Cleveland-Cliffs Inc. Q3 FY2025 earnings call

• Automotive sector is rebounding with the company locking in 2-3 year agreements with major automotive OEMs covering higher sales volumes and favorable pricing through 2027-2028. - Entered into a memorandum of understanding with a major global steelmaker, with plans to make a formal announcement in the next few months. - Sold properties with eight sites under contract or agreements in principle, combined value $425 million, proceeds for debt reduction. - Awarded a five-year $400 million fixed-price contract by the Defense Logistics Agency for grain-oriented electrical steel. - Revisiting rare earth elements potential with two sites in Minnesota and Michigan showing evidence of rare earth mineralization. - Made progress selling non-core properties, with eight sites under contract or agreements in principle.

In the third quarter, adjusted EBITDA improved to $143 million, a 52% increase over the prior quarter, driven by margin expansion from higher realized prices and improved mix. Steel shipment volumes were 4 million tons in the quarter, with the average selling price at $1,032 per net ton, up $17 per net ton over the prior quarter. Automotive shipments were the best since the first quarter of 2024. Roughly 9% of total sales come from Stelco in Canada, but the Canadian market lags expectations with import steel penetration at 65%.

• 2025 CapEx budget is now $525 million, down from original $700 million; full-year SG&A expectation is now $550 million, down from original $625 million. - Fourth quarter shipments expected to be similar to Q3 around 4 million tons; auto shipments expected to be similar; cost still expected to be down $50 a ton year over year when adjusted for automotive mix. - ASP for Q4 can be calculated with available pieces.

• Canadian market is disappointing with 65% import steel penetration and Canadian government unwilling to act against dumping steel; Stelco in Canada market lags expectations. - Uncertainty regarding the onerous slab contract expiring and its impact until it is resolved.

Q: How quickly could you produce products in the rare earth vertical and would you look to be a vertically integrated producer or partner?

A: Lourenco Goncalves said they have the opportunity to develop mining assuming studies play out, with options including working within US or with Canada.

Q: How has the asset sale process gone to date, interest in assets and FPT sale?

A: Lourenco Goncalves said they closed on a portion of FPT sale, under agreement to sell Florida assets to SA Recycling, with interest in Toledo direct reduction plant but deprioritizing asset sale process due to MOU.

Q: Comment on volume growth implicit in new auto agreements and pricing?

A: Lourenco Goncalves said directionally the contracts will generate more margin, with Cleveland-Cliffs having more capacity to produce automotive steels.

Q: Electrical steel award - one-time or series?

A: Lourenco Goncalves said it's a multi-year one-time opportunity for the US government to build a strategic inventory.

Q: What's driving cost reduction effort?

A: Celso Goncalves said it's from proactive footprint optimization since becoming a steel company in 2020, optimizing operations across assets.