CLF - Earnings call transcript Q2 2023

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Operator

Good morning, ladies and gentlemen. My name is Darryl, and I am your conference facilitator today. I would like to welcome everyone to Cleveland-Cliffs Second Quarter 2023 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 that Important Although assumptions, differ could SEC, results set results differ that the materially. cause on that reports XX-K on believes to could on to company's subject company are which news and forward-looking statements actual are the based forth in XX-Q risks website. factors available cause the are releases are its reasonable statements and uncertainties Forms with filed to and

the and At also earnings like in on was President special published and clevelandcliffs.com. call can call, certain be for broadcast available is Executive Goncalves, will Financial conference items. Today's be excluding found and The discuss morning. the time, results available Regulation also archived company conclusion purposes will Vice Chief Reconciliation website Officer. being at release, which G it introduce Celso replay. of At this the I for this to the would

Celso Goncalves

that company billion, to and than XXXX history. a in over lowest bringing to mining our flow down of adjusted everyone. down morning, million was of cash quarterly XXXX. net level $X.X in pay XXXX QX at We largest $XXX since quarter was debt our debt since $XXX used more million Darryl, were company of debt QX of debt our we reduction best just We you, Xx our Thank most QX. good than cash higher EBITDA had free million. $XXX

Since and repurchases. an million our the buying we balance acquisition debt majority billion nearly repayment million X flow pension the have liabilities to XXXX, from years, to past free $X.X Net cash $XX To returned XX% to accomplishments share. count dedicated down our of gone benefit share gone average per also back have to our X.X to shares billion, $XXX in XX%. by sheet of from over just FPT just to of by over November price $X.X at $XXX vast We summarize $XXX OPEB shareholders $XXX million by $X.X the gone million of share from has diluted billion by the net XX%. debt down shareholders. of million, And down our has and

do our in and going disciplined capital approach to continue forward. we'll remained have We so allocation, to

very a low low and multiyear strong for Our current -- very needs QX future. maintain to us. generator CapEx in to we the remain cash CapEx and flow a are expect was future for a strong foreseeable free

more and now $XXX evaluations been on annual XXXX. done XXXX, that Burns ahead, in for originally last With which only XXXX that, level by mentioned recent the importantly, pushed around was million reline expect by Looking call, very we X year now based to be remain and CapEx XXXX. will we now team, furnace Harbor has our at for blast planned XXXX, the on operations the

down our on specifically this for Drilling results quarter. past

mix from set we both This watermark representing This and high X than highlighted customers years a as led record increase volumes a sales selling matched company more better expected. price end-user nearly selling price impact effectively sales with per QX another up ago. value-added were expected $XXX net than mix originally averaging a per with ton ton shipment prices significant tons quarterly $X,XXX to level to quarter-over-quarter. our of automotive Shipments the sequentially by Our million X.X realizations that our richer QX. much and steel of to was

ultimately sold the compared targets -- we impact steel that offsetting reduction of flat than out to unit the proportion quarter. costs cost in anticipate costs being value-added the higher cost on laid quarter. came out side, the as a were our second We remain the of effectively This the we reduction QX, per During originally the mix the tons to third richer from expected. on in quarter a the track prior in $XX said, ton laid as we prior

will energy working maintenance our the already of This in statement which can costs will in reduction and scrap, lower The this of lower a cash function costs reduction repair inventory You see in as higher through drove index QX. of as healthy help with recently volumes, foreshadowed QX cost normalized alloy cost cost costs. half partially in back the in impact replacing well as flow is coming inventory year. and roll benefit to a pricing, production capital lower offset the

As typical for we volumes sector, will for QX likely -- year outages lower lower volumes in OEM changeovers. due automotive the see model to

to mix should in still QX, we aim QX, the of expected the costs. product maintain unit on favorable a While drive levels we impact achieved in total same high shipments

excited through cost are We effective higher maintenance our of repair effectively left from all elevated our have of and we worked -- days and production reduced that over now inventory volumes.

to only Looking and the in coal near-term forward, coming costs then down QX, further prices. to into but year, mainly expect QX next we see reductions lower see related also not

were our unsecured by maturity XXXX able to previously from extend our of debt following the in was pushing our years successfully of April, nearest the X well-timed to dated facility ABL upsize maturity. what and During quarter, we XXXX, the bonds issuance out

bond free that, part I the with the us now will with to $X.X rightsized as liquidity record call allowed offering With end ABL, to of now over With the billion. $X.XX $X.X flow we turn included ABL of quarter the collateral, our of from assets cash together Lourenco. to billion and The FPT our billion.

Lourenco Goncalves

good you, morning, and Thank Celso, everyone.

