Cleveland-Cliffs Inc. (CLF) Earnings Call Transcript & Summary

Good morning, everyone. It's a pleasure to be here in Coatesville with Ambassador Katherine Tai, our United States Trade Representative; Acting Secretary of Labor, Julie Su; Congresswoman Houlahan from Pennsylvania; and District Director of the USW District 10, Pennsylvania, Bernie Hall. This is a great day for us here in Coatesville for Cleveland-Cliffs because we have the opportunity -- we had the opportunity to demonstrate to this 2 -- actually 3, including Congresswoman Houlahan, but 2 members of the -- by the Harris administration where the result of the bipartisan, it's Bipartisan Infrastructure Law and the Inflation Reduction Act and all these good things that happened in the last 3.5 years. How we can translate that into progress for communities, good paying union middle-class jobs and the future of this country. That's more than anytime before is under attack from the outside and from the inside, we need to understand how things go and not to make mistakes that we made in the past to allow for the easy buck to destroy the way of living our people and communities, particularly here in the Midwest. We are trying to bring back -- because we are trying to bring back manufacturing and doing things that are really important for the country. So it's a great day for us. These are people in power that really understand what this country is about and what the people of the country really need. So for us to be able to host them here today is a great, great pleasure and a great honor to have you here. With that, I would like to ask Bernie Hall to say some word for us.

Thank you. Thank you, Lourenco. And thank you to the entire Cleveland-Cliffs team for hosting us here today, and I am especially appreciative of Ambassador Tai, Secretary Su, and representative Houlahan for joining us today at the Coatesville mill. This mill has been a foundation for the community for over 200 years. And the union members here some of the most advanced and technical skills in the world. For 5 generations, USW members like Fred Grumbine, Brannon Davey, Stacey Jones and so many others have provided not just high strength steel plate, but an economic engine for the 13,000 people in Coatesville in the surrounding Chester County. Our members here take pride and a steel plate that goes into the most sophisticated naval vessels on the planet. But it's much more than that. It's about working on the steel that replace the collapsed I-95 bridge in Philadelphia or onshore or offshore wind turbines or the infrastructure to build this country. We have had 5 generations of steel workers that have worked in this plant. These aren't normal jobs. These are real good paying family sustaining jobs, jobs that you can buy a home with, send your children to school or raise a family. And we want to thank you all for being here today and for the policies of this administration, like the Inflation Reduction Act or the Infrastructure Act that make jobs like this possible. And for committed to trade policies to put workers first. So thank you, and I look forward to hearing some more to me during your comments. Thank you.

The format of this event here will be more of a fireside chat to give these 3 ladies -- the very important people in our country, the opportunity to express their views and to share with us what has been done in the last 3.5 years. And what we really expect would happen in the next 4. So as -- Ambassador Tai, Secretary Su, Congresswoman Houlahan as you have witnessed today, Cleveland-Cliffs Coatesville plays a direct role in supporting our U.S. military. More broadly, steel plate from this mill serves several different critical infrastructure sectors, including clean energy, telecommunications, onshore, offshore, energy, wind, road and bridge construction. I'd like to hear from you, and I would like you to comment the importance that President Biden's Administration of science to sectors such as steel that directly support both U.S. National Security and our country's economic security. Please ambassador Tai, starting with you.

Thank you so much, Lourenco, and thank you, Bernie. Thank you. Congresswoman and all of you for this incredibly warm welcome in Coatesville today. Steel is the backbone of the modern economy. And we were talking a little bit about this earlier that as much as our imaginations may be captured by things in the digital and the virtual world, where there's a lot that you can see, but you can't feel or touch that we're still flesh and blood people that live in a brick-and-mortar world that is powered by and raised up by steel. And what we've seen today reinforces for me how critical steel is to our everyday lives as a product. But more than that, the reason why this industry is so important to our country is its criticality to our lifeblood, the lifeblood of our economy, to creating jobs, not just any jobs, which is why I'm so, so privileged to be here with Secretary Su today, it's about the quality of the jobs, whether or not those are jobs that lead to a path in the middle class for generations, as you noted Lourenco. The criticality of an industry like steel to the community, which is why Congresswoman Houlahan, I'm so privileged to be hosted by you today. In addition to spending time here this morning. We are also going to be visiting a small business incubator and also a brand-new grocery store that's come to Coatesville very recently to feed this community. And of course, Bernie, so privileged to have you here to help us fill out our understanding of why this industry is important to America to small town America to America large in terms of our economy and America's place in the global order in terms of our alliances. Our allies need for us to be strong, not just militarily, they need us to be economically vibrant so that the United States and our people have the confidence in ourselves and in our future to be that ballast to be that pro-democracy, pro international rules, pro opportunity ballast for not just ourselves but for the entire world. So I'm so grateful for the opportunity to be here to see how worker centrism and trade, finally aligning our trade policies with our investment policies, our labor policies, listening to the voices of our communities to see the progress that we are making. And to be clear, I see the progress, but I also know that there's so much more progress we need to make. And it's really going to be in partnership and collaboration with those who are here in the room today that we're going to be able to accomplish that.

