Cleveland-Cliffs Inc.

Good morning, ladies and gentlemen. My name is Kevin, and I'm your conference facilitator today. I'd like to welcome everyone to Cleveland Cliffs' first quarter 2026 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's prepared 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 Protection's of the Private Security 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 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 in the earnings release, which was published this morning. At this time, I'd like to introduce Lorenzo Gonsalves, Chairman, President, and Chief Executive Officer.

Thank you, Kevin, and good morning, everyone. The first quarter of 2026 was the beginning of a sustained improvement progression that will continue through the rest of the year. YQ1 results could be better and they would be better if not for a couple of one-timers. We can see the clear signs of a positive trend forming. Among these one-timers, The impact of the spiking on energy costs was the most relevant to Q1 results. Now to the good news. Our order book is full, and the automotive OEMs are booking more and more steel from cliffs. Production schedules are tight, and lead times have moved out. Historically, pricing changes took about a month to flow through our realized numbers. Today, that lag is closer to two months. In practical terms, that means the pricing strength visible in the market today will increasingly show up in our results as we move through the year, quarter by quarter. That combination, strong backlogs, disciplined production, and visibility is what a healthy steel market looks like. The extended lead times allow us to optimize production schedules in our mills, improving our overall efficiency, productivity, and costs. This market strength is driven by what is happening on the trade front. Steel imports into the United States are at their lowest levels since 2009, By now, it's clear that Section 232 works, the melted and poured mandate works, and the enforcement works. Along those lines, we are very encouraged by the recent changes in how derivative products tariffs are being enforced. Distribution transformers were added, which is exactly the right outcome. The Trump administration has given the domestic steel industry what we needed and have been asking for. Union jobs are being protected, domestic supply chains are more resilient, and mills are running at higher utilization with real predictability. The one piece still missing is Canada. There's a robust domestic market in Canada for our Canadian subsidiary Stelco to sell steel into. But the Canadian market is still oversupplied with steel from countries that are no longer able to dump their excess capacity into the United States. Because of that, they dump steel in Canada. That said, we are confident that Canada will ultimately get to the right place and enhance its own national security defenses against the negative impact of foreign steel causing the destruction of Canadian companies. We truly believe the Canadian government is honest about defending Canadian jobs and Canadian steel workers. We fully expect that Fortress North America can be and will be implemented by Canada because that's totally within their own power. Canada does not depend on anyone else to do so, and Canadian jobs are the ones at stake. The national security base for steel tariffs is being validated in real time. The war activity in Iran has disrupted global freight lanes, driven up energy prices, and destabilized metal supply chains. Imported steel is now not only subject to tariffs, it is structurally more expensive due to transportation costs, energy volatility, and geopolitical risk. And while this global uncertainty is exposing weaknesses elsewhere, it is strengthening the position of domestic steel producers like Cleveland Cliffs. Nowhere is that more evident than in aluminum. The aluminum industry has been hit repeatedly. Fires, power shortages, curtailments, geopolitical disruption, and customers have taken notice of all that. Automotive OEMs are prioritizing supply certainty, total costs, and safety. Our Cliffs steel delivers all of that without the fragility embedded in aluminum supply chains. In my long career in this business, I have never seen so much momentum in substituting aluminum with steel. And automotive is not the only place where the shift from aluminum to steel is occurring. Building products, Appliances and truck and trailer sectors have been recently gravitating toward more steel use as well. As we advance the use of our Cliffs steel, being formed in equipment previously utilized exclusively for aluminum, Cliffs has demonstrated to our clients with real-life results the most potential benefits to market share gains from aluminum. We are also pleased to inform all of our stakeholders that in February, Cleveland Police received from our clients, Toyota, the