CLEVELAND-CLIFFS INC

Previous wording

We are a leading North America-based steel producer with focus on value-added sheet products, particularly for the automotive industry. We are vertically integrated from the mining of iron ore, production of pellets and direct reduced iron, and processing of ferrous scrap through primary steelmaking and downstream finishing, stamping, tooling, and tubing. Headquartered in Cleveland, Ohio, we employ approximately 28,000 people across our operations in the United States and Canada.

Current wording

We are a leading North America-based steel producer with focus on value-added sheet products, particularly for the automotive industry. We are vertically integrated from the mining of iron ore, production of pellets and direct reduced iron, and processing of ferrous scrap through primary steelmaking and downstream finishing, stamping, tooling, and tubing. Headquartered in Cleveland, Ohio, with the closing of the Stelco Acquisition, we employ approximately 30,000 people across our operations in the United States and Canada.

Previous wording

Unless otherwise noted, discussion of our business and results of operations in this Quarterly Report on Form 10-Q refers to our continuing operations on a stand-alone basis without giving effect to the pending Stelco Acquisition.

Current wording

Unless otherwise noted, discussion of our business and results of operations in this Quarterly Report on Form 10-Q refers to our continuing operations on a stand-alone basis without giving effect to the Stelco Acquisition.

Previous wording

The following is a summary of our consolidated results for the three and six months ended June 30, 2024 and 2023 (in millions, except for diluted EPS):

Current wording

The following is a summary of our consolidated results for the three and nine months ended September 30, 2024 and 2023 (in millions, except for diluted EPS):

Previous wording

Steel market conditions in the first half of 2024 have been driven by continued strength in light vehicle production but also inconsistent service center buying behavior and higher import levels. The price for domestic HRC, the most significant index impacting our revenues and profitability, averaged $782 per net ton for the second quarter of 2024, 27% lower than the second quarter of 2023, and ended the quarter near multi-year low prices. Import levels were elevated in the first half of 2024 as HRC pricing spreads between the U.S. and other regions started increasing in the fourth quarter of 2023. Steel demand from service centers remained inconsistent during the second quarter of 2024, as service center inventory levels were reduced to 1.8 months on hand as the HRC price declined, after ending 2023 at 2.2 months of inventory on hand. Additionally, service centers remain hesitant to carry inventory as interest rates remain elevated. Looking forward, we expect domestic steel demand to grow as automotive production continues to remain strong, steel imports are now unattractive, other end-user demand is healthy, and incremental steel demand stimulated by recent government legislation and manufacturing on-shoring is realized.

Current wording

Steel market conditions in 2024 have been driven by weaker than anticipated light vehicle production, lower demand and higher import levels. The price for domestic HRC, the most significant index impacting our revenues and profitability, averaged $677 per net ton for the third quarter of 2024, 14% lower than the third quarter of 2023, and the lowest quarterly average per net ton since the second quarter of 2020. Import levels have been elevated in 2024, which has contributed to downward pressure on HRC pricing. Looking forward, we expect domestic steel demand to grow as interest rates have started to decline, steel imports are currently unattractive, other end-user demand is healthy, and incremental steel demand stimulated by recent government legislation and manufacturing on-shoring is realized.

Previous wording

The Infrastructure and Jobs Act, the CHIPS Act and the Inflation Reduction Act should provide meaningful support for overall domestic steel demand throughout the remainder of 2024 and in the coming years. Our extensive portfolio of products should result in increased steel demand from most of our end markets. The Infrastructure and Jobs Act includes approximately $550 billion of authorized spending for new investments and programs. This legislation provides direct spending support for roads, bridges and other infrastructure projects, including upgrades to the domestic power grid and building out a national network of EV chargers. The CHIPS Act promotes semiconductor manufacturing in the U.S., which should help support non-residential construction as well as machinery and equipment. The Inflation Reduction Act provides incentives for the use of domestic steel for investments in clean energy projects, including wind and solar projects, which consume a substantial amount of steel. Additionally, the on-shoring of manufacturing in the U.S. should reduce the risk of supply chain issues in the future.