XXXX, highlight in we we back The now quarter total first a we shipments were in tons. thing only set the operate in second matched operating our of We've record furnaces. XXXX, of I X. our blast that X.X the quarter is will And of results total At million about high XXXX. second time, X

If in you blast per furnace, we Indiana million Harbor idled year ton XXXX. a recall, our #X X.X unit

furnace able with major levels in use in footprint, This our of the to as last blast So with the our and demonstrates of our production strategic blast furnaces, shipments. our of maximization were together HBI we of BOFs. fact accomplish usage feedstock same efficiency the one scrap in

As to were the pig use for iron able amount a produced. lot result, we of less coke a same

HBI in more Cleveland-Cliffs significantly XXXX, Let's Cleveland-Cliffs of the COX be by acquired produced blast furnaces introduced higher. The evident, make had it would lot less same of generation allows a of but the the steel use steel be amount large X even for companies today, will not generation. COX in amounts

In has which level years our automotive while Europe, in company, world maintaining heavy in or Canada, of the and in case, product time. that do short mix, of XX% the minimal or We reduction U.S., same else steels. the not less anywhere flat-rolled similar of COX in same is production emissions Asia any in the know in achieved X magnitude integrated such other of a period

our Michigan is our ore One of pellets advantages from Minnesota. in full material raw main our key and competitive control of iron mines having

in Minnesota, the at of got issue QX, of resolution Speaking a final Nashwauk. we

since Nine high-quality there ore Hibbing. X control we decades at we I Nashawauk leases years been with ago our of leases. These to the private state now years add in the acquired came to later, have together fighting We Cliffs reserves for back XXXX. land,

the the We Nashwauk decision With where XXXX. reduction and support that ton. have per preliminary term. are work this plant and have our pellets a natural of ground in blast already ourselves less and gas prices metric assessment in On early they ore than long necessary We of grade will been, invest the began of production note, to started direct XXXX. find to we reduction both develop back for benefits of the body we reaping HBI that $XXX confirms XXXX, pellets direct the in production our late HPI in producing in at broke cost XXXX, furnace

analyst of the productivity ability lot projects and it goes construction of do worth years. Their have widow for during to called has our previously had Toledo operating execute but and that good one caused also reduction when once to startup. we execution built success maker Case have of they of a It's United iron after space operating other the failure HBI the margin-enhancing and add underappreciated companies to built plant, Neither Cleveland-Cliffs by we carbon are our successfully plants our commissioned X in our one that X.X plate on intensity building, skepticism plant. in plant Toledo agent. agent a our greenfield So research been only and to up add capacity struggles HBI ramping regarding uneventfully not It and in in our our and a comparing been Moreover, point the sheet new closed. that since reflecting a X direct it reduction examples States success. also

Our customers to ton important Cliffs what's clients $XX role steel that, recognize the played that made H With in recently carbon surcharge goals. with are introduced to ton our HBI. reduction our have has our starting surcharge a of with called we HBI each invoices in the Cliffs applied per to

metric in that For is metric ones tons the per $XX work ton.

in industry Europe, a Japan, other paid when deserve of in States, in or United the anywhere steel that Korea, entire of major in our to differentiates for truly suppliers be China in characteristic throughout world. particularly automotive compared the We us, South to steel to else the

the we the be invest the only in not to We price to surcharge to than Cliffs be that that. final largest initiatives. be automotive would a manufacturers to net steel by passed to window sticker green That's of suppliers for consumer. And as unreasonable increase should of car one Cleveland-Cliffs $XX and MSRP along world, actually should also therefore, continue H the by expected universally in accepted. wants Regardless, believe the the and less that paid car industry need X.X%. of ton per And the

to are have [ water our proven hydrogen the with COX HXO throughout ago, we trial facility X for the a of product be or of evolution the years hydrogen-ready. furnace replaced in our extended and Three footprint, in first for We vapor including at blast ones to already furnaces time. successfully on complete the the of fossil Works, was an injected fuel infrastructure with and ultimately into of all X release operating substitute the efficiency. reductant. no with a place, hydrogen quality the Using period pipeline This are gas a and our used full-scale The hydrogen happy of as all ] release to be May next Cleveland-Cliffs company existing injecting months the impact into of path. years DRI blast in we transportation X use Western our this which at will Middletown became on furnaces, at step Hemisphere blast first

chemistry trialing decarbonization changer effectiveness. furnace We steel. largest technology will #X. hydrogen will our be all. we proven for the We economics. true of next already It's be hurdle the simple at is after believe its now blast Indiana game main right the And The have Harbor

of gas. XXx gas plant. equivalent an direct hydrogen active Indiana still on specifically also is are Toledo, we reduction why hydrogen As units in Indiana in and Ohio our complex today, initiatives near about Harbor near are build than That's Northwest expensive to Midwest of our the Burns Harbor natural more hubs the player

carbon -- As hydrogen to in carbon account power economical, throughout just represents footprint. over of the which footprint be U.S. our for our more it we together transportation entire of industry The able X% XX%. steel generation, country's will compared our to and becomes and emissions more implement

electrical we using role at the XX,XXX we completed, massive overall to the are a Zanesville carbon-intensive vehicle tons these play have much XXX users pleased more our for On plant With pounds actively been we report has providing for road of steels and which recent our about are the healthy. related growing in on non-oriented electric started in EV Every for MOTOR-MAX producing position influx electrical we steels. are engaged steel. expansion now sectors. automotive, motors. remains in heavy that that automotive, months, demand we already regard, I'm solutions solar projects, our the a this needs And seen to orders Outside demand material. In galvanized have great of in to serve of steels

