Earnings Call: Q3 2021

Oct 22, 2021

Good morning, ladies and gentlemen. My name is Donna and I am your conference facilitator today. I would like to welcome everyone to Cleveland Cliffs' Third Quarter 2021 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. The company reminds you that certain comments made on today's call will include predictive statements that are intended to be made as forward looking within the Safe Harbor protections of the Private Securities Litigation Reform Act of 1995. Although the company believes that its forward looking statements are based on reasonable assumptions, such statements are subject to risks and uncertainties that could cause actual results to differ materially. Important factors that could cause results to differ materially are set forth in reports on Form 10 ks and 10 Q and news releases filed with the SEC, which are available on the company website. Today's conference call is also available and being broadcast at clevelandcliffs.com. At the conclusion of the call, it will be archived on the website and available for replay. The company will also discuss results excluding certain special items. Reconciliation for Regulation G purposes can be found in the earnings release, which was published this morning. At this time, I would like to introduce Lorenzo Gonsalves, Chairman, President and CEO. Please go ahead. Thanks, Donna, and good morning, everyone. So many of those listening today know him already. I am pleased to introduce on this call our new Executive Vice President and Chief Financial Officer, Celso Gonsalves. In his previous role as Senior Vice President of Finance and Treasurer here at Cleveland Cliffs. Celso was instrumental to our business and financial transformation. Over the past 5 years, he has led and managed our liquidity through the pandemic. Prior to Cliffs, He also had a very successful career as an investment banker, first at Jefferies and then at Deutsche Bank. Also, if you couldn't tell by his last name, Celso is my son. During the last several years, Keith Koci and I have been preparing sales for this job. With Keith now in charge of our new business unit as President of Cleveland Cliffs Services, We could not have a better or more prepared professional to lead our financial organization. With that, I will turn it over to CFO. Thank you and good morning everyone. I am humbled by the opportunity to serve as Cliffs' CFO, fully aware of not only our rich 174 year legacy, but also our position of immense influence as the largest flat rolled steel producer in the United States. I also fully expect that given my family name and the high standards set by our CEO. The expectations for me will be even greater than for anyone else in this seat. I am prepared to deliver. My experience here at Cliffs over the past 5 years has taught me that strategic and financial opportunities exist at all points in the cycle. My priorities as CFO are simple. 1, allocate capital in a way that strengthens our business. 2, maintain and enhance our financial flexibility. 3, deleverage the capital structure. 4, evaluate and execute opportunistic M and A and Capital Market transactions, always with a focus on long term shareholder returns and 5, continue our 5 year track record of share outperformance relative to our peer group and the broader market. With those introductory remarks To side, I will jump right into our Q3 results. We reported another quarter of record revenues of $6,000,000,000 record net income of $1,300,000,000 and record adjusted EBITDA of over $1,900,000,000 ahead of the guidance we recently set of $1,800,000,000 Our 42% quarter over quarter growth in adjusted EBITDA was primarily driven by continued price increases on our index linked and spot shipments. These sharp increases on the revenue side were only partially offset by gradual increases on the cost side, including for labor, natural gas and Additional Repairs and Maintenance, most notably the realign of Indiana Harbor 7, the largest blast furnace in North America. And even though it was clearly a one timer, we did not add back to EBITDA the vaccination bonus payment of $45,000,000 that was awarded and paid out to our workforce under our very successful vaccination incentive bonus program, which resulted in over 75% of our workforce fully vaccinated against COVID-nineteen. In the steelmaking segment, we sold 4,200,000 net tons of steel products with a mix of 32% hot rolled, 18% cold rolled and 31% coated steel with the remaining 19% consisting of stainless, Electrical Plate, Slab and Rail. Our automotive percentage of revenue was 20% compared to 33% just 2 quarters ago, clearly reflecting the reduced volumes and the legacy annual prices from that sector, both of which should dramatically improve next year. We expect the trends on pricing and costs in Q3 to carry over into Q4 with higher prices from both index linked contracts and some of our repriced automotive contracts, offset by similar cost impacts we experienced in Q3. Shipments will likely be lighter in Q4 due primarily to seasonality and lower automotive shipments. Offsetting this, We will be moving up to the Q4 some planned maintenance outages originally scheduled for next year, including