Current wording

The Infrastructure and Jobs Act, the CHIPS Act and the Inflation Reduction Act should provide meaningful support for overall domestic steel demand for years to come. Our extensive portfolio of products should result in increased steel demand from most of our end markets. The Infrastructure and Jobs Act includes approximately $550 billion of authorized spending for new investments and programs. This legislation provides direct spending support for roads, bridges and other infrastructure projects, including upgrades to the domestic power grid and building out a national network of EV chargers. The CHIPS Act promotes semiconductor manufacturing in the U.S., which should help support non-residential construction as well as machinery and equipment. The Inflation Reduction Act provides incentives for the use of domestic steel for investments in clean energy projects, including wind and solar projects, which consume a substantial amount of steel. Additionally, the on-shoring of manufacturing in the U.S. should prompt more domestic steel demand as well as reduce the risk of supply chain issues in the future.

Previous wording

The largest market for our steel products is the automotive industry in North America, which makes light vehicle production a key driver of demand. During the second quarter of 2024, North American light vehicle production was approximately 4.2 million units, up from 3.9 million units in the first quarter of 2024. Full-year 2024 North American light vehicle production is estimated to be 15.8 million units, which would be the highest level since 2019. North American light vehicle production in 2025 and beyond is expected to continue to increase from 2024 levels and is estimated to exceed 16.0 million units annually by 2026, implying continued strong demand for years to come. During the second quarter of 2024, light vehicle sales in the U.S. saw an average seasonally adjusted annualized rate of 15.6 million units sold, an increase from 15.4 million units sold rate in the first quarter of 2024. Additionally, the average age of light vehicles on the road in the U.S. is at an all-time high of 12.6 years, which should support demand as older vehicles need to be replaced. As the leading supplier of automotive-grade steel in the U.S., we expect to benefit from increased vehicle production over the coming years.

Current wording

The largest market for our steel products is the automotive industry in North America, which makes light vehicle production a key driver of demand. Light vehicle production in 2024 has fallen well below expectations. Full-year 2024 North American light vehicle production is estimated to be 15.5 million units, a significant decrease from original estimates of 16.3 million units, and a decrease from 15.7 million units in 2023. During the third quarter of 2024, North American light vehicle production was approximately 3.8 million units, down from 4.1 million units in the second quarter of 2024. During the third quarter of 2024, light vehicle sales in the U.S. saw an average seasonally adjusted annualized rate of 15.6 million units sold, the same rate as the second quarter of 2024.

Previous wording

Since 2021, the price for busheling scrap, a necessary input for flat-rolled steel production in EAFs in the U.S., has continued to average well above the prior annual ten-year average of approximately $400 per long ton. The busheling price averaged $429 per long ton during the second quarter of 2024. We expect the supply of busheling scrap to further tighten due to decreasing prime scrap generation from original equipment manufacturers and the growth of EAF capacity in the U.S., reduced metallics import availability, and a push for expanded scrap use globally. As we are fully integrated and have primarily a blast furnace footprint, increased prices for busheling scrap in the U.S. bolster our competitive advantage, as we source the majority of our iron feedstock from our stable-cost mining and pelletizing operations in Minnesota and Michigan.

Current wording

Since 2021, the price for busheling scrap, a necessary input for flat-rolled steel production in EAFs in the U.S., has continued to average above the prior annual ten-year average of approximately $400 per long ton. The busheling price averaged $408 per long ton during the third quarter of 2024 and has averaged $434 per long ton through the first nine months of 2024. We expect the supply of busheling scrap to further tighten due to decreasing prime scrap generation from original equipment manufacturers and the growth of EAF capacity in the U.S., reduced metallics import availability, and a push for expanded scrap use globally. As we are fully integrated and have primarily a blast furnace footprint, increased prices for busheling scrap in the U.S. bolster our competitive advantage, as we source the majority of our iron feedstock from our stable-cost mining and pelletizing operations in Minnesota and Michigan.

