Cleveland-Cliffs Inc.

Good morning, ladies and gentlemen. My name is Daryl and I am your conference facilitator today. I would like to welcome everyone to Cleveland Cliffs' third quarter 2024 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. The company reminds you that certain comments made on today's call will include predictive statements that are intended to be made as forward-looking within the safe harbor protections of the Private Securities Litigation Reform Act of 1995. Although the company believes that its forward-looking statements are based on reasonable assumptions, such statements are subject to risks and uncertainties that can cause actual results to differ materially. Important factors that can cause results to differ materially are set forth in reports on Forms 10-K and 10-Q and the news releases filed with the SEC, which are available on the company's website. Today's conference call is also available and being broadcast at clevelandcliffs.com. At the conclusion of the call, it will be archived on the website and available for replay. The company will also discuss results, excluding certain special items. Reconciliation for Regulation G purposes can be found in the earnings release, which was published yesterday. At this time, I would like to introduce Lorenzo Gonçalves, Chairman, President, and Chief Executive Officer.

Thank you, Dara. Good morning, and happy Election Day to the Americans listening in on the call today. Throughout my 10 years with Eclipse, We have worked very consistently to position the company to benefit no matter what candidate or political party is in power. This year is no different. At this point, it's clear to us that with either Donald Trump or Kamala Harris as President of the United States, our executive branch will work to improve conditions and support a domestic steel industry owned and operated by American producers. American steel companies are way ahead of all others in the entire world, both in steelmaking technology and access to capital markets. We have a domestic market for steel that's the envy of other nations, and we have the American people willing to work for us and benefit from these favorable conditions. It still touched several important areas, national security, infrastructure, manufacturing, supply chains, middle class, union, and non-union jobs, just to name a few. It's exciting that both presidential candidates are concerned about all these areas and also that both have similar pro-steel views. We have had a thorough dialogue with surrogates from each campaign, and we definitely believe that critical points we have made about our American steel industry have been heard, accepted, and understood. Our number one topic of conversation with these officials is trade. While steel imports are a fact of life in the United States, not all imports are created equal. A country like Canada, for example, follows the rules and does things the right way. And this is a large part of the rationale behind Cleveland Cliffs acquiring Stelco, the steel company of Canada. We received all approvals within the timeframe we expected we would and closed the deal in three months. That's how M&A is done. When we have two honest counterparties working collaboratively, the deal closes, bankers and lawyers get paid, and shareholders are rewarded. In our release yesterday evening, we provided Stelco's financial results. While operating on a smaller scale, Stelco provides amazing resilience in a not so good steel market, as well as substantial upside in a strong market, all driven by the best-in-class cost structure an emphasis on spot sales versus the primarily contractual book of business that standalone cliffs relies upon. Based on these current market conditions, the acquisition of Stelco will allow us to average up the overall EBITDA margin of Cleveland Cliffs. The standalone cliffs is primarily a company-centered towards serving the automotive industry. Our specialized equipment capabilities, our material flows, and our robust customer and technical service efforts are distinct from any other steelmaker. When automotive is humming, our footprint hums nicely along with it. Conversely, in an environment like we had in Q3, where the automotive industry is slowed down well below expectations. The fixed costs associated to our configuration become more difficult to overcome. With Stelco as part of our company, our overall cost structure is significantly improved, making us better suited to serve the non-automotive market. As a supplier to primarily non-automotive end users and service centers, Stelco runs a much lower fixed cost and nimble operation. They are geared to thrive selling to these end markets at mid-cycle, peak, and trough spot pricing levels because of their cost advantages. These advantages are well documented. Currency, iron ore cost, plant layout, health care, and power costs. With these advantages, Lake Erie Works became the benchmark in low costs of our new operating footprint from day one. Our Lake Erie cost structure for hot rolls is lower than anyone else's in North America, EAF Mini Meals included, and the numbers are unquestionable. Unlike the acquisitions of AK Steel and ArcelorMittal USA, which were either underperforming or underinvested when we acquired them, Stelco is both well-invested and a standout performer in the industry. Based on our experience from the previous acquisitions mentioned above, we are convinced that we have the opportunity to generate $120 million of cost synergies within the first year. Stelco will keep its name, structure, and most of its leadership, and the Canadian flag will continue to fly proudly at each operational facility. I will now kick it to Celso for his remarks.