As for growth is relatively this in the of market us for largest demand. far a steel, by terms area new

repair the Tuesday, Friday, the the report federal rolled in the melted great accomplishment to that was too the Coatesville Monday on a inflation that by begin the soft center have We of these on is being and quickly Cleveland-Cliffs I-XX achieved to appears it for a shipping and under a to it very the following steel the and ease. all the a speedy plants, women the to center collapse to the part real Sunday, of And the operator way with our that, professionally. already that men to and PO questions. control, new proud scenario to buyers in on with plate Darryl? for our accelerated X-day caution to Cleveland-Cliffs this off placed infrastructure. this Now and look buyers from are piece starting so spending effort Philadelphia, ahead Service on related job to demand low. lending needed a on important the reopening been of We Harbor turnaround sidelines. getting along service led who both Burns will incoming new team. And I'm With is our to This I a over sources and ability initiatives crisis, inventories personally of forward possibility. demand, remain huge bridge in note, schedule. recent On supply respond to bridge. I turn come done contract so those division's received the fabricators specific of like awarded quickly involved began to steel steel us would that should congratulate

Operator

questions Instructions] with We of will conducting now line question-and-answer be from Our Tanners Research. session. the a [Operator first Wolf Timna come

Timna Tanners

on could little be would any price to color the helping prices Wanted into on more about to mix correction, And bit ask give related coal specifics. you color quarter implications commentary costs. great. if on a declines, talk you expected also But more for any the the for third the

Lourenco Goncalves

Timna. Okay,

from that all, it's can coal It's I That's price year-over-year of First say prices can expect not handling quarter right you coming Maybe middle But to be because negotiation, at thing a things given to like is of too significant we I which this now The call only tell to good am negotiation. right year, would in I one. -- next get all That's the number done by are a that more this numerical. early. more percentage. myself. are decrease yet. now

you correction. know second you one, this clarify? what don't is. The mentioned mix Can I

Timna Tanners

absolutely. Yes,

changes quarter. a from strong the So when you talked mix the from about mix third into benefits in the the particularly second quarter

But don't an that like have want how about talked You price. costs. that, you to conclusions. tends jump on also selling to would But I see also imply, help if and to reduce your average it generally, you realized impact shift a would mix

So could of I kind as of well. if you also was that kind just provide wondering color

Lourenco Goncalves

Understood.

better for saw In largest Several to Here's demand the negotiations for steels far, been than or have that. the and being more OEMs issues because chain by union the though like bigger a cars strike supply by thing. it's Their centers than of sorry. the any Even automotive anticipating. ahead we of -- anything I were They expect large. be altogether. resolved We QX, service disruption, automotive to we that. steel don't supplier are aggressively and reasons building safe

behaving friendly. But negotiation, ahead if as is entering which the my good they they management even the to practice in of need are game, negotiation unit opinion, when is a we're if stay

stuff produce this rest sales because comparison others commercial that the added, of mini no by And everyone That's So beneficiary skewed a of do. price it's type largest value our biggest commodity matter the the what in automotive with the a can we is [indiscernible]. we're by are more towards if the grade, the that lot, being explains high why average up thing. of went

side. the price explains that So

other yield this the like on hand, mix -- specified heavy in is there's that. highly costs galven involved things prices. On margin producing galvanized higher because these

in a than great all We higher that were basically in all, line it had So cost with in was was for us. cost QX. slightly anticipated, the

number the $XXX, than significant, But me now. of or $XXX later front but it in more $XXX something price right the this up -- me. I to by that have take but in of don't for have bank, don't final, that. Our front with than this ton, I to per went the don't more check like number was number $XXX-and-something

share. they But are gaining about automotive keep in price of a story position separate higher $XXX I market know up, prices share, up about us the everything our because repeating tonnage this gains auto to anyway, market that others one confirms the this share with companies bulls. don't where the gaining that's story. the tonne, [ lots go buying. per by -- talk and goes market same all industry But love share market up, in are We ] goes the

So left I'm missing to I something, thing cost the think something ask I outside, I Timna? explained the unless free pricing feel if please and

Timna Tanners

Yes.

the just you think Lourenco, to the of yes, exactly. you the that [indiscernible] extra also So not off trying how Sorry, I implications talked was of to I well, the second about understand implications in auto which we quarter, the explained tonnage got -- backing the third but really just quarter,

Lourenco Goncalves

again, Yes. in at least I anticipating is confirming here the years. automotive even shutdown the were [ What with much some what are OEMs. They still X talk they basically though in very do. a the previous some summer about did reality we year, of cases, this the less week, ] mild comparison very shutdowns than weeks, July, which, normally