Previous wording

As for iron ore, the Platts 62% price averaged $112 per metric ton in the second quarter of 2024, which is 17% higher than the prior annual ten-year average. While higher iron ore prices play a role in increased steel prices, we also directly benefit from higher iron ore prices for the portion of iron ore pellets we sell to third parties.

Current wording

As for iron ore, the Platts 62% price averaged $100 per metric ton in the third quarter of 2024, which is 5% higher than the prior annual ten-year average. While higher iron ore prices play a role in increased global steel prices, we also directly benefit from higher iron ore prices for the portion of iron ore pellets we sell to third parties.

Previous wording

On July 10, 2024, the United States and Mexico announced key measures to protect the North American steel markets from unfair trade. Both countries are expected to implement policies to jointly prevent tariff evasion on steel being exported from Mexico to the United States. It will be required that steel imported from Mexico must be melted and poured in Mexico, Canada or the United States to be eligible for Section 232 exemptions. This will effectively put a 25% tariff on any steel that is transshipped through Mexico that originated in China or other countries outside of North America. We believe it is vital all members adhere to the USMCA and view this as a positive development to ensuring fair trade in the North American steel market.

Current wording

On July 10, 2024, the United States and Mexico announced key measures to protect the North American steel markets from unfair trade. Both countries are expected to implement policies to jointly curb tariff evasion on steel being exported from Mexico to the United States. If implemented as announced, it will be required that steel imported from Mexico must be melted and poured in Mexico, Canada or the United States to be eligible for Section 232 exemptions. This will effectively put a 25% tariff on any steel that is transshipped through Mexico that originated in China or other countries outside of North America. We believe it is vital that all members adhere to the USMCA and view this as a positive development to ensuring fair trade in the North American steel market.

Previous wording

During 2023, we significantly reduced costs compared to the prior year, as we had higher production volume and normalized repair and maintenance spending, and inflationary pressures on input and energy costs eased. We expect to continue to reduce costs in 2024, as we have worked through higher cost inventory, production volumes should remain similar, and reductions in even lower natural gas prices and coal and alloy costs should mitigate any inflationary cost increases.

Current wording

During 2023, we significantly reduced costs compared to the prior year, as we had higher production volume and normalized repair and maintenance spending, and inflationary pressures on input and energy costs eased. We expect that full-year 2024 costs will be reduced year-over-year, compared to 2023, as we have worked through higher cost inventory and lower natural gas, coal and alloy costs should mitigate any inflationary cost increases.

Previous wording

Due to its demanding nature, the automotive steel business typically generates higher through-the-cycle margins, making it a desirable end market. Demand for our automotive-grade steel is expected to remain strong in the coming years as a result of a healthy unemployment rate, pent-up automotive demand arising out of supply chain issues and the replacement of older vehicles.

Current wording

Due to its demanding nature, the automotive steel business typically generates higher through-the-cycle margins, making it a desirable end market. Demand for our automotive-grade steel is expected to be healthy in the coming years as a result of a low unemployment rate, declining interest rates and the replacement of older vehicles.

Previous wording

We are currently a leading producer of electrical steels referred to as GOES and NOES in the U.S. The U.S. Infrastructure and Jobs Act provides funding to be used for the modernization of the electrical grid and the infrastructure needed to allow for increased EV adoption, both of which require electrical steels. Because of these incentives and our current customer base, our electrical steel business is expected to continue to achieve strong profitability in the coming years.

Current wording

We are currently a leading producer of electrical steels referred to as GOES and NOES in the U.S. The Infrastructure and Jobs Act provides funding to be used for the modernization of the electrical grid and the infrastructure needed to allow for increased EV adoption, both of which require electrical steels. Because of these incentives and our current customer base, our electrical steel business is expected to continue to achieve strong profitability in the coming years.