the Dearborn hot end and both blast furnaces at Burns Harbor, along with a few other associated rolling and finishing facilities. These outages are being accelerated to this year in anticipation of a strong automotive recovery in 2022. All these events considered, Our Q4 production should be reduced by approximately 300,000 net tons compared to the 3rd quarter. Our free cash flow generation came in at $1,300,000,000 for the quarter, slightly lower than our original guidance due to slow demand pull from automotive, leaving more inventory to close out the quarter than we expected. The remaining outage period at IH7 as well as the additional outages As we scheduled for the Q4 should allow us to reduce these inventory levels during Q4. This free cash flow generated during Q3 was returned entirely to shareholders in the form of a stock buyback executed via the complete redemption of our 58,000,000 common share equivalent preferred stock. With only 1 quarter's worth of free cash flow, we completely redeemed our preferred shares. I will note that because of the weighted average calculation and the fact that the press were outstanding during a portion of Q3, The full 58,000,000 share reduction is not baked into our Q3 EPS just yet and we will see a further reduction of diluted share count in the 4th quarter. With the press now completely out of the way, we have resumed our aggressive debt reduction activities. In only the last 3 weeks since the end of Q3, we have already generated approximately $500,000,000 in free cash flow and have allocated all of it toward debt repayment under the ABL. Upon closing of the FPT acquisition next month, All excess free cash flow will continue to be allocated towards further debt reduction. By next quarter, Our LTM adjusted EBITDA should exceed our overall net debt balance, resulting in less than one turn of overall net leverage for the foreseeable future at any reasonable HRC pricing assumption going forward. Because of our strong profitability this year, at some point in the Q4, we will have utilized the majority of our tax NOL balance, leading to an expected Q4 cash tax rate of around 10%. Prior to the acquisitions of AK Steel and AAM USA, We once expected to be utilizing these NOLs for several more years, but the significantly higher profit generation Following the acquisitions will result in the consumption of the majority of the $2,500,000,000 NOL balance within a year of closing the December 2020 transaction. Even with the additional cash tax outflow and payments related to the CARES Act FICA deferrals from last year to this year, free cash flow should remain remarkably healthy in Q4. The $775,000,000 price of the previously announced acquisition of FPT is equivalent to less than 2 months of our free cash flow generation. Wrapping up, the financial position of the company is on stronger footing today than it has been during my entire time here at Cliffs and that trend should continue into Q4 and 2022. The fixed price contract business we have with high end clients such as the automotive OEMs gives us significant downside protection if spot prices trend lower. Therefore, even under the current bearish futures curve for HRC, our average selling price should be much higher next year than it has been this year, leading to the expectation of another year of outstanding EBITDA, cash flow generation and Debt Reduction in 2022. With that, I'll turn it back to Lorenzo. Thanks, Celso. Very few companies can show the magnitude of growth Cleveland Cliffs has delivered during the last couple of years. We were a $2,000,000,000 revenue company in 2019, became a $5,300,000,000 revenue Company in 2020 and expected to be a $20,000,000,000 plus company in 2021. All this growth was achieved preserving and enhancing our profitability as demonstrated by our Q3 numbers of $1,900,000,000 of adjusted EBITDA $6,000,000,000 in revenues for an EBITDA margin of 32%. These numbers have come primarily from the 55% of our business that is linked to an index price with a smaller contribution from the fixed price contracts that were signed before the market price recovery of last year. In the Q4, this will begin to change and even more so starting next year when the bulk of our annual fixed contracts for automotive as well as appliances, stainless, Electrical Steel's plate and team plate all reprice at significantly higher levels. That should protect our profitability into next year even assuming the spot prices go down next year. This being said, we do not believe we will see steel spot prices returning back to historical low levels and the main reason for that is prime Scrap. Branded Scrap is what electric arc furnace mills, old ones or brand new, Mid to Produce Flat Rolled Steel. We have seen a looming shortage of this type of scrap coming for several years, which partially motivated our $1,000,000,000 investment in our direct reduction plan 4 years ago. We were planning to supply HBI to EAF Mini Mills and that was in the past, but not anymore. At this time and going forward, we also plan to use more prime scrap ourselves in our POS that will allow us to stretch our hot metal without building new production capacity. Building new capacity is a common