Thank you, and good morning, everyone. Our Q3 results were impacted by weaker steel demand and pricing throughout the quarter, which were partially offset by a great cost performance by our team. These factors drove an adjusted EBITDA of $124 million on 3.8 million tons of shipments during the third quarter. North American automotive build rates in Q3 were the lowest since the deaths of the semiconductor shortage a few years ago, with only 3.75 million units built during the quarter. The latest expectation for automotive builds this year is around 15.5 million units, which is about 1 million units less than what was expected at this time last year. With our position as a large automotive supplier, this drove our shipments, average selling prices, and unit margins down quarter over quarter. And compounding this, our non-automotive business also saw continued weakness in demand and pricing, both in flat rolled and plate. Overall average selling price fell $80 per ton and shipments fell 150,000 tons compared to the prior quarter. Given the ongoing demand weakness, we temporarily idled one of our blast furnaces in Cleveland to better align production with our order book, as both automotive and service center customers reduced their order activity during the third quarter. The idle temporarily takes offline about 1.5 million net tons of annual capacity, and we don't plan to resume operations until market conditions improve. From a cost standpoint, We reduced unit costs by over $40 per ton during the quarter, exceeding our previous guide on both an absolute and mix adjusted basis. This came ahead of expectations, despite running our mills at reduced operating rates. The belt tightening at the operational level was reflected in both capital spending and SG&A costs as well. Our quarterly SG&A of $112 million and capital spending of $151 million remain substantially below our averages for the past four years. Along these same lines, we are taking a similarly lean approach to our capital expenditures budget for next year. We have guided to a capital spend of $600 million for 2025 on an ex-Delco basis, which would be our lowest standalone CapEx since our transformation in 2020. This is a function of reduced needs across the footprint and updated spend estimates on our three strategic growth projects at Middletown, Butler, and Weirton. In 2025, we also see the favorable impact of improved coal supply contracts to the tune of a $70 million cost improvement year over year. That said, our most critical recent accomplishments on the finance front were completing the necessary steps to close the Stelco acquisition. As you may recall, we originally intended to fund the acquisition with a combination of financing instruments, including a term loan, secured and unsecured high yield notes, and our ABL. But as we began to market the deal to investors, we noticed strong receptivity to the story and grew conviction we could raise what we needed without tapping either the secured bonds or the term loan markets. The resulting financing structure leaves us in an ideal and flexible position to weather any economic downturn and to de-lever quickly when cash flow starts to heat up. Now that we have Stelco closed, we'll be reprioritizing debt repayment over share with purchases with future cash flow generation. Looking ahead, the Stelco acquisitions assets to the footprint is exactly what we need at this time, a nimble operation that thrives even in down markets. The North American flat role market has long been in need of consolidation, and we continue to do our part to make that a reality. The deal is EPS accretive, credit positive, and we maintain ample liquidity to navigate the current cycle. Based on what we're seeing in the marketplace, we expect the tide to turn soon. And regardless of who wins the election today, it's easy to get bullish on the expectations for 2025. And our upside for that is further amplified with Estelco assets. With that, I'll pass it back to Lorenzo.

Thank you, Celso. In other news, each one of our three key strategic projects continues to progress well. We have received phase one funding approvals from the Department of Energy for our efficiency projects at Middletown and Butler, allowing us to proceed. As for our transformer plant at Wheaton, We are pleased to report that we have all of the necessary equipment ordered to begin making Transformers in late 2025, early 2026. We have secured a joint venture partner who we feel can complement our capabilities, a partner with technical expertise and customer relationships in this space. We will report more news with respect to the joint venture partner in the near term. From the cliff side, we are bringing a lot to the table, a large and skilled workforce, a plant site with all of the essentials already built and in place, and most importantly, the internal supply of grain-oriented electrical steels from our Butler, Pennsylvania plant. Our actual third quarter results were certainly not a reflection of what we think a mid-cycle environment in our industry should be. Demand was the weakest it has been since COVID, and achieving our 4 million ton sales targets would have forced us to chase prices even lower. As we have done historically in similar markets, we acted with discipline and reduced production by idling our blast furnaces. Going forward, Based on the trend of falling interest rates, election certainty, import economics, and manufacturing onshoring, we are getting more and more comfortable forecasting a rather strong 2025 for both our automotive and non-automotive businesses. I end my remarks with a note of recognition to our workforce. Our safety metrics in 2024 are the best I have ever seen in my entire career in the steel industry. Specifically for our union partners, we thank you for your support this year. We now have officially added another 1,800 USW members in Canada. Welcome to the team, each one of you. With that, I'll turn to Daryl for Q&A.

