Goncalves

All right, Seth.

I think we’re done.

I think, any more questions. don’t have we

being So, thank us for you with today.

a is money we very the months. be important going important That’s a to very QX. and things. on very in the shareholders we today. thing, are are the can’t marketplace link leverage to strong to a is between returning a A going We debt. with we we weekend. we’ll down wait we We thing, me, QX. QX talking addressing; is are continue doing, a you making is I be lot given and be are making; Have two shortest pay position do. is to this We’ll talking Based about ESG important, we company cash a addressed in your lot are to back a to to in other But the now. to onetime that, buyback. good soon. gift rest gift. talk Bye day If the of great use continue more

Operator

conference. today’s Thank you. conclude This does

disconnect this you your participation. time. may for thank You lines your at And

Cleveland-Cliffs (CLF) 11 Feb 222021 Q4 Earnings call transcript