QX less mix automotive. you that So tonnage QX, compare with for -- for when

you're QX, a taking into reverse QX. about explained that everything So

are to of going steel we're producing costs QX. in we So the be well that us carried less because to have going lower

costs. lower by hand, other prices be -- average slightly the this lower offset will On lower

go So these together. things

their we July less producing vacations. number, for still the offset a doing a The but the with shut playing revenues amount. side. the will on -- -- We impact cost less will going same big to that that a aluminizing Still time kind galvanneal, had not for that be we're then of game have the be in producing less down we're summer galvanized,

Operator

Our the next with questions Woodworth Suisse. Curt of come Credit line from

Curtis Woodworth

follow-up Timna's a to question. of Sort

saying are that. respect with So would the spot equivalent XX%, the cost then and you that be mix shift shift of to down roughly to being combination index the price

like what So give can specifically on your could be average ton do quarter? XQ? during similar feel prices you you Or per any color this more selling see to you EBITDA

Celso Goncalves

we on as of kind like cost lower mentioned, -- But Yes, lower demand. coming in through what's touch less production go -- lower volume, scrap, center higher lower the And average volume alloy add be running Celso. over is to automotive impact be It's I'll Lourenco here by less lower price is Curtis. Sure, said, and and expectations. in selling me the let then that going and value higher Yes. cost maintenance going with QX, driven of And costs there's inventory. energy costs. Q this to service driving and repairs of

So that ton that's baked for what's per QX into over quarter-over-quarter $XX QX. reduction

of relates then enough given we've to lags average mix. just reflect impact mix you're to sort selling works. a work. to that terms of kind kind going And it in how pricing price, with And selling the and price similar just But have how of by everybody driven -- our index as remind to average of

is is then year And on which have that spot. of the XX% on of and XX, that the impacted X-month a lag, is full is beyond we XX% provided on the percent give that XX% is, lag, slabs I resets of quarter is of we've remaining our XX% for And We And year fixed fixed-price is of a ASP pricing, CRU then guidance contracts. month a year. that, XX% full the throughout by XX prices. under are volumes portfolio think lag, breakdown that CRU that a XX% is index XX%. And

know, color, all for can crumbs But bit with let of be. given little need can think that, us there. just think to further. I kind get we any a we've of and should the I to try But enough help bread implied ASP if you So more you what QX

Curtis Woodworth

that going trend with like -- working the seems it of progression cost cost then the of the just of to next down into the terms in high-cost what would respect only the the XX% year, guide similar kind part, for saying XQ for then a you're -- be model another of And in some real off change inventory? is to most respect coal. And with

do at cost way, you MRO you'll be much another like pretty it's next structure year? So targeted going feel into

Celso Goncalves

that's Yes, right.

costs get by just to XX% that the here XX range is -- XX the for $X,XXX So of sort but directional year end that altogether QX the to of X,XXX. this goal And the get year, to we're our QX the per is down and end -- XX% the to get trying of to by of the ton is right? goal that back by end us to

driver into going very assuming get step again down big we be a into confident which we're will lower That the there. year, then big QX, coal And year, benefits we that for these costs next function be will QX on of next that XXXX. will,

Lourenco Goncalves

Yes, Curt, Lourenco here.

Just keep more to mind. like that I thing you one in would

We amount I blast continue a enormous I furnaces, cost -- use my gave figure today, remarks. our an have in prepared in HBI which of the showed to

we cost into back feel So like helping prices their to taken they that be gas to a natural structure. level Also, that are are needs consideration.

So don't forget that.

that BOFs, And much in use so last the of the mini terms me too. scrap they we prices are do for mills least, down pushing in scrap but benefiting everything not because our benefit, their

a to just an beauty was with They would owning that about work to easy past, company. scrap the So fact way hard the push lower price in the accommodate I always down. had scrap that's upset they prices.

XX%, scrap our to the Okay, how use BOFs. now the in they benefits Cliffs do we because close Cleveland work,

them thank I they for costs that. do, go time do My benefit. they Every I what down. So

Curtis Woodworth

$X CapEx quick Lourenco a given side. at then understood. you feel reline do you return, return And like Do see be capital guess, a to or initiate Burns on given you push to well level gives just Board That's the capital by you're to the debt target No. on bit runway evolving kind the dividend? there's how net And maybe little out of at more closer going year-end. billion of I appetite

Lourenco Goncalves

the Board this almost it's Look, Board -- me, a possibility. everybody is, for X been has Yes. with years. And

been been well. they have have you through that through So -- as everything

been a have us one You been long years. for time. for the X following have the around all of We're that ones

the So difference. we see

But this it's has to been want everything. like Board we of actually are. extremely supportive not capital shareholders. the return to And -- We don't we

If in reduced years, the Curt, our you look shares Two last share million XX%. XXX was ago, years count by now X million our share shares. was count XXX it's

So of buying lot a back stock. we're

money So shareholders. we dividend are right to lot come will returning a the of the A time. at

are the all closer very commit speed. want the And I moves don't high every right in right anything. is we time to the right quarter. But direction with the getting making with

to there going get we're So soon.