Toyota Quality Excellence Award. Toyota does not hand out quality excellence awards lightly. Their standards are among the strictest in the world. Winning that award is confirmation that our processes consistency, execution, and our overall quality are at the highest level for Toyota's high standards. That strength has drawn attention from companies outside the United States. When we last spoke, we expected to achieve during the second quarter a mutually satisfactory transaction with POSCO in accordance with the Memorandum of Understanding signed by both companies last year. This goal remains achievable, but the current disruption in the Middle East and its impact in the country of South Korea have not helped accelerate the conclusion of our ongoing discussions. That said, our engagement with POSCO is active, and we still believe a deal can be completed within this timeframe or is lighted later. Our Department of Energy funded projects. On this side, we continue to make solid progress. The Butler Works electrical steel expansion project is moving along as planned and remains on schedule for 2028 completion. Similarly, our Middletown Works project has received clear affirmation that the project will proceed once the updated scope is finally approved, and we are now in the final stages of completing that work. The revised scope of the project reflects a modern blast furnace configuration that positions Middletown among the most energy efficient in the world. Taken together, The Butler and Middletown projects underscore our disciplined approach to modernization, investing in critical infrastructure in a way that strength domestic steelmaking, improves efficiency, and supports long-term competitiveness. At the same time, we are continuing the footprint optimization actions we began last year. At Burns Harbor, We are idling our smaller plate mill as we have successfully been able to consolidate all capabilities of the 110-inch mill into the 160-inch mill. This removes an inefficient line, improves utilization at the efficient 160-inch mill, and strengths our cost performance without sacrificing any capability. We are also idling the gary plate finishing line, which is no longer needed. There will be no loss in overall steel production or layoffs, as we will backfill those roles in areas where we have seen rotary attrition. We expect that these operational changes, coupled with the positive momentum we are currently seeing in the plate market, should enhance our earnings from the plate business. On rare earths, we continue to analyze our potential on these critical minerals. That said, economics hinge on domestic refinement capability. And today, that infrastructure is extremely limited in the United States. Refinement is capital intensive and not something we intend to pursue ourselves. If and when viable domestic refinement infrastructure becomes available, either through government supported projects or third party investments, we see ourselves well positioned to take advantage of the opportunity. We have also partnered with a leading and prominent AI provider to help us take a meaningful step forward in how we run the interface between operations and commercial, particularly by embedding AI into our production planning and order entry processes. Their platform allows us to use machine learning models across our internal data to anticipate constraints, optimizing sequencing, and making better decisions in real time rather than after the fact. Our people are good, but it is impossible to perfect these processes with humans running Excel spreadsheets. This initiative will ultimately move us from human experience-driven planning toward a new and enhanced AI-assisted decision-making system that scales with the complexity of our operations. We expect to make a full announcement on our AI initiative, including the name of our partner, in the next few weeks. One important milestone we will navigate in the coming months is the renegotiation of our labor agreement with the United Steelworkers. Our employers are the backbone of this company, and their skills, commitment, and pride in what they produce are critical to our success. In our evolving and increasingly capital-intensive industry, we must ensure that the structure of our labor agreement supports competitiveness, flexibility, and long-term sustainability. We approach these discussions with respect and realism, with the goal of reaching an agreement that rewards our workforce while strengthening the company's ability to invest, grow, and remain a strong employer for decades to come. This process represents a meaningful opportunity for both Cleveland Cliffs management team and our union workforce to demonstrate the depth and strength of our partnership, and we will not disappoint anyone. With that, I'll turn it over to our CFO, Celso Gonçalves, to go over our financial results.