Thank you. We'll now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for your questions. Our first questions come from the line of Lucas Pipes with B. Reilly Securities. Please proceed with your questions.

Thank you very much, operator, and good morning, everyone. Congratulations on the timely close of the Stelco acquisition. Lorenzo, given that the deal closed mid-quarter, I wondered if you could maybe speak to Q4 volume price and cost expectations. Thank you very much.

Yeah, I'll talk on volume and market expectation. Let's also talk about the cost portion. As far as volume, we believe that our clients, as soon as we have a little more clarity, which should happen in the next few days on the election, customers will start placing orders and things will start to hit up fast. I am anticipating a very strong Q1, and I believe that we are going to have volumes back to normal by the first half of next year. I also believe that the automotive clients, at least two of the big four that decide to go for lower prices, are starting to feel the pain of their decisions, and this business is already coming back to cliffs. So the automotive side of business should be much better as well because we will have that business that was taken away for absurdly low prices coming back to us. I'll let Celso answer to the cost portion of the question. Thank you.

Yeah, sure. Hey, Lucas, and thanks for your comments. From an average selling price standpoint, we expect Q4 to be similar to Q3 on a standalone basis. will have a little bit less HRC and a similar level of automotive and not a big impact from the October auto contracts. From a shipment standpoint, our standalone shipments will obviously be a little bit lower in Q4, but Stelco will kind of bring us up. So what we lose on a standalone basis kind of gets backfilled from what we bring from Stelco. So you can expect similar shipment levels in Q4 relative to Q3. And then from a mixed standpoint, it'll likely be more weighted toward HRC, obviously, from having the Stelco footprint as well. We'll get two months of contribution from Stelco, obviously, given where we closed the deal. And then other things like working capital, we should see a build of, call it, $50 to $75 million as inventory could be impacted from the C6 outage. but will be partially offset from a release in receivables. And then from things related to acquisition costs and things like that, it'll be pretty minimal in Q4. Of course.

Thank you very much for all that detail. Bigger picture question on the CapEx guidance for 2025, a very meaningful reduction versus prior commentary. So I wondered if you could maybe walk through the changes and then You're still going ahead with your strategic projects that you outlined could add $600 million of EBITDA. Could you remind us how quickly that EBITDA could flow through and attribute that $600 million to the various projects? Thank you very much for that caller.

Lucas Lourenço here. We are basically pairing the CAPEX needs with what we expect in terms of what will be the next year in terms of our automotive demand. Remember, we spent a lot of money in the last couple years bringing the equipment, particularly the one that we acquired from ArcelorMittal USA. ArcelorMittal was running the assets to destruction, and we had to really do a lot of catch-up maintenance to bring the equipment back to SNAP. And now they are. So we don't need to spend as much as we thought that we would need going forward. Things are in good shape as far as the equipment goes. The other thing that it's clear that our clients are not transitioning to electric vehicles as fast as they said that they would. Actually, some are really doing a completely 180 on their strategies. and going back to ICE and some starting hybrids. So we are taking the automotive clients with a grain of salt going forward. And that makes us less eager to be spending money to change things here, to upgrade for what they say they would be. So that's what you get when you are price driven as a client. we're going to be a lot less aggressive in bringing our equipment to what they expected us to be. As far as the new plant, Stelco, we believe that we are going to spend between $80 and $100 million in capex as maintenance capex. The equipment is in good shape. Like I said in my prepared remarks, different from previous acquisitions, We don't believe to have anything meaningful to do there other than normal course. And so the number is pretty realistic. And with a higher price environment, we expect that the overall impact will be very net positive. And I don't know if Soso has anything else to add to what I just said.

