Cleveland-Cliffs Inc.

Good morning, ladies and gentlemen. I'm your conference facilitator today, Kevin, and I'd like to welcome everyone to Cleveland Cliffs' fourth quarter and full year 2025 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there'll 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 reports on Form 10-K and 10-Q and news releases filed with SEC, which are available on the company's website. Today's conference call is also available and being broadcast on 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'd like to introduce Lorenzo Goncalves, Chairman, President, and Chief Executive Officer.

Thank you, Kevin, and good morning, everyone. After several years of no real actions taken to reverse the systematic destruction of the American industrial basis, we finally saw in 2025 a federal administration that values the importance of preserving and growing American manufacturing. That said, in 2025, throughout the entire year, we were still exposed to a lot of steel imports, poisoning our domestic market, creating a demand gap that negatively impacted our steel shipments and asset utilization. In response to these challenging conditions, we made difficult decisions on shutting down assets that were dragging us down. Also, in 2025, we terminated our index-based slab supply contract with ArcelorMittal. The contract became very onerous in its final year when the Brazilian slab price index unnaturally separated from the U.S. finished steel prices. The factors that weighted on our performance in 2025 were well known and addressable. As we entered 2026, These problems have either been resolved or are clearly improving. We have already secured more business from our automotive clients, and that will show throughout 2026 as the OEMs reshore production back to the United States. Also very important, at the end of 2025, the Canadian government has finally made a move to restrict imported steel into Canada, and that has created positive momentum in 2026 for our Canadian subsidiary, Stelco. Our robust order book is the best confirmation that the business environment has already started to improve. Section 232 tariffs at 50% are, of course, a leading driver of this impact. We are seeing the benefit of melted and poured requirements in driving demand for domestically produced steel. A lot of the new galvanizing capacity in the US has come online and taken share from imports, reducing the amount of hot-rolled availability in the marketplace. We have been able to use the melting capacity previously allocated orders of low-margin slabs to few orders of higher-margin flat-rolled products. That said, due to melted and poured requirements, we anticipate continued demand for our domestically produced slabs. We remain open to being a domestic slab supplier to those in need of domestic slabs, as long as we can agree on a pricing construct that makes sense. With all this positive influence, the spot steel price is sitting at a two-year high. Layering in the recent cold weather stretch across the Midwest, scrap prices and electricity prices have continued to grind higher, which has increased the cost structure of the mini mills to a greater level than our own. This has given us a cost advantage. as we generate a lot of our own power and use much less scrap. Even with our sizable fixed-price automotive footprint, because of our vertically integrated nature and the also significant size of our non-automotive customer base, cliff profitability is more impacted by spot steel prices than any other company in our industry. Said another way, when hot-rolled coil prices rally, we, Cleveland Cliffs, benefit. Automotive is still our core end market, and when domestic production levels of car trucks and SUVs remain weak for an extended period, the impact on us is unavoidable. Vehicle production in the United States was down in 2025 for the third consecutive year, But with this new era of policy-driven reshoring, the return to pre-COVID levels of vehicle production in the United States is inevitable. Throughout 2025, we geared up for this inevitability by signing multi-year fixed-price contracts with all major OEM customers. These agreements increased our market share and secure the high-margin business that will flow through in 2026. We have the installed capacity available right now. Cliffs does not need to build new plants. Unfortunately, the transition to Cliffs Steel from the previous suppliers is not instantaneous. It takes some time before we see the full impact of these changeovers. but we will see it in 2026. The expected combination of these market share gains with an increased domestic production of vehicles will be a massive gain for our throughput, efficiency, costs, and ultimately profits. One more time. Differently from our competitors currently building new steel plants, or announcing plans to build steel plants, Cleveland Cliffs has production capacity available right now. Again, Cliffs does not need to build plants to be ready in 2028, 2029, or 2030. The incremental volume demanded by the automotive industry can and will be absorbed by our existing footprints. That volume carries attractive incremental margins, and thanks to our multi-year fixed price contracts with all major automotive OEMs, there will be no pressure on the price of cars to