Thank you. Good morning, everyone. Our adjusted EBITDA in the quarter was $95 million, a $274 million increase from a year ago, due primarily to increased pricing. Starting with the top line, first quarter shipments totaled just over 4.1 million tons, which represents a recovery of more than 300,000 tons sequentially. That improvement was driven by better demand conditions across spot and trade channels and by a more stable operating cadence coming out of the fourth quarter. We were still impacted by weather-related disruptions, but volume strengthened as the quarter progressed. Shipments should increase further into Q2 as this trend continues. That volume recovery is critical because of the fixed cost nature of our business. Every incremental ton we produce and ship has a disproportionate impact on margins. The operating leverage embedded in integrated steelmaking remains substantial. Pricing also moved in the right direction. Average selling prices increased by $68 per ton from a year ago and sequentially by $55 per ton during the quarter, reflecting improving market conditions and better automotive pull. This came in slightly below our original estimate as contractual lags were longer than anticipated based on customers ordering at max levels. As mentioned earlier by Lorenzo, what used to be roughly a one-month realization lag has effectively extended to closer to two months as our order book has filled and schedules have stretched. That means price strength visible today will show up more fully in Q2 and Q3 results. In the U.S., about 45% of our sales are linked to the commodity HRC price. The remainder are under fixed price arrangements, like in automotive, or linked to other indices like we have with plate. In Canada, effectively all shipments are sold on a spot price basis. but that price has completely disconnected with the US price. Historically, pricing in Canada was effectively in line with pricing in the US. But in today's market, the Canadian selling price is at a 40% discount to US pricing. This is still margin positive for Stelco, but well below what this entity would have generated historically in this type of pricing environment. On the cost side, The most visible pressure in the quarter came from energy and the impact of the extreme cold weather we felt here in the Midwest during the winter. We lock in most of our natural gas purchases for the following month, three days before the start of each month. The day that gas was locked for the month of February was the highest price in three years, and it very shortly thereafter came back down to historical levels. This piece of the energy spike was known at the time of our last call and was partially offset by hedges, but we also felt an immense impact from the run-up in electricity and industrial gases. We have three EAF facilities and two integrated facilities in the unregulated states of Ohio and Pennsylvania, and when prices jump like they did during the cold weather months, we feel a direct impact. All factors considered, the energy spike drove an $80 million negative impact to EBITDA on Q1 relative to historical expectations. Since then, natural gas and electricity prices have normalized, but we've seen other cost pressures emerge. The cost of fuel, for example, has impacted mining costs at our iron ore pelletizing operations, and scrap has continued to grind higher as well. Combining these with the impacts of some scheduled outages in Q2, our Q2 costs should tick up another $15 per ton higher before falling meaningfully in the back half of the year. We will update our cost expectations on a quarterly basis. All of our other full year expectations, including volume, CapEx, and SG&A remain in line with prior guidance. SG&A has been a clear area of success for us while earnings have been under pressure. Even after acquiring Stelco in the fourth quarter of 2024, which naturally added to SG&A, we've been operating at essentially an all-time low on a quarterly basis since becoming a steel company, after factoring in non-cash amortization that is added back to EBITDA. This is good evidence of our cost discipline, even after absorbing the impact of acquisitions and normal inflationary pressures. The result is a leaner overhead cost base that positions us well as operating conditions improve and underscores our ability to trim fat and capture synergies. Turning to cash flow, first quarter free cash flow was negative as expected, primarily due to working capital timing. Our first and third quarters are always heavier cash use periods due to the coupon schedule of our high-yield bonds. Accounts receivable increased during the quarter as shipments accelerated into March. This, along with higher pricing compared to the prior quarter, is a recipe for a large receivable build, but the evidence is clearly there for a major cash collection quarter in Q2. Combining this higher collection with higher EBITDA sets us up for a return to meaningful positive free cash flow in Q2. From both an EBITDA and cash flow standpoint, Q2 should be our best quarter in nearly two years, and that will be the quarter where we have a number of outages across the footprint. Because of this, our full shipment and cost potential will not be on full display until Q3, which is an outage-like quarter. Q3 will give us maximum operating leverage on volumes and pricing and is where you should expect to see the earnings power of this business become much more apparent. If the steel price curve holds constant, the improvement from Q2 to Q3 will be even better than the sequential improvement from Q1 to Q2. Our job right now is to run reliable operations and let the strong market we're in take care of the rest. Our outlook on improving leverage position remains firmly supported by the expectations for strong free cash flow generation over the balance of the year, along with the completion of multiple real estate transactions currently in process. Our $425 million cash receipt expectation from idle property sales remains on target, with two more properties going under contract since we last spoke. As we translate earnings into cash and close on these asset sales, We expect to further strengthen the balance sheet and continue making progress towards our longer-term leverage objectives, while maintaining the flexibility to operate the business from a position of strength. We're also pleased to have come out of the most cash-intensive use periods at CLIS, still with liquidity above $3 billion. I will now turn it back to Lorenzo for his closing remarks.