Celso Goncalves

Yes.

add to that, to Just too.

and I it, XX% about at share debt allocated free the towards flow repayment way if cash think towards repurchases. like sort think you XX% of Curt, recent to look the we've of quarters,

doesn't debt once allocation closer kind will stop and billion breakdown we're It's that bit, will capital toward the closer just XX/XX, get that to $X debt It returns and more can get a little this towards toward capital down we less of net As of and returns. target, to to reduction. of shareholders shift be change going mean debt more skewed the we X. paying it to

Lourenco Goncalves

as issue the of dividend. this Well on incurred

ahead follow to go allocating sale, Stock we buy. us money one now goes our on and and price then are the is There's have back. We clear. way to we results. expedite because been every for price to buybacks? to dividend. the money stock Why allocating then, buy That's

of excited As year, year has dividend. quarter, delivering soon been price after will the as Cleveland-Cliffs be a we more stock quarter reflecting after reality what starts about the

as consider you, the to need promise me excited, money excited, soon stock artificially through Because not in I way be consistently to is stock the is shareholders, that that for volatility dividend I'm as we best way return a but through buyback that will and be higher to Board to see continues a to a And the to return the my to be deserve. a capital we price to sure shareholders don't the buyback. inflicted

Operator

Lucas from next line Securities. Pipes of Riley Our come B. the questions with

Lucas Pipes

the more across to pushout wondered on mentioned and I you And I hearing in those. us Harbor. Lourenco, Cliffs of could hydrogen more in about about fleet. what update remarks. could Reline the you prepared the wondered hear really if schedule those. the And of hubs kind role good I at of the reline your exactly And then, am play Burns development

you think Ohio, your and Indiana would comments as I appreciate well. mentioned that on

Lourenco Goncalves

operational for we to be the the to every updated is Look, the is of based time line blast relined in furnace we Thanks, Lucas, some Harbor, [indiscernible] Burns next the and We'll continue -- operate question. monitor funds, on to released information. funds. information continue

So until XXXX quarter, would last Harbor. Burns scenario our worst-case be to relining for at blast furnace

for is that perfect. conviction in to be great furnaces our sure the us shape XXXX, to -- are enough XXX% that increased we quarter, this the Through postponement

now blast XXXX. After #X, time So XXXX. finished that's that, see is our the in furnace Indiana biggest why Harbor will we

year. recent. very it's We last So just finished Cleveland

It's next is be not because happen the this Middletown, there the going we But continue XXXX -- improve the XXXX We'll later. happen. Middletown. number or XXXX. one to But Middletown, become going XXXX not theoretically, before is will take So operations might and to line at to to monitor. bank don't continue in will to

very at point. this blast So furnace. we that's regarding have what

because want touch Regarding will hydrogen, and you be COX really hydrogen. solution down carbon. in knock hydrogen, is the carbon Industries, of back. Hydrogen produce first oxygen one chicken with there's all, COX if remove thing and we'll step with the to egg a we unless

is That's the hydrogen. carbon. to replace to something with way remove So the else doesn't carbon best have that

that's H combine That's with you water, great. generate when vapor. So OX, you it's HXO,

not COX. that's -- So

demand. reduce because because is problem operate amounts there of companies big cost a the plants. either the don't demand the there to build And But gases massive then no that no plants in hydrogen to is gas build scale produce is companies with the don't

at So -- we Cliffs. Cleveland are we

the with We by conundrum and egg chicken are offtakes breaking permitting to hubs. this

the is leading Toledo, the So day. there main tonnes gases is of throughout hub company in supplier footprint XXX is per our Linde, that's proposed and the being

per is day. there tonnes offtake Our XX

as We several is to alternative to of replace possibility the leaving other that for that capacity industries considering battery are now a vehicles. cells I electric other half and hydrogen-powered vehicles industries believe battery taking the half among to right is use, an this propel add their which to route. great are the but OEMs There serious electric are solution, other to not cars automotive. to And

the the that. promoting So in we hub Same in BP Northwest is are Constellation in Toledo, thing Northwest hub. Indiana, Indiana,

So at the management Cleveland-Cliffs we met yesterday of with here BP.

we support their hub Northwest on BP in than the XXx the but in per hub produce bigger tonnes day. itself own our hydrogen more is enormous, It's doing to Torino. X,XXX the So and hub, to landed only Indiana not is anything

But my have day. there, there, we Harbor over is Indiana Burns my Hub commitment and XXX per because offtake tonnes

stuff would us this be make hydrogen that automotive Indiana, Northwest for route. the of pursue enabler to really if building OEMs having in So produce industry, the the to cars

then instead HX be to and that ton. and HX, a [ HBI clients. a come the like of use I'm HBI, at point, our have able on will #X for that will is be only little expensive it's we that pipeline be we'll Cliffs that XXX ] At X use be confident HBI Cliffs just with be that's to only to Cliffs hydrogen so trial will about H, $XX things. hydrogen, it Harbor a per So normal we And basis, today. of and to we're Cliffs Indiana Hs, more H talking because going state a done permanent

Lucas Pipes

in about a a parties of the on follow-up, from apply ask XXXX? I price to expect Just to own you range purchase assumptions As then that. rough my amount third can that I coal wanted

And be would think, about XXXX, separately, that down I demand was level. steel per pre-COVID then helpful. So versus U.S. still in capita X%

XXXX. So into I'm second what the but the wondering more market this year, the look broadly of also for view we in as half for your is steel U.S.