consumers in the U.S. that could even remotely be attributed to the price of cliff steel. Another example of the progress we continue to demonstrate in automotive OEMs is our successful replacement of aluminum with steel using aluminum forming equipment. Our Cliffs steel is now stamped into exposed automotive components using existing forming equipment on a production scale basis. This Cleveland Cliffs development demonstrates that the changeover from aluminum to steel can be easily done without requiring new tooling or capital investment from the customer. That significantly lowers the barrier to adoption and expands the addressable market for our Cliffs steel products, particularly as the aluminum supply chain has suffered severe disruption with a succession of fire events, clearly exposing its weakness. More than ever before, Cleveland Cliffs is seeing a clear path to replace aluminum with made in USA steel in major applications. We operate in a market that companies from around the world are spending billions of dollars to enter. We are already here. We already have the assets. We already have the workforce. As manufacturing activity in the United States continues to recover, Cleveland Cliffs is the best positioned to benefit without requiring massive capital investments. I want to drill down on another factor that impacted our 2025 performance, and that was the change in dynamics in the Canadian steel market. For the last several years, Even under the previous tariff regime, pricing in the Canadian market moved in tandem with the U.S. market. We acquired Stelco on November 1, 2024, four days before President Trump's election, and immediately took Stelco out of the U.S. market, redirecting Stelco's output 100% to the Canadian market. This was not driven by policy change, but rather our conviction on what's in the best interest for our shareholders and our employees on both sides of the border. Even the all-surprising change in Canada relations with the U.S. should not have affected this strategy at all. But that's not how it played out. All of a sudden, Canada became a dumping ground for producers trying to avoid US tariffs, and downstream Canadian manufacturing was negatively impacted as well. Canadian pricing decoupled from US pricing. Until recently, the Canadian government insisted on doing nothing about this unsustainable situation, preferring to watch its steel industry flounder for the sake of globalism. After raising the alarm louder and louder, we finally saw the Canadian government come around late in the fourth quarter of 2025. While still insufficient and limited in scope, the restrictions implemented were at least able to stop the bleeding. As a result, we have seen Canadian pricing and shipments improve in the last month. Prior to our acquisition, Stelco was a low-price exporter into the U.S. and a highly disruptive one, by the way. When you look at the big picture, what our acquisition has done to transform and improve the U.S. marketplace more than justifies and supports a return on our $2.5 billion purchase price of Stelco. In the fourth quarter, we revealed that our memorandum of understanding partner was POSCO, Korea's largest steelmaker and the world's third largest steelmaker outside of China. The partnership with Cliffs will allow POSCO to support and grow its established U.S. customer base while ensuring that its products meet U.S. counter of origin requirements melted and poured requirements. Our collaboration represents a model of how allies can deepen industrial cooperation under fair and transparent trade principles. And it aligns with US policy goals to strengthen domestic industry and attract foreign investment. POSCO continues to conduct due diligence as part of our recently announced strategic partnership. Both parties are focused on structuring a transaction that is highly accretive and strategically compelling for each company. The duration of these negotiations reflects the seriousness and potential scale of the opportunity. We are targeting signing a definitive agreement in the first half of 2026. This remains the number one strategic priority for both Cleveland Cliffs and POSCO, and engagement between the teams is active and ongoing. Our MOU is non-binding, and we will only move forward on ratifying our partnership if the collaboration is accretive to Cliffs shareholders. I would like to conclude my remarks congratulating our employees for our remarkable safety record. In 2025, we achieved the lowest total recordable incident rate since Cleveland Cliffs became a steel producer six years ago. Our TRIR, including contractors, which is unusual in our industry, we include contractors, our TRIR was 0.8 per 200,000 hours worked. That represents a 43% improvement compared with 2021, which was our first full year operating as an integrated steelmaker. This is a direct outcome of how we manage and operate in contrast with how the predecessors used to do, with the same people and the same plants. Safety performance at this level requires discipline, consistency, and leadership at every site. We have room for improvement, but the amount of progress we have seen in safety results since forming this new iteration of cliffs six years ago is truly remarkable. I will now turn it over to our CFO, Celso Gonçalves, for his remarks.