Thank you so much. Secretary Su, please.

Well, I look out, and I'm also just so proud to be here. We were talking as we were walking through this Cliffs, the steel workers. You all have built this community for generations. And you are rightfully proud of what you do here what you contribute and what it means for our country. So we come really to share in that pride and let you know that we, in this administration, see you and appreciate all that you do. I'll just add one thing to what the Ambassador has already said, in addition to the --- thanks to you Lourenco, for being such a gracious and generous host. I know it takes a lot to stop doing what you normally do in order to give us time to be here with you. So we really appreciate that. The Congresswoman, we couldn't do much of what we do, especially with our investments without you fighting in Congress, and we know it's a fight, to make sure that we continue to invest in America. And to the steel workers and Bernie, I am proud to be the Labor Secretary for the most pro worker, pro union administration this country has ever seen, and that's not just a slogan. That is a promise. And my work, the ambassador's work is so -- it's so key to that because we know that when we invest in America, we create demand for things, demand for steel. And when we make sure that those things are made in America, then we also ensure keeping the good jobs that we have, but also expanding on them. This administration has seen over 16 million jobs created in this country since the President and the Vice President came into office, that's the most jobs under any President and Vice President in that same time period in history. So you're saying that what we're doing is a game changer is true. And the Ambassador is right, we have more work to do, but we cannot build the economy that we want if we don't prioritize union work -- we know if you want the job done right, you also need union workers to do it. So if we don't prioritize union jobs, expanding those union jobs and making sure that in everything that we do from domestic investments, to the trade policies that our ambassador is so fearlessly leading that if we don't make sure that those contribute to maintaining those jobs, and advancing the well-being of working people, then we can't have the economy that we want and we need.

Congresswoman?

So I don't want to take very much time other than to say, I'm enormously grateful for you all spending time here in our community. I am enormously proud of in the Coatesville and Coatesville community and the steel heritage that we have here of 5 generations worth of men and women who have put their lives in heart and soul into this industry. And what I would emphasize in the military parlance would foot-stomp is how important it is that the work that you guys do to our national security and to our stability in the world. The work that you're doing, even though some of it is going to go into submarines and aircraft carriers and a variety of other different defense mechanisms, much of it is also going into our economy as well, whether with renewable energies or with our bridges and rails and those kinds of industrial efforts. All of that allows us to be the strong nation that we are to stand on this stage as a world leader, as the world leader offer democracies around the world. And so I would just want to emphasize how proud I am to be able to represent you down in Washington. You are, in our community, a gem of our community, it's my privilege when I get to visit here. This is, I think, my third or fourth time having the opportunity to tour the facility, and it astounds me every single time I'm here, the magnitude of the things that you are able to accomplish. I just also want to end by concluding how proud I am as well that all of this work is union work. And that all of this work are proud union workers who are doing what amounts to representing this nation with the products that you provide. So what I would say that the administration has done to answer your question is all of the things that were outlined before, the inflation Reduction Act which is about half of it about reducing prescription drug pricing and medical expenses, but the other half is about making sure that we have the technologies of tomorrow to be able to power our economy in all ways, shapes and forms. We talked about the Infrastructure and Jobs Act. Pennsylvania, I think, is #3 in the country in terms of the number of bridges that we have. We need to fix our bridges and steel is required to do those kinds of things. We talked a little bit about the CHIPS and Science Act. The CHIPS and Science Act is bringing hydrogen power our community, which is very much part of the manufacturing process that we need. And all of those kinds of things are the things that this administration that this -- the Congress of 118 on -- 117 to be specific, have brought to the community. Generation-changing pieces of legislation that are bringing tens of millions of dollars to our community. I'll end by saying that some of the technologies that I just saw inclusive of the Crane flip the thing that flips the steel came from the CARES Act, a piece of legislation that was passed that provided almost $60 million to this facility, which I'm very, very proud to have been able to help bring here. Thanks very much for having me again.

Thank you. Look, and all this of legislation that we are talking here, they happen because there is political resolve and because we have the people behind and the support of the people for these things. But we are very, very concerned about the long-term viability of these things. We are under attack from several fronts. Of course, we have China. Of course, we have Mexico that's next door, creating a back door for us to complicate our life in terms of trade. So I would like to ask a question that could be slightly uncomfortable to answer, but it's necessary. How do we ensure continued focus on these issues for the long term so that communities like Coatesville and countless others throughout the country, but particularly here in the Midwest, that rely on manufacturing continue to benefit.