Previous wording

We are the first and the only producer of HBI in the Great Lakes region. Construction of our Toledo direct reduction plant was completed in the fourth quarter of 2020 and reached full run-rate nameplate annual capacity of 1.9 million metric tons during the middle of 2021. From this modern plant, we produce a high-quality, low-cost and low-carbon intensive HBI product that can be used in our blast furnaces as a productivity enhancer, or in our BOFs and EAFs as a premium scrap alternative. We use HBI to stretch our hot metal production, lowering carbon intensity and reliance on coke. With increasing tightness in the scrap and metallics markets combined with our own internal needs, we expect our Toledo direct reduction plant to support healthy margins for us going forward.

Current wording

We are the first and the only producer of HBI in the Great Lakes region. From our Toledo, Ohio facility, we produce a high-quality, low-cost and low-carbon intensive HBI product that can be used in our blast furnaces as a productivity enhancer, or in our BOFs and EAFs as a premium scrap alternative. We use HBI to stretch our hot metal production, lowering carbon intensity and reliance on coke. With increasing tightness in the scrap and metallics markets combined with our own internal needs, we expect our Toledo direct reduction plant to support healthy margins for us going forward.

Previous wording

Our unique capabilities, driven by our portfolio of assets and technical expertise, give us an advantage in our flat-rolled product offering. We offer products that have superior formability, surface quality, strength and corrosion resistance for the automotive industry. In addition, our state-of-the-art Research and Innovation Center in Middletown, Ohio gives us the ability to collaborate with our customers and create new products and develop new and efficient steel manufacturing processes. During 2022, we introduced our MOTOR-MAX™ product line of NOES for high frequency motors and generators. During 2023, we introduced our C-STAR™ protection design, which was developed for the purpose of providing EV battery protection for improved safety purposes, but can be used in any type of light vehicle. These unique product offerings and customer service capabilities enable us to remain a leading steel supplier to the automotive industry.

Current wording

Our unique capabilities, driven by our portfolio of assets and technical expertise, give us an advantage in our flat-rolled product offering. We offer products that have superior formability, surface quality, strength and corrosion resistance for the automotive industry. In addition, our state-of-the-art Research and Innovation Center in Middletown, Ohio gives us the ability to collaborate with our customers and create new products and develop new and efficient steel manufacturing processes.

Previous wording

We have ample access to scrap along with internally sourced iron ore pellets and HBI. Our ability to optimize use of these raw materials in our blast furnaces and BOFs ultimately boosts liquid steel output, reduces coke needs and lowers carbon emissions from our operations. As a result of successful operational improvements, we announced the indefinite idle of the Indiana Harbor #4 blast furnace in the first quarter of 2022. The indefinite idle reduced our operational blast furnaces from eight to seven. Our strategic use of HBI in our blast furnaces and maximizing scrap usage in our BOFs has allowed us to achieve the same steel production with one less blast furnace in our footprint.

Current wording

We have ample access to scrap along with internally sourced iron ore pellets and HBI. Our ability to optimize use of these raw materials in our blast furnaces and BOFs ultimately boosts liquid steel output, reduces coke needs and lowers carbon emissions from our operations. As a result of successful operational improvements, we announced the indefinite idle of the Indiana Harbor #4 blast furnace in the first quarter of 2022. This indefinite idle reduced our operational blast furnaces from eight to seven. Our strategic use of HBI in our blast furnaces and maximizing scrap usage in our BOFs has allowed us to achieve the same steel production with one less blast furnace in our footprint.

Previous wording

We have a proven track record of successfully identifying undervalued assets and completing value-enhancing transactions through mergers and acquisitions. With our strong balance sheet, proven ability to integrate acquired assets and capture synergies, along with our powerful partnership with our union and non-union employees, we are confident in our ability to identify and execute value-enhancing mergers and acquisitions. We have remained active in our opportunistic pursuit of value-enhancing mergers and acquisitions and recently announced that we entered into the Arrangement Agreement to acquire Stelco.

Current wording

We have a proven track record of successfully identifying undervalued assets and completing value-enhancing transactions through mergers and acquisitions. With our strong balance sheet, proven ability to integrate acquired assets and capture synergies, along with our powerful partnership with our union and non-union employees, we are confident in our ability to identify and execute value-enhancing mergers and acquisitions.