Lourenco Goncalves

Okay.

sorry. at to million production So SunCoke our goes What of purchase Lucas, question, typical tonnes, other million X coal our through plus what own I'm is Princeton. was the X including

Lucas Pipes

in demand that in been actually the U.S. down versus has Your demand view steel pre-Covid outlook, levels. capita especially still per

Lourenco Goncalves

good a figures capita capita factor. Yes, right very United the States, per per I here when in was any I I a get don't more that in produce because us. makes to is normal go was so Not prices for to now. Brazil And But to because [indiscernible] doing also level. at changer with demand was is have produce at automotive big for the type commodity #X a COVID about tell market, only compete and us will steel that steel But I to less be will the don't our in this problem. that. markets, This with us automotive of for bring first will year players since out I method close, you close makes focus that's industry down more us, the us. better, game to but no not in on that supply automotive

coming the start soon. we're now. to seeing of the Reduction actually will the CHIPS is also infrastructure right Act bill, We Act, see, inflation impact the

quarters. are We that to the going coming see in

here of are in we last we convincing in in can't. happening United and China, that. in the Guess this of manufacturing in What's completely in Vietnam, India, ourselves spent the XX We produce terms States, good country. that this everything now in Indonesia right in could So years resurgence is of underappreciated. places terms in We like shape demand what?

here. produce to have We

And and -- joining next concept not produce people computer The to that starting need staying to but Otherwise, percolate. we Because start educating that to the a there's invest need life that is is will, our this younger the money, here, need in willingness I'm to that behind. is is And life people. convincing need going reality, in Zoom a home lag our there's calls working thing We this we to that's start this parents, there to glad there's manufacturing, engineering. thing the things people. we're that's grandparents country. the in behind but

We blessed. have been

very We and successful new have people younger been in retaining hiring people.

trained completely of year our inside trained almost, that ones We have replace that's are and to an the entire year. people company next being retiring this group

But the picture in the that's not country. overall

equation. able the We of part country. to America, people support strength be effort redoing bringing last also to what to back to manufacturing that's this destroyed, this bring generation So back need the of

Operator

line come Morgan Carlos of questions Alba Stanley. with De next from Our the

Carlos de Alba

Lourenco and Celso.

little comments. us in can discussions. And bit, a you sector that on push some Just earlier your Lourenco a been happened if give may wonder what has is But lot share that share. for your your I detail given on bit question perception higher Is -- more your with that a prices. the discussion shipments, auto a in little have that you I've sort Cliffs addressed lost this recently getting there of or

I hear do see that? you how wanted to So you from

Lourenco Goncalves

loss perception a share said You of in market automotive?

Carlos de Alba

Right.

Lourenco Goncalves

reported at volumes, are We volumes. our that year-over-year. been quarter record they Look has a just up

know the So people lot of But say things. you numbers. is reality a what, in

is share. able ton. everybody share gain ton reduced We buying last share of gave last their between us continue in prices. $XXX and the in only cycle prices -- else per gave to price by renewals, market automotive to per everybody differentiation else that quest were the gain year, to market and farm without in net The we And increase market away

because for are the because increased half. I They we even price. in Because all price, thank that all, reduced we they them OEMs supply stayed probably good.

together keep everybody Stellantis, good for the for given good Ford, half Toyota, going. other good So GM, for good and discount, to enterprise good supply in for

picture. the got You've

I So that's deliver the time. steels they fine We on with that me. need. produce

pay, with the to models. is We per get this with we exposed bleeding And comes hope don't are because produce they bleeding and parts, them use stopped $XX except stopped of Mini-mills aluminum. HBI push than BS. we the way, when And new the Carlos. by that to and paying point, it's are We exports, we show ones they the We exceptions if are on but the everyone don't charging if I come done. exceptionsof they understand the they that, my ton, for to us. produce deliver cannot can us exceptions. mini-mills. Other the

Carlos de Alba

to No, right? I the year, second in I assume half it's continue dynamics will did. these And fair the of that presumably, Yes.