mistake. The steel industry insists in making time and time again. Cleveland Cliffs is different and we act accordingly. With that in mind, a few days ago, we announced the acquisition of FPT. While the majority of scrap companies we looked at had a prime scrap mix of 10%, 15%. FPT stood out with an outsized 50% of PRIME's graph in their mix. FPD is actually one of the largest processors of prime scrap in the country, representing 15% of the entire merchant market in the United States. Private scrap is a byproduct of manufacturing, including automotive. And Cleveland Cliffs is the largest supplier of steel to this automotive and other flat rolled consuming manufacturers. As such, We can offer a compelling proposition for their scrap uptake, keeping the lifecycle of our steel in a closed loop between Cleveland Cliffs and the OEM. Furthermore, The main theme for the steel industry is decarbonization and melting clean, low impurity scrap is a good way to reduce carbon emissions. That applies to both EAFs and DOFs. The DOF is often overlooked as a user of scrap, but in our footprint it's actually where we consume the most. The use of higher amounts of scrap in the BOF boosts liquid steel output for the same amount of hot metal, which is what we call the liquid pig iron from the blast furnace. So the more scrap used in the BOF, the less cook needed in the blast furnace per ton of crude steel produced. With ample access to our own prime scrap, we can optimize our productivity with a higher scrap charge, while significantly reducing our carbon emissions. On top of that, during the last 50 years, The supply of prime scrap in the United States has been steadily shrinking. We expect that half a century trends to continue as yields continue to improve and unfortunately China continues to dominate manufacturing. Finally, all of the new flat rolled capacity coming online in the United States is from the EAF side, which means that demand for prime scrap and metallics will continue to increase. That is very conservatively another 9,000,000 tons or 40% growth of demand for these products over the next 4 years. With our decision to use our HBI internally At Cleveland Cliffs and primarily in our blast furnaces, there is a zero response in supply to this massive growth in demand for prime scrap and metallics coming from the EAFs. Big iron maybe the most likely alternative, but the CO2 emissions that come attached to big iron weather imported or made in North America effectively create a negative impact to the Scope 3 emissions associated to these EIS. In that regard, We fully expect that in a not so distant future, the SCOOP 3 emissions will have to be reported as much as our SCOOP 1 and 2 already are reported today. That would create a level playing field for all the steelmakers integrated in the AFs. Moving forward, this is a good opportunity to remind everyone that no other steel company in North America has more capabilities and modern ones by the way than Cleveland Cliffs when it comes to producing flat rolled steel. That's particularly true regarding automotive. People tend to confuse old plant names like Indiana Harbor, Cleveland works for Burns Harbor with old plants. In fact, old plant names actually carry pre modern state of the art equipment. For example, Our hot dip galvanizing line at Rockport Works was built in the 90s and it's 80 inches wide And that is 6.8 inches wide or 2,032 millimeters before a metric system person, more than 2 meters wide. There is no other facility on the continent that can produce what we make there. The same is true for the 6 footers at Tank and Coats in New Carlisle, Indiana and Columbus, Ohio. Also, our advanced high strength steel capabilities at Cleveland Works are second to none and the automotive OEMs know that. Our Pickering line, turning cold bill and galvanizing line in Dearborn, Michigan by the way another 6 footer Specialized in exposed panels were both built in 2011. One more time. The awarded works was built by Ford Motor Company in the early part of the 20th century. But the PLTCM and the HOTBIP COVID-nineteen line are only 10 years old. Our level of technological sophistication and our ability to produce all kinds of automotive flat rolled products including Stell, as you are the reasons why Cleveland Cliffs is by far the biggest supplier of automotive still in this country. A couple of our competitors will be spending 1,000,000,000 of dollars We are working very hard to build capacity during the next 3 years. We don't need to because we already have the capabilities we need. That's why Cleveland Cliffs supplies 2.5 times more steel to the automotive industry than the 2nd largest supplier for more than the second plus the third combined. Another important accomplishment during the quarter was the consistent performance of our direct reduction plant in Toledo. The plant continues to operate above nominal capacity and to exceed our expectations, not only on production, but also in quality and cost. Casing point, our all in cash cost Of HBI in Q3 was $187 per net ton, a number much better than the cost projected when we first approved the construction of the plant a few years ago. This figure is also much better than the price our