Cleveland-Cliffs Inc. (NYSE:CLF) Q4 2022 Earnings Call Transcript

Lourenco Goncalves : As far as the overall mix, you should expect more on the high value-added side in general and less in the low value-added side. Why is that? One, automotive. The more these guys build cars, the more we’re going to be concentrated on the higher side. You saw the mix that we informed, 70% coated, 15% hot-rolled, 15% cold-rolled. That’s the mix that we sell automotive these days. So the more cars they build and the more participation continues to increase in automotive, we’re going to have more galvanized, more galvanneal, more electrogalvanized; and percentage-wise, less hot-rolled, less cold-rolled. That’s one. Second, you will have heard about electrical steels. We made an investment in our Zanesville, Ohio, facility that increased our ability to produce more non-oriented electrical steels, more — it’s called NOES, non-oriented electrical — no grain-oriented electrical steels that goes to the motors of the electric vehicles.

And with that, we are freeing up Butler to concentrate only on GOES, on grain-oriented electrical steels that goes to the grid, that goes to transformers. So we’re expecting a meaningful increase in throughput because we’re basically separating Zanesville for NOES and Butler for GOES. So — and that’s very high value added. The contracts are negotiated extremely well by the team towards 2023. And that, again, it’s more in the high EBITDA per ton type of a business. And last, but not least, if we — there’s one more before the last one that I want to comment. Stainless, we did well as well. Stainless — and there is a big component of stainless for automotive. So I also mentioned the bright anneal and the trim material that we sell, that’s our highest margin.

These are $5,000 per ton type of material — $5,000 per ton plus material. So it’s really, really high value-added material. But that was good, too. And it’s automotive, it’s setting stone as well. But the last item that’s kind of easy is tinplate. Because tinplate is a typical case of dump, we are starting to really gather information about a pretty absurd type of collusion against the suppliers, particularly against Cleveland-Cliffs. And we are exposing what I believe is a serious issue that might start in the ITC and ended up in a court of law with the personal liability for a few individuals. And I’m going to go to the NAC on that one. Because what they do in terms of making us starve is totally absurd. It’s not enormous for us in a big scheme of things.

We’re talking 300,000 tons, but it’s very strategically critical for the country. We cannot, particularly in a state of cold war that we’re in right now, to outsource our ability to produce canned foods. And that’s the main reason we are fighting this fight. But at the end of the day, we expect higher prices at the other end. And a few people that are acting like thugs to be personally responsible for their actions. So we’re working on very seriously with our lawyers on that.

Operator: Our next question comes from Lucas Pipes with B. Riley.