Hey, good morning. Total shipments in Q4 were 3.8 million tons, which was slightly lower than Q3 due to heavier than usual seasonal impacts. Looking forward, Q1 shipment levels should improve back to the 4 million ton level again, driven by improved demand and less maintenance time at our mills. My expectation for full year 2026 shipment level is in the 16.5 to 17 million ton range, an improvement from 2025 as we run our mills at higher utilizations. Q4 price realization of $993 per net ton fell by around $40 per net ton as the lagging indices on spot prices declined. Automotive volume fell, and slab prices became even more disconnected. Since these factors are largely behind us, I expect a substantial improvement in realized prices starting in Q1 of 2026, an increase of approximately $60 per ton from Q4 of 2025. As pricing continues to grind higher, And assuming this trend continues, we will likely see even further increases in this price as the year progresses. On the operations side, 2025 represented our third straight year of unit cost reductions, with another $40 per ton reduced last year. The much-needed rationalization of our footprint and reduction of around 3,300 employees last year was a big part of that. We have further momentum heading into 2026 as we locked in coal contracts that generate over $100 million of savings year over year and an expectation of much higher utilizations, both in melt and in our finishing operations. Combining this with some partial offsets in utilities and labor costs, we expect unit costs to decline again for a fourth straight year, down another $10 per ton in 2026. On an apples to apples basis with 2025, the reduction is even greater as we are also selling a richer mix this year without slabs, making the year over year reduction even more impressive. With that said, for the first quarter of 2026, the recent spike in utilities costs and change in mix will likely push costs up temporarily before normalizing into Q2. As a reminder, generally hedge 50% of our natural gas exposure to looking forward one year. On CapEx, we had a record low year in 2025 in capital expenditures as a steel company, with only $561 million spent. 2026 total CapEx is projected to be around $700 million, reflecting more normalized maintenance capital, as well as some pre-work and a coke plant upgrade ahead of the Burns Harbor Furnace C Reline plan for 2027. annual pension and OPEB cash obligations continue to decline. With the HRC curve where it is and automotive volumes ultimately returning, I expect to return back to healthy cash flow generation in 2026, all of which will be used to pay down debt. Asset sale processes continue, and they should bring us more cash proceeds throughout the year. We have already closed the sale of FPT Florida, and we are under contract to sell several idled properties, with agreements in principle for the majority of the rest. My expectation of the $425 million in total proceeds from these sales remains intact. Some of the larger asset sale processes remain in a holding pattern while the POSCO talks remain ongoing, but we have several options out there that we're evaluating. One major success we had in 2025 was balance sheet management, particularly in the fourth quarter. From a pure dollar perspective, our leverage remains too elevated for my liking, but the shape and format of our debt structure gives us incredible runway and flexibility. After the refinancings that we completed in 2025, our nearest bond maturity is now in 2029, and all of our outstanding bonds are unsecured. Our ABL draw is the lowest it has been since the Stelco acquisition, and our total liquidity to end 2025 was $3.3 billion. The focus this year is on generating EBITDA and cash flow. I feel much better about where we are today versus where we were 12 months ago. Looking ahead, our order book is solid, demand is improving, lead times are going out, prices are rising, costs are still coming down, tariffs are in place, the slab contract is gone, manufacturing is coming back, unemployment is low, Rate cuts are here, tax refunds are coming, Stelco's contributing, autos are looking to replace aluminum with steel, POSCO is collaborating, our employees are incentivized, and our operations and commercial teams are working together towards the same goal to maximize profitability in 2026. With that, I'll turn the call back over to Lorenzo for his closing remarks.