Yeah, sure. So, I mean, just to put some numbers to it, the cadence of the capital spend, Lucas, 2024 will end the year around call it 625. standalone. And then as we look forward to next year, we've reduced the sustaining level down to $500 million. And then when you add in the strategic investments, the Middletown spend for 2025 is about $50 million. That's the Cliffs portion. But you have an offset in terms of other CapEx savings on Middletown about the same level, so they net out. And then the Cliffs portion for Weirton is about $30 million. And the Butler spend, the CLPS portion, is about $35 million. So all in for next year before Stelco is around $565 million. And then you add another call at $100 and $110 for Stelco brings you to about $675 total for 2025.

Thank you very much. And on the timing of the positive contributions from the growth project? I'm sorry, say one more time, Lucas. Time of contribution of what? In terms of Middletown, Weirton, Butler, and the EBITDA contribution from these growth projects, could you speak to the timing?

Yeah, Middletown is a long-term project. Middletown will be operational by 2027, so it takes a long time to get there. It's a long, long project. Butler will be a little earlier. but probably still late 26, early 27. And we are working hard to start up our plant in the fourth quarter of 2026. I'm sorry, fourth quarter of 2025. But the official time frame that we have right now is still on first quarter of 2026. So these are all big projects, and we need to receive equipment that has long lead time, things like that. But assuming everything goes well, Wilton should be operational by the end of next year. But we're still working with the late 2025, early 2026 time frame.

Gentlemen, I appreciate all the detail. I wish you and the team all the best of luck. Thank you so much, Lucas. Appreciate it. Thanks, Lucas.

Thank you. Our next question has come from the line of Lawson Winder with Bank of America. Please proceed with your questions.

Thank you, operator. Good morning, Lorenzo and Celso. Nice to hear from you both. Celso, maybe for you, just on cost heading into Q4, pretty remarkable cost savings of $40 per ton in Q3. Is something of that magnitude potentially achievable heading into Q4?

Yeah, thank you for the comments, Lawson. Yeah, we've, like I said, we've been tightening the belt a lot on costs. So, you know, the quarter over quarter performance is remarkable. I'm very proud of the team here of what we accomplished from a cost standpoint. You know, we were down $40 a ton versus our guide of 30. And that's really, really difficult to do. So that should be commended. And that comes from improved operational efficiencies and just continuing to be disciplined. You know, these Q3 costs are the lowest level since, I think, 2021. So, you know, we're going to continue to bring costs down. Stelco is obviously going to be a big benefit. It's going to benefit us a lot on the cost side. But we also have the Cleveland 6 idle, which bring costs up. So, you know, I wouldn't expect to see the same magnitude of cost reduction going into Q4. But we'll continue to bring costs down, as you guys have seen.

Okay, well, that'd be great. And thank you for your comments on the auto contracts. Could I maybe just follow up on that and ask a follow-up question as to how the current contracting cycle, so the October 1st contracts compared to the prior year's contracts in terms of pricing. Are we looking at fairly stable pricing there?

Yeah, look, the October clients, were part of the ones that did not move much in terms of tonnage. One of them didn't move at all. So we only increased with new models. So what's normal course. But make no mistake, I had to be a lot more flexible in taking lower prices. Not to dump the prices that the competition was throw in the marketplace, fomented by foreign-owned companies operating here inside the borders of the United States. We have one, and we almost had a second that we had to block. I believe we did. To be seen, let's see what's going to happen. But we can't allow foreigners to dump from the inside. They are very good at dumping from the outside, but dumping from the inside, is a new development that I learned in 2024, but we acted upon. So our prices of the contracts for the next year are lower, but the tonnage is preserved, except for two of the clients that really elected to go to lower prices. So coincidentally, these are the two car manufacturers that are really underperforming the competition. There's a lot of work to be done going into next year. We are good with prices. We acquired this telco. We have a big, big, big barrier now to the situation that we had to suffer through in Q3. And let's see 2025. All right.

Thanks very much for those comments, Lorenzo. Thank you to you both for your responses.

Thank you.

Thank you, Lawson.

Thank you.