Lourenco Goncalves

bet. You

will we is lot X% is thing or get are of because some CXHX,CXHX,CXHXX; blast with gas and hydrogen, -- H continue, in are with furnaces our enrich doing to natural But others a mix reduce you we inject hydrocarbons. CHX of hydrogen like Cliffs gas they our and our of enrich to You a bet XX% now Cliffs we a natural when HX COX natural is good emissions. gas when

a really to I gas. to Cliffs And when And enough H Max So we have go hydrogen hydrogen but mechanical within injecting with at the decade, that to furnaces day, enough H also in to enrich funds Because vertical then Board. And going will rates gas this hydrogen. [ are pellets. minimum be Cliffs the position to replace for body ore Cliffs point, the will reductant, call still one have ] cook the because natural [ hopefully, inside the for just it's HX. coke keep to we're our theoretical support this stage is the we ] the from natural iron

we're to at to be going minimum that So the theoretical point.

wheel, that that he the this the into edges. or I'll reinvent fired. new other Cleveland-Cliffs. I that anything. late beast. be spot believe buying drop they But and or not go, was with have at they share, to need, will early Cliffs deal they XXXX, believes and XXXX. moving be they at they're talking XXXX, real are gaining need she XXXX buying the is They say reality the XXXX, that enough gaining the Cliffs prices go having XXXX, to just got that because talking If will is is they they about By entice and HX. And hope to say about point, new XXXX, reality market when are XXXX, the hydrogen And guy the I that buy share. They XXXX. will one then purchasing manager steel they have a then type. H that market Others I'm No,

not gouging just the we paid business of anyone. in want to are for what We We get do.

will been the I do. our hope answer, automotive We latter what We of you we -- got paid your for and appreciate the have this I partners in the Carlos. XXXX, into part of XXXX. industry, support continue

Carlos de Alba

-- whatever mining where capital sector to cash possibility and want coming then of they to that you not, on allocate generation several flow back companies and Do allocation allocation, frameworks you And this think -- believe in to shape have the believe don't you measure And is sort if return been that? money why you percentage capital a don't shareholders. form Cliffs? free they designing the it a to of in in fixed steel why

Celso Goncalves

I and I get free -- continue like time, what we're toward we've we're of Carlos, stated our at debt. it's of flow actually something the going cash to debt that rest to we Celso. allocated considering and that the it's As No, net construct right? and that it's earlier, repayment to get we a towards that right $X doing, repurchases. Once that's share down billion until XX%

there, be and debt on table, dividends at paying will mentioning, towards be weighting cash like of but it you're to a once we're more paying higher $X that return other to to buybacks say constructs making net once opposed Now it as we're generator including are down flow the billion capital very what still down a to either the or just shareholders free that the of debt, go entirely, will a at generated formulaic the of cash all Not majority will at we'll stop the time. shareholders time. that that strong

Lourenco Goncalves

Carlos. Thanks,

little but $XX was had like any purchase not it stock thing, we of have to more, abundantly did a would Just more because sale. a I paid paid debt. million But clear. we a could purchased even we on lot QX, one if of but talked debt. stock. about that, we -- In down more make already We I lot paid

go things these altogether. These things go So altogether.

down debt. down would paying last pay down going use debt to pay -- we want because not debt. are every just said to We be pay would to that we penny We

But will date a will for buy back or debt. down will accomplish We of shares free, start market stock, that I and whatever create to if gives the postponements pay dividend. the gift

a can the doing I'm ourselves. is and I there solution the company what So Otherwise, only then real reflects value kidding this start of am price is a one we goes dividend. stock our the thing we reflects for shareholder. are real of up, value

few CEOs, about. brag think a thing I can way, By particularly that's like a in very our the space shareholder. that

given that sold open the to that me in have a as or are I never compensation. single acquired share was market

I off future, in I far that's dividends to And away XX man. One the going will a shareholder, years retire. So leave like think I'm I dividends. like day, I'm Cleveland-Cliffs. from old

So date. the dividend please. right Think place to price commit the go the about I stock before really need with that, to I

Operator

Our next with line JPMorgan. of Peterson Bill the questions come from

Unknown Analyst

continue on wanted I Celso. the Lourenco discussion H. and Cliff to of this

guess, your So the does it that automakers? to from also demand just across I mix And on this, you sure. how steel about next but a I few years? then ahead, already Cliff want sounds the think But the alluded words, portion board automakers. other of it over of In to is should auto we demand make broad H mix shipping. as begun looking how like you've the