Previous wording

On July 15, 2024, we announced that we had entered into the Arrangement Agreement pursuant to which we plan to acquire Stelco. The Stelco Acquisition confirms our commitment and leadership in integrated steel production in North America and is expected to strengthen our cost position by incorporating one of the lowest cost flat-rolled steelmaking assets in North America within our footprint. The Stelco Acquisition has the full endorsement of the USW and, when complete, will bring an additional 1,800 USW-represented employees into our workforce. When complete, the Stelco Acquisition will expand our existing footprint in Canada and diversify our customer base across service centers, construction and other industrial end markets with higher volumes of spot sales. As a result of the Stelco Acquisition, our exposure to the North American spot market is expected to double, giving us further insight into spot market dynamics and diversifying our customer base further toward spot customers. We expect the Stelco Acquisition to close in the fourth quarter of 2024, subject to approval by Stelco shareholders and other customary closing conditions.

Current wording

On July 15, 2024, we announced that we had entered into the Arrangement Agreement to acquire Stelco. The Stelco Acquisition confirms our commitment and leadership in integrated steel production in North America and is expected to strengthen our cost position by incorporating one of the lowest cost flat-rolled steelmaking assets in North America within our footprint. The Stelco Acquisition has the full endorsement of the USW and brings an additional 1,800 USW-represented employees into our workforce. The Stelco Acquisition expands our existing presence in Canada and diversifies our customer base across service centers, construction and other industrial end markets with higher volumes of spot sales. As a result of the Stelco Acquisition, our exposure to the North American spot market is expected to double, giving us further insight into spot market dynamics and diversifying our customer base toward spot customers.

Previous wording

Going forward, we will continue to be opportunistic in our pursuit of assets that would grow our business and offer opportunities to generate significant synergies. Our strong partnership with our union-represented employees was crucial in prior mergers and acquisitions as well as our recently announced entry into the Arrangement Agreement pursuant to which we will acquire Stelco. We remain the only domestic steel company in recent years to successfully acquire steel producing assets with USW-represented employees.

Current wording

Going forward, we will continue to be opportunistic in our pursuit of assets that would grow our business and offer opportunities to generate significant synergies. Our strong partnership with our union-represented employees was crucial in prior mergers and acquisitions as well as with the Stelco Acquisition. We remain the only domestic steel company in recent years to successfully acquire steel producing assets with USW-represented employees.

Previous wording

On July 22, 2024, we announced our investment plan for our new electrical distribution transformer production plant at our recently indefinitely idled Weirton, West Virginia facility. We intend to invest approximately $150 million to repurpose a warehouse to commence production of three-phase distribution transformers used in electric power distribution transformers. We expect to receive $50 million in support from the West Virginia Economic Development Authority in relation to the project, which reduces our net capital investment to approximately $100 million. Our Weirton facility benefits from the ability to use existing building assets, infrastructure and re-employment opportunities for members of the workforce that were previously employed at our indefinitely idled Weirton tinplate mill.

Current wording

On July 22, 2024, we announced our investment plan for our new electrical distribution transformer production plant near our indefinitely idled Weirton, West Virginia facility. We intend to invest approximately $150 million to repurpose a warehouse to commence production of distribution transformers used in electric power distribution. We expect to receive $50 million in support from the West Virginia Economic Development Authority in relation to the project, which reduces our net capital investment to approximately $100 million. Our planned Weirton distribution transformer production plant benefits from the ability to use existing building assets, infrastructure and re-employment opportunities for members of the workforce that were previously employed at our indefinitely idled Weirton tinplate mill.

Previous wording

This project is also expected to increase demand for American-made GOES produced at our Butler Works steel mill as well as for our carbon and stainless steel products used in the manufacturing of distribution transformers. We believe that distribution transformers are critical to America’s electrical infrastructure maintenance and expansion, and we look to benefit from a market that is undersupplied in the United States and currently experiencing extended lead times with a strong demand outlook. This project is expected to take approximately 18 months to complete.