Lourenco, that's such an important question. We've been involved in a version of globalization for a long time now that has been about minimizing costs, cutting costs everywhere, right, in order to, I guess, maximize profits, we talked a little bit about shareholders and how shareholders drive so much of what happens in the economy and decision-making by a lot of our companies. One of the important things to realize is that calculus around costs has been really, really narrow. We have ignored the larger costs that America -- Americans and American communities have borne over time because of a large number of economic policies with trade policy leading the way, right? We have been doing trade in a way with others that has continually pitted Americans against Americans, our farmers against our industries. It has pitted our middle class against the middle case of other countries. It's pitted our workers against other people's workers. And this has led to that famous race to the bottom where it feels like things are hard for an industry like the steel industry to continue manufacturing here in America, it's because this is the fight. This is what we've been up against, right? So what we are trying to do with the worker centric trade policy is to flip the script. Now this is a script that's been prevalent for a very, very long time now. So it's going to take all of us pulling in the same direction, but it's about driving the race to the top because it turns out in all those international conversations I've been in, everybody is trying to build their middle class. Well, then there's got to be a way where we can be building our middle classes together, where instead of pitting our workers against each other, we can be thinking about how to strengthen our workers together and I feel strongly that an important part of this conversation is through a pathway to thinking about our industries differently. Instead of pitting them against each other, how can we be building our industries together? How can we be thinking about more win-win solutions. And that's really reorienting us to thinking about industrial policy in a new way. Industrial policy that's not just about enriching us and making others poor but an industrial policy that's collaborative, where we can be strengthening our industries and doing it in a complementary way to allow for our middle classes to grow together. It seems like a very tall order. I promise you if human beings can figure out how to send people, other human beings out of the space to land on the moon. This is a small challenge by comparison. The only difference is that we've never asked ourselves how we're going to do this, and we are starting to do that, and it is going to take more time. But it's going to take a commitment to thinking about how do we negotiate trade agreements that don't bleed out entire industries and leave communities suffering and without hope because the fact that Coatesville is still here and is still making steel today in 2024, I know that you have scars from the fights to stay operational and to keep this community afloat. We are all engaged in those kinds of fights, and we have to keep fighting to change that conversation. I've heard every single one of you say this, and I just want to reinforce that the overall feeling I have from this morning is a very deep sense of pride. Pride in being an American, pride in seeing what all of you produce here, pride and imagining how these giant slabs of steel are incorporated into enormous accomplishments of our industrial progress and how we're going to keep doing that. Pride in the family connectivity, Lourenco, you and your family are invested in this company. But the steel workers, the multigenerational working alongside your family, having the skills and expertise passed down from generation to generation. This is well worth our fighting for. And so whether that comes in the form of new types of trade agreements that are going to produce new types of outcomes. Two, the strategic smart, defensive use of tariffs. I'm going to say it because as the trade representative, we think about tariffs every single day. And I know that tariffs have taken on this kind of cultural currency. People feel strong feelings about them. I'm just going to say here to this crowd, the company and the workers, you understand better than anybody, how tariffs can be used constructively to level the playing field to give all of us a fighting chance and also how tariffs can be used recklessly. And it is really important. The tariff is just a tool, tariff is like a slab of steel. You can either put it into a design and architecture to make something powerful and strong that stands tall or you can use it to create chaos. From our perspective, it is really, really important to bring that sobriety and that commitment to outcomes and the commitment to the outcome that I think that we have actually -- all 5 of us sitting up here is to strong industries, strong workers, strong communities and a strong future for America. So again, in terms of what we can do, there's so much that we have to do and there is so much innovation that we need to bring, not just -- I know you're doing it in terms of steelmaking, in terms of making it safer, more efficient, more effective to making stronger steel we also need innovation in our policies so that our policies deliver more resilient and stronger outcomes. Think of our policies like the steel that we see you making here every single day.

And if I could add, I think that there's the policy that the members of Congress have the opportunity to sort of weigh in on. You guys get to execute on it and develop it. But when we have something like the Section 301 tariffs, we need to make sure, as I have in our office to empower our administration to continue to think that way. Listen, I serve on the Armed Services Committee and the Intelligence Committee. I'm a veteran. I don't think China is our friend. And what China is doing across all industries, but specifically in this industry is dangerous. And so I need to use my voice as a member of Congress to be able to articulate that, which I've hopefully done by testifying in front of the Trade Commission that this these kinds of Section 301 needs to continue. I hope that we've been able to do that by signing on to letters, which sounds sort of interesting. It's a superpower of members of Congress to be able to say like, hey, this is not okay what's happening with steel and with China and with Mexico. And we need to make sure that, that stops. And so combined, I think the people who are on this stage are trying to do the right thing every single day in combating what is really very destructive behavior on the part of China, both for our national security, but also economic security. And make sure that it continues to be -- the court is continue to be in our favor, and that's what we're working on.

