Cleveland-Cliffs Inc.

Good morning, ladies and gentlemen. My name is Donna, and I am your conference facilitator today. I would like to welcome everyone to Cleveland-Cliff's third quarter 2025 earnings conference call. All lines have been placed on mute to prevent 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 could cause actual results to differ materially. Important factors that could cause results to differ materially are set forth in the reports on Forms 10-K and 10-Q and news releases filed with the SEC, which are available on the company 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 on the earnings release, which was published this morning. At this time, I would like to introduce Lorenzo Gonsalves, Chairman, President, and Chief Executive Officer.

Thank you, Donna, and good morning, everyone. Our third quarter results were a clear indication that a significant rebound in domestic steel demand has started, and the automotive sector is leading the way. It's now widely accepted and understood that tariffs are here to stay, particularly the Section 232 tariffs on steel, autos, and derivative products. These tariffs are not a negotiating tool. And the only effective way to avoid tariffs is manufacturing in the United States. With all that, third quarter was our best auto steel shipment quarter since the first quarter of 2024. That's a very encouraging sign for what's coming in 2026 and beyond. Over the past quarter, Cleveland Cliffs was able to lock in two or three year agreements with all major automotive OEMs, covering higher sales volumes and favorable pricing through 2027 or 2028. These are not small renewals. These agreements represent strategic commitments to domestic steel sourcing by the most relevant auto OEMs. Many of these customers have told us directly that they want to reduce their exposure to tariffs and to foreign volatility. They want stability and resilient supply chains. With a total of nine automotive-grade galvanized steel plants, five of them designed to produce exposed parts in all specs and widths, Glyphs is the natural partner for the car manufacturers expanding production in the United States. President Trump's trade agenda has steel and automotive as part of its core. These two sectors are not just economically relevant, they are fundamental to national security. Rebuilding this strength is essential to sustain America's industrial independence and to improve our national defense readiness. The same industrial base that builds advanced vehicles and powertrains for civilian use, supported by domestic steel production, can also provide the engineering capability, supply chain depth, and logistics expertise required to support the American military. There is no question that the resurgence of the US auto sector, supported by domestic steel, is a matter of great urgency. While other steel companies are still building or promising to build new capacity, to be ready in 2028, 2029, or later, Cliffs is ready for 2026. Our state-of-the-art automotive-grade galvanized steel plants, Spartan and Dearborn in Michigan, Middletown, Cleveland, and Columbus in Ohio, and Rockport, Indiana Harbor, Burns Harbor, and New Carlisle in Indiana are all up and running. Cliffs has plenty of capacity right now, and the multi-year contracts we have signed with our automotive clients should give us the demand we need to make all these plants work at full capacity and at full employment levels. This quarter also reminded the automotive OEMs why steel, and cliffs steel in particular, is irreplaceable. When lightweighting became a major trend several years ago, some automakers jumped on the aluminum bandwagon, chasing immaterial and expensive lightweighting gains, while ignoring very meaningful technological advances in the production of high-strength steels and, more importantly, the enormous supply chain risks they were assuming. A huge fire at the nation's largest automotive aluminum-producing mill this past quarter revealed the fragility of that shift. Vehicle models that were years ago moved away from steel and toward aluminum are suffering the most. The silver lining is that switching back to steel is now under serious consideration by the most affected OEMs. Recent trials of conforming parts with our steel using equipment originally designed for aluminum are showing very promising results. This is a huge win for American-made steel and a validation of everything we have been saying for years. Domestic steelmaking, and particularly Cliffs steel, is the backbone of the American automotive supply chain. We fully expect that aluminum's participation in the automotive space will continue to shrink, with cliffs being the biggest beneficiary of the trend. The resurgence of U.S. manufacturing, enabled and supported by the Trump administration, has made cliffs very attractive to a number of major global steel producers. These steelmakers supply steel within their respective countries to important clients, and these clients are now moving production to the United States. Exporting steel into the U.S. is no longer a viable option for these foreign steel companies. Like their steel-consuming customers, these folks need a physical presence in the United States. Cliffs is a fully integrated steel company, starting from mining iron ore and going all the way downstream to the production of high-end finished products. And that is all based in the United States. This foreign interest in Cliffs is fully aligned with President Trump's agenda of strengthening America's industrial base and attracting foreign investments. With all that, a few months ago, we were approached by a major global steelmaker who wants to leverage our footprint in the United States to enable a smooth onboarding for their downstream industrial clients moving production from their country of origin to the United States. During the third quarter, we entered into a memorandum of understanding with this global steelmaker. and we expect to make a formal announcement in the next few months. I will not take any questions on this subject today. Separately, we have made excellent progress selling profits that no longer fit into our production footprint. I am pleased to report that we are under contract or agreements in principle for eight of these sites. with a combined total value of $425 million. The proceeds of these sales will go directly toward debt reduction. As for our larger operational asset sales process run by JP Morgan, this is currently being deprioritized, given the comprehensiveness of our MOU with the global steelmaker. We are not quite pencils down on this process, but advancing our negotiations under our MOU is now our top priority. While our U.S. business is on a clear path to recovery, we complete on November 1st our first year of ownership of the Canadian steel company Stelco. The picture in Canada remains disappointing. Roughly 9% of our total sales come from Stelco in Canada, and that market continues to lag our expectations. There's only one cause to the problem. The Canadian government has been completely unwilling to act against dumped steel into Canada. Importing steel penetration into the Canadian market stands at a ridiculous and absurd 65%. The Canadian government could easily resolve the problem by replicating what the United States has done under Section 232. Impose meaningful tariffs, close loopholes, and enforce the implementation of these anti-dumping countermeasures. With other regions of the globe moving in the right direction, even the European Union has recently tightened its quota and tariff regime. Canada stands alone in doing nothing. A bailout loan as the one given by the Canadian government and the province of Ontario to Algoma, one of our Canadian competitors, is not a fix for the problem. Trying to weaken Section 232 in the United States just to bring back Canadian steel into the American market is even worse. Stelco, under our ownership, does not want to and should not depend on selling steel into the United States for its survival. Stelco could thrive exclusively by selling steel in Canada. While I confess my inability to convince the several Canadian government officials I regularly speak with, I continue to expect Prime Minister Carney to make a move in the right direction. Let's see how long it takes or if I will need to be more persuasive. Meanwhile, the U.S. government continues to grow as our partner. During the quarter, we were awarded a five-year, $400 million fixed-price contract by the Defense Logistics Agency of the US Department of War. This contract covers up to 53,000 net tons of grain-oriented electrical steel, which the US government intends to store for national security purposes. The award underscores Cliff's position as the only US producer capable of supplying this critical material, gold's grain-oriented electrical steel, further reinforcing the strategic importance of our electrical steels to the nation's defense and energy infrastructure. Also, we recently learned that our two projects receiving grants from the Department of Energy at Middletown, Ohio and Butler, Pennsylvania, were not included on the cancellation list that ended more than 200 other projects. As such, we will proceed with the Butler project on schedule, and we will also continue to work with the DOE on the new scoping of the Middletown project, which is critically important, as that blast furnace will be relined in the next four to five years. Last but not least, the growing strategic value of rare earth elements has prompted us to revisit this potential within our mining portfolio. We view this effort as both an opportunity and as our responsibility. Comprehensive reviews of our ore bodies and tailings basins have identified two sites one in Minnesota and one in Michigan, where geological surveys show evidence of rare earth mineralization. We continue to assess our potential on both sites. Advancing this initiative would position Cleveland Cliffs squarely within the nation's pursuit of critical material self-sufficiency. We believe America's industrial foundation must never depend on China or any other foreign source for essential minerals. Cleveland Cliffs is committed to contributing to our independence from foreign powers on critical materials. With that, I will turn to our CFO, Celso Gonçalves, for his remarks.