Thank you. Our next question has come from the line of Carlos de Alba with Morgan Stanley. Please proceed with your questions.

Yeah, good morning, gentlemen, and congratulations on closing Stelco. Just to make sure then on prices quarter-on-quarter, given the mix with higher spot, higher HRC in the fourth quarter with Stelco, do you expect then prices quarter-on-quarter to be down at least slightly?

Yeah, probably slightly, just given all the dynamics that we have going on at the moment, Carlos. Makes sense.

And then, Lorenzo, if I understood correctly, the 2025 prices, auto prices, would probably decline a little bit versus what you guys will average in 2024. Also, on top of this, you have other industries on fixed annual prices. Can you talk about how those are evolving for 2025?

Yeah, look, you're correct about the automotive contracts. So far, we agreed with slightly lower prices in our renewals, nothing really to change meaningfully from a dollars per ton standpoint. Now it's all about the tons. Let's see how many cars. The car manufacturers will project. They underperformed themselves by a lot in 2024. And we being the most automotive-driven supplier, and I insist with that, not being in the business of dumping from inside the domestic market into the domestic market, we suffered more than anyone else in Q3. That's a fact. For the other contracts, it's more of the same. It's CRU minus a number, low single-digit number. And let's see where CRU will go. Without imports, I believe that price will go up. What do you think, Carlos?

Yeah, yeah. That's for sure. Without less supply, prices tend to be stronger. Now, on the cost side, I wanted to just explore There is 70 million lower cost overall next year because of lower call contracts. Are you expecting anything else on the call side or that is it for 2025? And what else on cost, any big initiatives that maybe you can highlight and what the expectation will be in terms of cost reduction for next year?

Oh, that's a big component that we will have for next year. we found a very significant spare capacity on cook making in Canada in our new footprint at Stelco. And with that, we definitely will be buying less outside the company. So affecting our costs very significantly in terms of cutting costs. We haven't quantified exactly how much that will be, but it will be a number that will be significant going forward. The impact will be more in 2026, because we need to go through the tail of the existing contracts. But in the next negotiation, we are going to be negotiating a lot less tons with the outside. Anything else? Thank you very much.

Yeah, no, maybe just to round that out, Carlos, if you allow me, on both the average selling prices and costs, right, Stelco will bring an impact on both sides, right? The ASPs will be impacted here from Q3 to Q4, just given their less rich mix and spot exposure. But this will also come with a cost benefit. And then as we think about costs going into 2025, you know, the reduction in coal costs that you mentioned, are very meaningful. And then there are other levers or other drivers, I should say, such as scrap, which will offset the increases that we'll see in things like labor and alloys and other costs. So you've got to think of it all together.

Okay. Thank you for the call, Lorenzo. Thank you, Lorenzo. Thanks, Carlos. Thank you.

Thank you. Our next question has come from the line of Bill Peterson with J.P. Morgan. Please proceed with your questions.

Yeah, hi. Good morning, Lorenzo and Celso, and thanks for all the color. I wanted to come back to the market environment. You touched on weak demand. You talked about weak auto demand. I guess, were you seeing any other pockets of weakness, especially heading into the election, delays going on or things that could unlock that you expect? I'm trying to get a sense through also where customer inventories are just to get a sense of when this snapback could occur.