Lourenco Goncalves

several that United ones are plants the Everywhere that description. in is plants we and what here is here Cliffs H. Good differentiating States this in the furnace in steel H Plants a here Bill, we have produce. producing in Cliffs we way. States and plants Cliffs plants we in automotive the H and there States plants in United Cliffs United a in industry produce integrated factor morning what H the we Europe, blast is for the by can Japan. produce companies are footprint. like to Brazil, our have the follow and

because Europe the lower COX and associated automotive in pellets. needs because cannot a use we of Well, their HBI we these sinter only to pellets, companies don't. use get steel use emissions And they for that they portion has and

concept. That's H. a Cliffs that's So

H. steel Our all automotive to is industry sell Cliffs that the we

it's of in our we footprint. everybody to are from and with have integrated We ton, these folks. produce already per support the because time, everything early pay the clients. signed up we appreciate our over $XX we clients negotiating will So pay But all

beams. but not a Yes, going with higher rebar, And trying not build to are then wide trying to flange build but [indiscernible. the route the your may you say, a emissions work. to "Oh, build Yes, work. car try car it's the with It's than through mini-mills. flat-rolled doing of to work. integrated a Korea. to would emissions Yes. that do in doing be will a steel would be I in car. it, They If have they steel scrap. All not that. does the with produced be in They places to lot doing way be no It flat challenge of will a that lot in of Japan. going

the That's way. concept, Bill? you no there's it -- get So

Unknown Analyst

theme. Maybe Yes. one. sticking with the carbon

So EU see ongoing reinforced October against upside between feasible XXX that met want on Section risk deadline. I negotiations not may thoughts looking guess, you prices EU? the is Do I a what thoughts any on the is U.S. solution? to the any a if your that. structure the wanted and tariffs are standard on your thoughts to to see carbon Just if be you by the on had the which like tax get

Lourenco Goncalves

have to Section over been using It's us they to played for addressed role any come that costs time. you to for furnace to here Their regarding that help time these that believing a I diluting. just market if They're fixed talk would demand don't think fair Look, continue know have No. support market. We so by trade. I XXX is the believe that will specifics play. Yes. what really about. already items the me stop the to -- Section XXX our like there's

Unknown Analyst

we can tax carbon [indiscernible]. the take to easy it related it's offline. It's Really, structure, and

Lourenco Goncalves

we steels mini-mills tax mini-mills, parts. in better States a enormous producing and are And in The decent I in users in gave other have made the advancements much the reality the automotive. support States. But on just nonexposed United we United exposed because check for the they here then participation automotive parts. them Carbon structure. so

United XX everything So compared a fair steel in produced have some better of is of to rest a have Canada, United the so exclusive about talk U.S. the than the and we areas world, Canada, we transshipment that somewhere from are not world. of then because the includes are our are These the playing of and we by ones else. just much which States. not to I capital steels. But be up Japanese Mexico, produce the tax carbon the adjustment. And talking setting field still the the in the have of we dumped when really are of way. to resemblance part And States, to part Europeans in Koreans. That's that Canada about ourselves terms MCA. And the

We acting going Mexico still way with are. not are they the to stand

Operator

Bank Lawson from of with America. Winder come Our the next questions line of

Lawson Winder

over to potential cost you've reduction repairs I working days terms of volumes. just maintenance elevated that You in effectively magnitude? means capital half mentioned and through rough second from production left of higher ask all inventory and the in of what lower for further And the that worked the wanted

Celso Goncalves

Yes. it's Lawson, Celso.

nice a driven So We inventory to a see, in replace QX, out mostly it higher lot of by relates working inventory. with you higher-cost moved automotive of the release lower we as that as can and costs. had system cost capital, steel

release driven expect by We here an mostly even further AR further in inventory. and

impact it that of a if in positive QX, QX, neutral working be then and So should in sort helps. release capital

Lawson Winder

with have Yes, what that available. or helps. ask time time you the one And if more we have maybe remaining I could

demand. auto strong about talked You've

strong end You've other in markets? low chain. for about an talked some the demand inventories from of the about expectation What supply

Lourenco Goncalves

the percolate. with related X things. reduction already inflation infrastructure solar. to Yes. Look, addressed is at are very impressed act least I I during the my things prepared believe view tangentially to remarks, but and starting I'm One

amazing demand, It's real now. is Solar right demand.

demand coming internally starting from The more biggest solar. to to are impact We regalvanized. and now make accommodate is things more

And electrical one the is other steels.

the more is are increase less These there or already accommodate down steels. they that the because Steel, in I to steels. X have capacity in we had at when States. and we that important more saw we competitors electrical to to this was produces very capacity. Keep acquired Cleveland-Cliffs And coming. increased to come. plant this our our from still and to a competition, more AK there are have steels. investing saw we things on we're -- And welcome years the initiatives electrical their demand now ago, because decided here continue mind, electrical still increase I kept United plant to produce decision. capacity And moves -- demand We produce than to enormous And And -- shut

but Automotive There's promising. on and to first a positive. normal normal close have time very a normal, is year demand or So normal year, for year ] still the real to lot since COVID. close going not will [

Operator

you. Thank

of hand management We back question-and-answer I'd comments. over call have closing any the like end the reached to to the session. for

Lourenco Goncalves

with there for everybody, and is me today, here be in more again. more being X you, Thank happy We'll to come than to talk months.

Bye now. have a a lot. Appreciate day. You great guys it. Thanks

Operator

does This today's conclude you. Thank teleconference.

You a time. at participation, great your and may for Thank have your disconnect you day. this lines

Cleveland-Cliffs (CLF) 25 Jul 232023 Q2 Earnings call transcript