Thank you, and good morning, everyone. Our third quarter results were driven by steady operational execution and much better than expected pricing, supported by automotive strength. Our adjusted EBITDA on the quarter improved to $143 million, a 52% increase over the prior quarter, driven by margin expansion from higher realized prices and improved mix. Our steel shipment volumes were 4 million tons in the quarter. a reduction from the prior quarter as a function of summer slowdowns and our continued discipline in the broader market. Fortunately, as a result, our mix shifted favorably toward automotive, which drove our average selling price to $1,032 per net ton, up $17 per net ton over the prior quarter. This improvement in price is entirely driven by automotive shipments moving from 26% to 30% share, and coded volumes moving from 27 to 29% share. On the cost side, we continue to deliver great results as our unit costs adjusted to the much richer automotive mix. Our continued cost performance was almost entirely driven by the footprint optimization activities we announced earlier this year and have fully implemented at this point. The third quarter was the first full quarter we operated with these operational efficiencies in place, and our projected annual savings of $300 million from these maneuvers remain on track. We also continue to take further action to reduce both SG&A run rate and capital expenditure budgets. Our CapEx budget for 2025 is now $525 million. down from our original expectation to begin the year of $700 million. This is reflective of dramatically reduced spend at Stelco, as well as the now changing DOE projects at Middletown. In addition, full year SG&A expectation is now down to $550 million from our original expectation to begin the year of $625 million. These savings are reflective of overhead and incentive pay cost cuts in response to weaker demand conditions. Another upcoming item to highlight is the December 9th expiration of our onerous slab contract. For the past five years, we've been bound by a contract that valued imported slabs using the now irrelevant Brazilian slab index. That index no longer reflects the real cost or value of American steel. much less the value of our automotive grade slabs produced at Indiana Harbor. With the contract expiring, we will reclaim that production internally using our melted and poured slabs to serve growing automotive demand. This past quarter, we also took advantage of the strong high yield market and refinanced the entirety of our remaining bonds maturing in 2027, leaving us with a runway of more than three years with no upcoming bond maturities. Our next bond maturity is not until March of 2029, and those notes can be redeemed at par starting in March of next year. Together with the outstanding balance on the ABL, we have plenty of prepayable debt to pay down with the incoming proceeds of property asset sales and future free cash flow. Our gross debt amount remains elevated, but we will have ample opportunity to pay it down over the coming quarters. That said, the composition of our debt and maturity runway leaves us with plenty of flexibility going forward. The primary end markets that we serve, transportation, manufacturing, and construction have been experiencing recession-like conditions over the past 12 months. We have navigated this with our operational improvements, footprint optimizations, and reductions in overhead and capital costs. The construction and general manufacturing sectors still remain relatively weak, but if history is any guide, those sectors will follow the trajectory of the automotive sector, which is now tracing upward. We have finally started to see a bit of restocking activity in the distributor and end-user markets, an indication that the new tariff reality for those buyers is setting in. The signs of a real recovery are forming, and we need consistent demand and stable policy to keep it going. Once these policy changes give us the demand boost that we need, the foundation that we have laid with these operational improvements will propel us further to amplified EBITDA and cash flow. With that, I'll now turn it back to Lorenzo for his closing remarks.