Yeah, Bill, the weakness in the demand is actually a lot more driven by high interest rates. It's very interesting to see day after day after day the Fed officials going giving speeches and talking about how great things are and how fixated they are that the economy is doing well. All things are great, and then they go with 25 base points. They continue to keep interest rates up. Let me tell what happens in real life. In real life, a consumer that has a, let's call a suburban that's five years old, and he wants to replace with a new suburban, he goes to the dealer, and the price tag is higher, not because of steel, Because in five years, it still did not change. But the car prices doubled in five years. So that's number one. And number two, because almost nobody really pays the price tag cash, the finance. So he's going from a payment plan that has like 1.52% interest rates to a payment plan that have a 7.578% interest rate. And then the dealer tells him, okay, if you don't want to increase your payment plan, I can give you this Equinox here. So instead of the Subaru, you have a brand new Equinox. And the guy says, thank you very much. I'll keep my car. And that's how cars don't move at the dealer. It's not an EV against IC, all these beautiful conversations. It's all about money. It's all about interest rates. And people are employed because companies are afraid to let people go because we went through hell to hire people recently. But the situation is a lot more complicated than it looks like on television. Guess what? Interest rates need to come down. What I explained for automotive also works for houses. People don't sell their house because they have low interest rate mortgages. And if they try to sell, nobody will buy their house. And if they try to buy, they will be confronted with very high interest rates mortgages. So I'll give a minute for people in the call to think about what I'm saying and think about your own situation. You would like to go to a higher, a better house, but you know what? My mortgage is good. If I go into this, I'm not sure if I'm going to sell my house. and I'm not sure if I'm going to be able to afford the new mortgage. That's what high interest rates do for the country, just because people want the 2% target to be achieved. We are in good shape. It's time to bring interest rates down, and it's time to get consumers going again. Once this is done, the weakness of the market goes away very quickly.

Yeah, no, thanks for that, Collin. I drive a 10-year-old car for those reasons. But my next question is actually on infrastructure. We brought this up in the past, and it feels like the infrastructure-related projects still seem to continue to be delayed. But one would think this may not be as interest rate sensitive. Are you seeing any signs there? Maybe more broadly, can you speak to what you're seeing in the plate market?

The infrastructure projects, they have two problems. One is red tape. particularly between the bickering on what's federal and what's local. And the second one is the inability to finance things because interest rates are high. So that's also affecting the big ticket items. I was using the consumer because in our day-to-day business here, That's what we deal with a lot more because we're a lot more in light flat roll than in plate, but affects plate through the big ticket items. We see projects being delayed because money is expensive. They should be corrected next year as well. So that's what we expect, Bill.

Yeah, thanks for that. Thanks for the call. Good luck.

Thanks.

Thanks, Bill.

Thank you. Our next questions come from the line of Alex Hackney with Citi. Please proceed with your questions.

Yeah, thanks. I just have one follow-up question for Celso. On your commentary on the 4Q volume, if I heard correct, maybe I misunderstood, you said that shipments should be flat-ish, including Stelco, but two-thirds of a quarter of Stelco should be around 400,000 tons. So that seems awfully low. I just wanted to double check that. Thank you.

Yeah, no, that's right, Alex. It'll be, you know, the benefit that we're getting from Stelco from a volume standpoint kind of makes up for the volume loss for having C6 down. So quarter over quarter, Q3 into Q4, volume should be around the same level.

Alex, this year, we're going to have Thanksgiving in November. And the holiday season between December 25th and December 31st. So it's a slow time. It's Q4. Last year, Q2 was 4.1 million tons. Q3 was 4.1 million tons. And Q4 was 4. So Q4 is always less. So when we say that it will be around the same, it means it will be higher.

OK, thanks. Okay. Thank you. Yeah, thanks for the clarification.

Thank you. There are no further questions at this time. I'd now like to hand the call back over to Lorenzo Gonzalez for closing comments.

Very good. Thank you very much for everybody that's here. Daryl, I'm seeing here on my screen there is one more analyst. Sure. Yeah, if we could get the question.

It's Chris Lefemina from Jeffrey.

Hey, guys. Yeah, sorry to dial in so late. Thanks for taking my question at the end here. Lorenzo, I just wanted to ask on the number six glass furnace, if we have a pretty strong demand recovery, let's say in 2025, how long does it take to bring that back online? What are the costs to bring it back online? And what sort of pricing environment do you need to see before you would make that decision? Thank you.

Chris, we will bring six back as soon as possible, as soon as the demand comes back. And demand will come back when price recover. So it's all interconnected. And I believe that that will happen in terms of price recovery early in the year, early in 2025. So I fully expect that we're going to bring six back sometime early next year.

Yeah, if you just think, Chris, there's a lot of potential catalysts that are brewing in the market that could be a benefit here in the short term, right? Obviously, we've started to see interest rates come down. We're going to get clarity on the U.S. elections here, hopefully today. It's not this week. Manufacturing on shoring will lead to demand. Imports are currently unattractive. There's potential for increased trade protection. You're going to see a lot of demand from the CHIPS Act and IRA. The auto industry eventually will rebound. So those are the things that we're kind of keeping an eye on. But as soon as we see more green shoots, we'll think about what we do from a footprint standpoint and bring it back.

