Cleveland-Cliffs Inc.

Good morning, ladies and gentlemen. My name is Rob, and I'm your conference facilitator today. I would like to welcome everyone to the Cleveland Cliffs' second quarter 2025 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 far we're looking with 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 could also cause actual results to differ materially. Important factors that could cause results to differ materially are set forth in reports on Forms 10-K and 10-Q and 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 this morning. At this time, I would like to introduce Lorenzo Consalfas, Chairman, President, and Chief Executive Officer.

Thank you, Rob, and good morning, everyone. Our Adjusted EBITDA and Q2 showed an improvement of $271 million from the prior quarter. We achieved higher shipment volume targets, and as a result, we improved our operational efficiency and lowered our production costs. Our recently announced footprint optimization initiatives are underway as planned And you will see their impact in the second half of this year. We are laser focused on cost cutting and steel sales. And that's the way we will continue to execute going forward. Section 232 steel tariffs implemented on March 12 at a level of 25% and increased to 50% on June 4th, have played a significant role in supporting the domestic steel industry. Foreigners competing unfairly will do whatever they can to get into our great American domestic market. They pay their workers a lot less than we pay our American workers. They receive direct subsidies from their governments. And they do not have to comply with the stringent environmental standards and laws we have in place in the United States. So far, there's no indication that the Section 232 tariffs will be used as a bargaining chip by the Trump administration as leverage in trade deals with other countries. We appreciate that. and fully expect that the administration will keep in place and enforce this Section 232 tariffs. If the United States really wants to continue to have a strong domestic steel industry, proper enforcement of the Section 232 tariffs is absolutely necessary, with no exceptions or exemptions allowed. The import data that has been published thus far makes it very clear that the 232 tariffs are having a positive impact, not just on steel, but also on the automotive sector. Both flat-rolled steel imports and light vehicle imports hit multi-year lows in April. The Trump administration has prioritized two sectors, steel and automotive, that are critical to the strength of our economy, to the resilience of our supply chains, and to United States national security. Glyphs sits right there at the intersection of both sectors, steel and automotive. The place where imported steel remains a huge problem is Canada. We understand why the US has a 50% tariff on imported steel from Canada, and that's fine. We are keeping all Stelco steel in Canada, and we are doing that by design. Since we acquired Stelco in November of last year, and not now as a result of the tariffs implemented in 2025. It's well known that the United States is a net importer of steel. What's not as well known is that Canada is also a net importer of steel. So just like the U.S. used to be prior to President Trump, Canada is still being taken advantage of by all foreign producers, friends and foes, all dumping steel into the Canadian market, friends and foes. The Canadian government's latest attempt to stop unfair trade is insufficient. It only covers 70% of steel imports into Canada. because of the insistence on allowing free trade agreement countries, the so-called FTA friends, to continue to use Canada as their outlet for overproduction. Our message is very clear and easy to understand. If Prime Minister Carney and his cabinet really want to have a steel industry in Canada, they should put in place significant trade protections. Then they will have a strong domestic steel industry in Canada, able to support a vibrant domestic Canadian market. We are doing just that here in the United States, and it's working. Strategic protection leads to reinvestment, full employment, and long-term viability. Our Canadian employees need more action, real action, from Prime Minister Carney. Now, on the top of automotive, the most relevant issue to be attacked and resolved is enhancing the consumer's ability to finance the purchase of a vehicle. Despite no signs of tariffs reigniting inflation, The Federal Reserve continues to keep interest rates unnecessarily high. After making home buying unattractive with very expensive mortgages, the Fed's inaction on cutting interest rates is now an impediment to car buyers. Once Chairman Jerome Powell is gone, and that's now a matter of when, not if, and as soon as interest rates come down by 50 or 75 basis points, the automotive sector will take off again. Demand is there, but this Fed chairman will not act. So we need a new Fed chairman appointed as soon as possible. At Cleveland Cliffs, even with the growth we have been seeing in our tonnage delivered to the sector, we still have underutilized automotive steel capacity. With the OEMs continuing to bring back production to the United States and with consumer-friendly interest rates, the automotive sector will thrive. CLIFS is ready for that. We can ramp up quickly, and our capabilities, quality, and customer service are well known by all OEMs. CLIFS is in a unique position to support the upcoming resurgence in American vehicle production. Right now, not in three or five years. Other relevant news in trade enforcement is the very important 50% tariff that will go into place on Brazilian pig iron starting August 1st. Cleveland Cliffs does not rely on imported pig iron at all. We have our own hot briquetted iron facility in Toledo, Ohio. But several of our EAF competitors do rely on imported pig iron. We are vertically integrated, and we use American iron ore and American coal and American natural gas as feedstock, all produced right here in the United States of America, employing American workers. There is no justification. to exempt imported pig iron from tariffs, as it is just to create an artificial cost advantage to benefit some players to the detriment of others. That would be equivalent to allowing imported steel into our market just because dumped steel is cheaper than domestic produced steel. Or allowing for imported cars made in China to be dumped into the United States just because Chinese cars are cheaper. Cliff's vertically integrated business model differentiates us from the rest of the industry by being completely independent from imported feedstock. The EAF mini mills, rightfully so, do not support any exemptions for imported steel. And as a matter of coherence, they should not ask for exempting from tariffs imported pig iron from Brazil or from any other country. In Q2, we also had some exciting news for our stainless steel business. Our smaller but consistently profitable stainless business is one of our best kept secrets. During the quarter, we completely and commissioned a $150 million investment in our bright annealing line at our Coshocton Works plant in Ohio. Bright annealed stainless is a premium stainless steel product for high-end automotive and critical appliances applications. If you think about the bright rim surrounding a car window or the inner drum of a washer and dryer, that's what we make there. With this investment, which should generate a quick return on invested capital, we are dramatically improving the quality and productivity of this critical product that our customers rely upon Cleveland Cliffs for. Finally, Let me briefly touch on the shifting competitive landscape in the domestic steel market. The United States remains the most desirable market for steel. Nippon Steel's entry into our market and their astonishingly high investment promises highlight the strengths and appeal of the opportunities here. Nippon's nearly $29 billion total investment proves something we have said all along. Fully integrated mining, pelletizing, blast furnace, BOF production is necessary, particularly in a country like the United States that already has more than 70% EAF-based steelmaking. If that was not the case, Nippon Steel would have just built a big number of new EAF mini mills in the United States for a much lesser investment and would not have purchased a primarily integrated steelmaker. They see the value in blast furnaces just as we at Cleveland Cliffs do. Through their recently acquired and now third tier subsidiary US Steel, Tokyo based Nippon Steel is now an active participant within the American market. This is a fact. And the fact creates a new level of optionality for other market participants. Cleveland Cliffs included. Among several possible outcomes, foreign investment in cliffs becomes an attractive opportunity for other foreign entities, particularly due to our unique position as a major supplier to the automotive sector and of electrical steels. With that, I will turn it over to Celso.