Secretary Su?

Well, I'll just add one more thing, which is that leadership matters, right? So your question about how do we keep on the right path, leadership matters. You see that year in your company. You see that in the partnerships that you all have built here. You hear that when you hear our Ambassador talk about how she goes out and leads in the world, and her point about trade being one part of a holistic approach to building a strong economy and a strong nation. The investments that are happening in this country right now are a part of making sure that everything we do in the rest of the world also flows to the benefit of the American people. Let's just talk about infrastructure for one moment. You all remember that in the last administration, the President at that time, Donald Trump, promised an infrastructure week that never materialized. Right? I mean we never had infrastructure week. And you all know a week for infrastructure is not anywhere near enough. We're investing in infrastructure decade. The other things that both of you have talked about in terms of the legislation, those laws passed without a single Republican vote. The CHIPS and Science Act, the Inflation Reduction Act, those investments that are rebuilding in the United States are happening because they are leaders like the Congresswoman, like our President and our Vice President, who understand that we have to have policies, we have to have -- that translate into what's good for this industry. And in order to do that, we have to have leadership in place to do it. And that -- we -- the progress that we've made will only continue with leaders who understand how to use the tools that we have in an intelligent, thoughtful way.

Absolutely. We need predictability. We can't be surprised by the unthinkable. And Ambassador Tai said extremely well. Tariffs are 2 into 2 box, but -- it's a very powerful tool in the toolbox to be used in a way that we can bring back sanity to capitalism. Capitalism is not made -- was not build to make sure that bankers are richer and the population is poor. Capitalism was a way to make everybody race to get. And the middle class and unions are part of that. Let's accept the truth and then you build from there. And that's what we're trying to do. Because when we put numbers and things, things are not as bad as they look. You look at ton of steel today, a ton of hot-rolled coil $700, 10 years ago, it was $650. So we increased $50. In the meantime, the average price of a car was at that time, $24,000. Now it's $49,000. So how much steel there is in a car? 1 ton. So our contribution was $50 for the price of the car more than doubling. So these profits are certainly not going to the people. It's certainly not going to these 2 companies. So we only need to be able to reinvest to continue to build what we need as a company that exists in the society. Because at the end of the day, everybody are competing against our building middle classes, that are bigger and more powerful than our existing one. And they use as a reference, our middle class of 50 or 60 years ago. Another question that I would like to really -- just to lower the temperature a little bit because it's an interesting point. This company here was founded, and the first CEO was a female that was in 1825, That's 199 years ago. So that's a lot of time ago, Rebecca Lucas. Our 2 panelist here, Congresswoman Houlahan, Secretary Su and Ambassador Tai are also trailblazing women. Congresswoman Houlahan was the first female representative from this congressional district, Ambassador Tai and Acting Secretary Su are the first women of color to lead their respective agencies. The USTR and labor department. And by the way, look at our people, we understand a little bit about diversity. For many females, African Americas, native Americas, we have everybody here. We are a good picture of what the United States of America really is. I would like to hear from you how do you bring this unique perspective to work every day serving the American people. Let me work with you -- start with your Congresswoman.

Down in Washington. As I mentioned earlier, I'm a veteran, and there's actually only about 20% of the Congress are veterans, and it used to be as high as 70% -- and so I'm kind of unique in that way. There's only a handful of women who have worn the uniform who are active in Congress right now. And so I feel sort of special in that way, too. But importantly, there's a lot of other things that I bring to work that are unique and I think important. I'm an engineer, and there's only about 2 dozen engineers or STEM professionals in Congress right now. And we need more. We need more people with technical backgrounds and understanding. I'm a chemistry teacher. I worked...

[indiscernible] I started my career teaching chemistry.

And we need more educators in places like Washington. And I guess my point is Rebecca Lucas was a bada**. Clearly was ahead of her time in a woman with a vision and a purpose. But what we need is diversity of all forms in all places. And so I think that by being able to bring your whole self to work wherever work is and to be able to add all of that flavor that comes from your background. I think that's what makes this country powerful. My dad came here as a 5-year-old from Ukraine. He was born in -- what is -- it was Poland that is now Ukraine. And one generation later, I get to sit here as a member of Congress as the first woman serving in Congress in my district. And that's the power of this nation. So I'm grateful for being here. And Rebecca Lucas amazing woman who also is a chemistry teacher apparently.