CLEVELAND-CLIFFS INC. Q4 FY2024 earnings call

• 2024 saw weak steel demand, especially in automotive, construction, and industrial sectors, leading to the idling of the C6 blast furnace at Cleveland Works. - Appreciated the 25% tariffs on steel imports, which help address unfair foreign competition. - Acquisition of Stelco is progressing smoothly with operational transition, and the company expects $120 million in synergies by year-end 2025. - Scrap market is tightening with prime scrap prices up $70 per gross ton in two months. - Order book is strong and pricing is improving in 2025, particularly in the automotive sector. - Safety record in 2024: total reportable incident rate was 0.9, including contractors. - Liquidity position is strong with $3 billion in liquidity after the recent capital raise.

In the fourth quarter of 2024, Cleveland-Cliffs posted an adjusted EBITDA loss of $81 million, primarily due to weaker automotive demand and lagged pricing. Total shipments in Q4 were 3.8 million tons, lower than Q3 due to the idling of the C6 furnace, seasonally weaker demand, and Stelco being included for only two months of the quarter. Q4 price realization was $976 per net ton, down from the previous quarter mainly because of Stelco's lower price mix. The unit steel cost was reduced by $30 per ton year-over-year as guided in 2024, and the company expects to reduce average cost by another $40 per net ton in 2025 with the inclusion of Stelco. Stelco contributed 2.6 million tons and helped lower the weighted average unit costs by roughly $15 per net ton compared to the prior quarter.

• Expect improved EBITDA and cash flow in 2025 due to rising steel prices, addition of Stelco's 2.6 million tons, and lower costs. - Target net debt-to-EBITDA of 2.5 times and focus on debt reduction. - CapEx in 2025 is expected to be $700 million, with $500 million for the legacy Cleveland-Cliffs footprint, $100 million for the Stelco footprint, and $100 million for projects in Middletown, Butler, and Weirton. - Q1 2025 shipments are expected to be above 4 million tons due to improved demand and Stelco being included for a full quarter.

• Ongoing trade distortions from foreign overproduction, dumping, subsidies, and currency manipulation. - Litigation regarding US Steel's sale to Nippon Steel, with Cliffs believing the deal won't close due to national security concerns. - Potential impact of changing tariff environments and their evolution on pricing and demand.

Q: Next week the US may move forward with 25% import tariffs with Canada and Mexico. Can you discuss how Cliffs navigates the evolving tariff environment, its implications on price and demand? And what the strategy is for the recently acquired Stelco asset? And is there an option to move slabs rather than finish steel from Stelco into the US?

A: Lourenco Goncalves said tariffs are necessary, Stelco's book of business is primarily in Canada, and they believe any small negative impact on Stelco will be offset by benefits to the rest of the footprint. Stelco can execute on orders from American clients using assets near the border, and there are no plans to move slabs instead of finish steel from Stelco into the US.

Q: If we were to see the equity remain under pressure, if you might consider pausing paydown for any share repurchases? And then my second question was, do you have a target level of net debt in mind?

A: Lourenco Goncalves said no plans to buy back stock, focus is on paying down debt to maintain target net debt-to-EBITDA of 2.5 times.

Q: How are you thinking about the capital expenditures this year and into the future, especially regarding projects like Middletown and Butler?

A: Lourenco Goncalves said CapEx for 2025 is $500 million for legacy Cliffs, $100 million for Stelco, and $100 million for Middletown, Butler, Weirton projects, with next year's CapEx depending on project progress, especially Middletown related to hydrogen efforts.

Q: On the auto price for 2025, any more color? Do you expect prices to be flattish, to move higher, move down?

A: Lourenco Goncalves said automotive will represent a less percentage of overall volume, prices had to go slightly down in renegotiations but not as drastically as competition's 2024 deals.

Q: Can you discuss the potential dilutions of tariffs and the benefit of downstream tariffs on articles of steel?

A: Lourenco Goncalves said this administration is committed to not allowing exceptions like past administrations, and downstream tariffs on articles of steel help plug leakage and support domestic manufacturing, benefiting Cliffs indirectly and directly by preventing unfair competition in finished goods