Thank you. Q2 results were largely driven by better realized pricing, cost reductions, and record shipments. Volumes of 4.3 million tons represented a 150,000-ton increase from the prior quarter and allowed us to run our mills more efficiently. We had previously expected a slight unit cost increase quarter over quarter, but with the solid operating performance we actually recorded a $15 per ton unit cost decrease. Average selling price of $1,015 per ton represented a $35 per ton increase from the prior quarter, driven primarily by higher index pricing and partially offset by lower slab and plate pricing. DELCO pricing was relatively flat. After the Arcelor slab agreement expires in December, Assuming today's pricing and demand environment, we should get another $125 million per quarter in EBITDA boost. From a cash flow perspective, inventory reductions, particularly in raw materials like iron ore and coke, served as a meaningful source of cash in Q2. The acquisition of Stelco came with the benefit of being able to use excess coke production out of Hamilton in our U.S. mills. Delco's pricing has been hampered by the excessive imported steel penetration in Canada, but the value of being able to use Hamilton Coke has been the biggest driver of us reaching our cost synergy target. As a result, we were able to let one of our third-party Coke supply contracts expire on June 30th, reducing our need to purchase Coke externally. We have another Coke contract expiring at the end of this year that we will no longer need either. Our ability to source more coke internally, in and of itself, has already made Stelco a valuable contributor for the combined company. And this will be further bolstered once the next coke contract expires. On top of that, based on current market dynamics, we expect even lower coal prices for 2026. Our balance sheet remains well positioned as a result of Q2 and future working capital reductions. We ended the quarter with $2.7 billion of liquidity and no near-term maturities. Net debt remains manageable and is soon to be on a downward trajectory. Our capital allocations priorities remain clear. Use excess free cash flow to pay down debt and reach our leverage target. This is the history of my nine years at Cliffs. We lever up to make necessary acquisitions, and we use the resulting free cash flow to pay down debt quickly. Potential non-core asset sales could also accelerate debt reduction. We have now engaged J.P. Morgan as our advisor and launched sell-side processes to explore the potential sale of certain non-core operating assets. These selected assets could represent billions of dollars of value, and we will only sell these assets if the sum of the parts valuation unlocks trapped value for Cleveland Cliff shareholders. In addition to these non-core operating assets, we are also receiving inbound interest in some of our recently idled facilities, which could also sell for cash. These sites, particularly Riverdale, Steelton, and Conshohocken, are all uniquely positioned geographically and have what data center developers are looking for, access to power and water with the infrastructure already in place. While these properties are idled, If opportunities don't arise that justify restarting, they have good value and the amount of interest we have received in these properties so far is reflective of this. If we're successful in executing any sales, the cash proceeds will go directly to debt reduction. We also took actions during the quarter to lower both our SG&A run rate and capital expenditure budgets. Our full year 2025 expectations for these items were reduced by a combined $50 million. These were proactive surgical reductions based on our newly tightened footprint. Our overhead structure is now leaner, and we're getting more out of every dollar we spend. Our steel unit cost reduction target of $50 per ton remains firmly on track. This cost reduction pace, combined with healthy HRC pricing, is expected to support growing EBITDA generation in the coming quarters. Operational discipline, capital prudence, and free cash flow generation remain our top financial priorities. We're confident that these principles will continue to guide us to even better results in the coming quarters. With that, I'll turn it over to Lorenzo for his closing remarks.