And one point about the demand recovery, depending on who's going to be the president of the United States, I anticipate a lot more actions in terms of protecting the domestic market against the ones that act in concerted efforts to destroy it. And I'm talking about some that are already operating here inside the United States and some that are wannabes that are not going to be able to come in. So I'm very excited, very bullish about 2025, Chris. That sounds good.

Thanks a lot for that. I appreciate it. Good luck.

Thank you. Thank you.

Maybe one more point on that. As soon as things start to pick up, we're going to see a more immediate impact now, obviously, now that we have Stelco.

Yeah, that's a good point. That's a good point. Now that we have a smaller boat to maneuver instead of the carrier that's Cleveland Cliffs, we're going to see impacts... going through the numbers a lot quicker. So that's actually a very important point.

Thank you. Our next questions come from the line of Phil Gibbs with KeyBank Capital Markets. Please proceed with your questions.

Hey, good morning.

Good morning, Phil. I thought I had one, but actually, why was the answer increased? I saw your name popping up on the screen. So go ahead, please.

Thank you. Thank you. Regarding the synergies with the Stelco acquisition, how should we think about those building up over the next few quarters?

Yeah, we have full conviction on the $120 million on year one that we just gave to you because we are starting to be inside the house now because there are some things, because we're very ethical, We did not address anything related to commercial until after we closed, just to let you know. Different from other companies that they blurred the line. They blow up everything that we know as rules of M&A. And they still don't close anything. We do everything by the book. So anyway, we're starting to see real opportunities over there. So I would say that the $120 million Synergy is pretty conservative. So year one, and we'll start to see right away.

Thank you. Go ahead. Sorry.

I was going to say, yeah, we'll probably update the Synergy number, you know, on the next call. We didn't want to do it here just, you know, since we just closed the deal on Friday. But we feel really, really, really good about the 120, and we'll look to give you guys an updated number, which will likely be higher on the next call. from a cost synergy standpoint. And as Lorenzo mentioned, that doesn't even take into account any sort of commercial opportunities that we're only starting now to identify. We're going over to Canada tomorrow and we'll be with the team. So we're really excited about getting going.

Thank you. And then on the larger scale projects you have over the next few years, particularly at Middletown and to a lesser extent Butler, I know that there's some grant money associated with those projects. Have you received any of that? And what are the expectations in terms of the flow to you for those funds?

Yeah, we already received the first installments related to the Butler and Middletown projects, and it's all ongoing, and it's on schedule. I don't have this schedule in front of me right now, Phil, but we are absolutely on schedule on that.

And then lastly for me, just on the macro side, certainly mentioned some auto headwinds in the quarter from two specific customers at a high level, but any way to any way to frame up how much your auto business was either impacted versus the second quarter or the third quarter of last year when I know the third quarter seemingly last year was pretty strong ahead of the work stoppage?

Yeah, look, we are not going to give you the specifics per client because that would not be right. But, you know, the good thing is that the customers that we have maintained are full volumes or slightly increased because of new models. are the ones that are performing far better than the customers that are taking less, less tons from us. And even those folks, they are coming back, and they're coming back very quickly. So even with that, we believe that the future will be better for us in terms of what you saw in Q3. Our Q3 performance in automotive was not good. We totally understand that. You're going to get better. And that's what I can tell you without giving any specific numbers. But directionally, you got the picture, and I'm sure they're going to be able to model on your work.

Thanks. Go USA. Go Cavs.

Thanks. Yeah. Yes, 8-0 for now. It's the best start since the 76-77 season. And as soon as we win in New Orleans, tomorrow will be the best in history. And look at the jersey. We are there, and we are proud to be there. One last thing before we adjourn. Go out and vote. It's the most important thing an American can do. It's time to do it. It's time to go forward in this great country of ours and make sure that the next four years will be much better than... The last eight, no matter if it was Trump or Biden, we need to keep going forward. We are the envy of the world, and we need to fulfill our duty as the leader of the free world. Thanks a lot, and go USA. Bye now.

Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.