Current wording

This project is also expected to increase demand for American-made GOES produced at our Butler Works steel mill as well as for our carbon and stainless steel products used in the manufacturing of distribution transformers. We believe that distribution transformers are critical to America’s electrical infrastructure maintenance and expansion, and we look to benefit from a market that is undersupplied in the United States and currently experiencing extended lead times with a strong demand outlook. This project is expected to be completed in the first half of 2026.

Previous wording

We are seeking to expand our customer base with the desirable EV market. At this time, we believe the North American automotive industry is at a structural inflection point, with the adoption of electrical motors in passenger vehicles. As this market grows, it will require more advanced steel applications to meet the needs of EV producers and consumers. These features include the already existing sophisticated steel supply for internal combustion engine vehicle parts, along with the added need for steel-based battery enclosures and reinforcement in EVs. With our unique technical capabilities and leadership in the automotive industry, we believe we are positioned better than any other North American steelmaker to supply the steel and parts necessary to fill these needs.

Current wording

We are seeking to expand our customer base with the desirable EV market. As this market grows, it will require more advanced steel applications to meet the needs of EV producers and consumers. These features include the already existing sophisticated steel supply for internal combustion engine vehicle parts, along with the added need for steel-based battery enclosures and reinforcement in EVs. With our unique technical capabilities and leadership in the automotive industry, we believe we are positioned better than any other North American steelmaker to supply the steel and parts necessary to fill these needs.

Previous wording

In March 2024, we were selected by the DOE for award negotiations to receive up to $575 million in total funding for two projects to accelerate industrial decarbonization initiatives. If awarded, we would receive up to a $500 million federal investment to replace our existing blast furnace at Middletown Works with a 2.5 million ton per annum hydrogen-ready direct reduced iron plant and two 120 megawatt electric melting furnaces to feed molten iron to the existing infrastructure already on site, including the BOF, caster, hot strip mill and various finishing facilities. The project is designed so that Middletown Works would maintain its existing raw steel production capacity of approximately 3 million net tons per year and would no longer use coke for iron production. We expect that the process would dramatically reduce carbon emissions intensity with no impact to product quality or capability and would consolidate Middletown Works as the most advanced, lowest GHG emitting integrated iron and steel facility in the world.

Current wording

In March 2024, we were selected by the DOE's OCED for award negotiations to receive up to $575 million in total funding for two projects to accelerate industrial decarbonization initiatives. If fully awarded, we would receive up to a $500 million federal investment to replace our existing blast furnace at Middletown Works with a 2.5 million ton per annum hydrogen-ready direct reduced iron plant and two 120 megawatt electric melting furnaces to feed molten iron to the existing infrastructure already on site, including the BOF, caster, hot strip mill and various finishing facilities. The project is designed so that Middletown Works would maintain its existing raw steel production capacity of approximately 3 million net tons per year and would no longer use coke for iron production. We expect that the process would dramatically reduce carbon emissions intensity with no impact to product quality or capability and would consolidate Middletown Works as the most advanced, lowest GHG emitting integrated iron and steel facility in the world. Following negotiations, in the third quarter of 2024, the OCED awarded us $9.5 million to begin Phase 1 of the Middletown project, with the remaining award being subject to future award negotiations at the end of each project phase. The Middletown project is expected to be completed by 2029.

Previous wording

Additionally, if awarded, we would receive up to $75 million at our Butler Works facility to replace two of our existing natural gas fired high temperature slab reheat furnaces with four electrified induction slab reheat furnaces, to bring optimum efficiency to our production of electrical steel. This project would lower carbon emissions, substantially reduce energy costs and improve slab quality. As a result of both of these projects, we would anticipate generating in excess of $500 million in annual cost savings and yield improvements.

Current wording

Additionally, if fully awarded, we would receive up to $75 million at our Butler Works facility to replace two of our existing natural gas fired high temperature slab reheat furnaces with four electrified induction slab reheat furnaces, to bring optimum efficiency to our production of electrical steel. This project would lower carbon emissions, substantially reduce energy costs and improve slab quality. Following negotiations, in the third quarter of 2024, the OCED awarded us $19 million to begin Phase 1 of the Butler project, with the remaining award being subject to future award negotiations at the end of each project phase. The Butler project is expected to be completed by 2029. As a result of both of these projects, we would anticipate generating in excess of $500 million in annual cost savings and yield improvements.

Previous wording

Given the cyclicality of our business, it is important to us to be in the financial position to easily withstand economic cycles and be opportunistic when attractive strategic opportunities arise. Since the acquisition of our steelmaking assets in 2020, we have demonstrated our ability to generate healthy free cash flow and use it to reduce substantial amounts of debt, return capital to shareholders through share repurchases and make investments to both improve and grow our business. During the second quarter of 2024, we returned $124 million of capital to shareholders via share repurchases under our current $1.5 billion share repurchase program that was effective April 22, 2024. We also reduced the principal amount of our outstanding long-term debt by $157 million in the second quarter of 2024. We have a track record of demonstrating that we can quickly deleverage our balance sheet and have also historically shown our ability to take advantage of volatility in the debt markets and repurchase notes at a discount. We expect to continue to use the financial levers available to us to both opportunistically reduce our debt and return capital to shareholders throughout the remainder of 2024 and beyond. At the end of the second quarter of 2024, our net debt to trailing-twelve months Adjusted EBITDA leverage ratio was 2.1x, which provides us flexibility to execute additional attractive strategic, operational or financial opportunities we identify. It is also important for us to maintain sufficient liquidity, which was $3.7 billion as of June 30, 2024.

Current wording

Given the cyclicality of our business, it is important to us to be in the financial position to easily withstand economic cycles and be opportunistic when attractive strategic opportunities arise. Since the acquisition of our steelmaking assets in 2020, we have demonstrated our ability to generate healthy free cash flow and use it to reduce substantial amounts of debt, return capital to shareholders through share repurchases and make investments to both improve and grow our business.

Previous wording

The following is a summary of our Steelmaking segment operating results for the three and six months ended June 30, 2024 and 2023 (dollars in millions, except for average selling price, and shipments in thousands of net tons):

Current wording

The following is a summary of our Steelmaking segment operating results for the three and nine months ended September 30, 2024 and 2023 (dollars in millions, except for average selling price, and shipments in thousands of net tons):

Previous wording

•A decrease of $520 million, or 26%, in revenues from the direct automotive market, predominantly due to a decrease in shipments due to proactive customer diversification;

Current wording

•A decrease of $624 million, or 32%, in revenues from the direct automotive market, predominantly due to a decrease in demand;

Previous wording

•A decrease of $170 million, or 11%, in revenues from the infrastructure and manufacturing market, predominantly due to a decrease in shipments; and

Current wording

•A decrease of $267 million, or 19%, in revenues from the infrastructure and manufacturing market, predominantly due to a decrease in shipments and steel index pricing; and

Previous wording

•A decrease of $164 million, or 21%, in revenues from the steel producers markets, predominantly due to the decrease in pricing indices for slabs and busheling scrap.

Current wording

•A decrease of $129 million, or 18%, in revenues from the steel producers markets, predominantly due to the decrease in pricing indices for slabs and busheling scrap.

Previous wording

•A decrease of $773 million, or 20%, in revenues from the direct automotive market, predominantly due to a decrease in shipments due to proactive customer diversification; and

Current wording

•A decrease of $1,397 million, or 24%, in revenues from the direct automotive market, predominantly due to a decrease in demand;

Previous wording

•A decrease of $259 million, or 17%, in revenues from the steel producers markets, predominantly due to the decrease in pricing indices for slabs and busheling scrap.

Current wording

•A decrease of $388 million, or 17%, in revenues from the steel producers markets, predominantly due to the decrease in pricing indices for slabs and busheling scrap.

Previous wording

•A decrease in average selling price (approximately $125 million impact), predominantly due to lower spot prices and lower direct automotive mix.

Current wording

•A decrease in average selling price (approximately $460 million impact), predominantly due to lower spot prices and lower direct automotive mix;

Previous wording

•A decrease in sales volume (approximately $190 million impact); and

Current wording

•A decrease in sales volume (approximately $140 million impact); and

Previous wording

•These decreases were partially offset by a decrease in cost of production (approximately $40 million impact) driven by lower raw materials and utilities costs, including natural gas, coal, coke, alloys and scrap.

Current wording

•These decreases were partially offset by a decrease in cost of production driven by lower raw materials and utilities costs, including natural gas, coal, coke, alloys and scrap.

Previous wording

•A decrease in average selling price (approximately $370 million impact), predominantly due to lower spot prices and lower direct automotive mix; and

Current wording

•A decrease in average selling price (approximately $590 million impact), predominantly due to lower spot prices and lower direct automotive mix; and

Previous wording

•A decrease in sales volume (approximately $125 million impact).

Current wording

•A decrease in sales volume (approximately $340 million impact).

Previous wording

•These decreases were partially offset by a decrease in cost of production (approximately $15 million impact) driven by lower raw materials and utilities costs, including natural gas, coal, coke, alloys and scrap.

Current wording

•These decreases were partially offset by a decrease in cost of production driven by lower raw materials and utilities costs, including natural gas, coal, coke, alloys and scrap.

Previous wording

Adjusted EBITDA from our Steelmaking segment for the three months ended June 30, 2024, decreased by $459 million, as compared to the three months ended June 30, 2023, primarily due to the decreased gross margin from our operations. Additionally, our Steelmaking Adjusted EBITDA included $96 million and $141 million of Selling, general and administrative expenses for the three months ended June 30, 2024 and 2023, respectively.

Current wording

Adjusted EBITDA from our Steelmaking segment for the three months ended September 30, 2024, decreased by $490 million, as compared to the three months ended September 30, 2023, primarily due to the decreased gross margin from our operations. Additionally, our Steelmaking Adjusted EBITDA included $105 million and $133 million of Selling, general and administrative expenses for the three months ended September 30, 2024 and 2023, respectively.

Previous wording

Adjusted EBITDA from our Steelmaking segment for the six months ended June 30, 2024, decreased by $304 million, as compared to the six months ended June 30, 2023, primarily due to the decreased gross margin from our operations. Additionally, our Steelmaking Adjusted EBITDA included $221 million and $260 million of Selling, general and administrative expenses for the six months ended June 30, 2024 and 2023, respectively.

Current wording

Adjusted EBITDA from our Steelmaking segment for the nine months ended September 30, 2024, decreased by $794 million, as compared to the nine months ended September 30, 2023, primarily due to the decreased gross margin from our operations. Additionally, our Steelmaking Adjusted EBITDA included $326 million and $393 million of Selling, general and administrative expenses for the nine months ended September 30, 2024 and 2023, respectively.

Previous wording

During the three and six months ended June 30, 2024, our consolidated Revenues decreased by $892 million and $988 million, respectively, compared to the prior-year periods. During the three and six months ended June 30, 2024, our consolidated gross margin decreased by $482 million and $296 million, respectively, as compared to the prior-year periods. See "— Steelmaking Results" above for further detail on our operating results.

Current wording

During the three and nine months ended September 30, 2024, our consolidated Revenues decreased by $1,036 million and $2,024 million, respectively, compared to the prior-year periods. During the three and nine months ended September 30, 2024, our consolidated gross margin decreased by $584 million and $880 million, respectively, as compared to the prior-year periods. See "— Steelmaking Results" above for further detail on our operating results.

Previous wording

During the three and six months ended June 30, 2024, Selling, general and administrative expenses decreased by $46 million and $41 million, respectively. The decreases primarily relate to lower employment-related costs.

Current wording

During the three and nine months ended September 30, 2024, Selling, general and administrative expenses decreased by $27 million and $68 million, respectively. The decreases primarily relate to lower employment-related costs.