competitors pay for both prime scrap and Imported Big Art. Also differently from our original plan, HBI sales to outside EAF mills are not significant and maybe this continues completely very soon. We actually We have already decided to use the majority of our HBI in our blast furnaces, not even in our own EAFs. That allows us to improve better cost and productivity, while improving our coke rate and reducing our CO2 emissions. Also as a consequence of our HPI use in our blast furnaces, We have already idled the coke battery at Middletown Works as that coke is not needed at this time. Another operational change we started to implement in the Q3 involves our Menorca Mine and pellet plant, which we acquired as part of the ArcelorMittal USA acquisition. Based on our tasks, We will soon be shifting our Doctor grade pellet production away from Northshore and into Menorca, where we will not have to deal with the unreasonable royalty structure at Northshore. As we plan to no longer sell pellets to 3rd parties in the coming years, Northshore will become A Swing Operation, which will keep idle every time we decided to do so. In any event, we will continue to be able to feed our Toledo plant with a consistent feed of Doctor Great Palace, but from Menorca and not from Northshore. As Celsu explained earlier, We continue to generate plenty of cash and should see a meaningful reduction in debt during the Q4 even after paying for the FPT acquisition. Based on our expected EBITDA for this year, Our 2021 full year leverage is already at a very comfortable level of less than one time EBITDA. With the new sales contracts we have already signed, our ability to continue to pay down debt is even stronger than what we announced last quarter. Wrapping up, I want to send a special thank you to our workforce for making another half record quarter possible. The $45,000,000 that we paid in vaccination bonus This quarter was by far our best use of cash and we are pleased that we reached above 75% vaccination rates across our entire footprint, beating by a large margin, the percentage of vaccinated local population in all communities we operate. We are keeping our workforce safe, healthy and compensating them to do so. Soon, we look forward to welcoming another 600 Cliffs employees from the FPT acquisition. We can't wait to bring them into our company and our way of doing business. I will now turn it over to Donna for Q and A. Thank you. Ladies and gentlemen, the floor is now open for questions. A confirmation tone will indicate your line is in the question Our first question is coming from Michael Glick of JPMorgan. Please go ahead. Good morning and nice print. On the contract side, I was wondering if you could give us a bit more color there. I know you probably can't get into the quantitatas And to the extent you can, that would be great. But qualitatively, what are you seeing now in contract negotiations versus the old dynamic? And how much of your contract book is still open? And then when you talk about higher average prices next year, just wanted to be clear for the non fixed business. It sounds like you're using the current HRC strip. Yes. Look, we Michael, first of all, thanks for The compliments are talking about Automotive. Cleveland Cliffs today supplies give or take 5,000,000 tons of Steel to Lautomotive. As you know, 1 car, 1 ton, so of Steel. So we are talking about a market that's now in the below 15,000,000 tons. So let's call it 15,000,000 tons just to make life easier in terms of the calculations. If we supply 5 out of 15, we supply 1 third. It's a big percentage, But it's a lot less in terms of percentage than when we are just the owners of AK Steel. Now that we are Cleveland Cliffs combining all this footprint, We diluted the participation of automotive in our mix. We are renewing contract by contract. And so we are done with a number, a significant number. We're not done with all. The important thing to consider is that as we renew our contract, things get a lot more complicated for the next one Because I'm not going to continue to add automotive and every single contract that we negotiated right now We not only negotiate for a higher price, but they also offered us a lot more tons. So we are growing the tonnage that we are delivering for the car manufacturer that we have already closed the negotiation. And even though I don't have a hard thought for the number of tons that are supplied to the automotive industry, We are going to get to a point that we are going to get selective at the end. And another point that I would like to clarify to you because it's a change All the way we do business with automotive OEMs. There is not such a thing of we're going to supply a few things like exposed parts, they are not supply everything. If we are a supplier of car manufacturers, We are considering that we are going to supply everything from the most complicated parts that we are the only ones that can produce all the way down to the easy stuff. But the microchip shortage has showed that the small things Can complicate the life of a car manufacturer a lot. So long story short, we are Do you want to plan to do? We're executing. The car OEMs are behaving extremely professional as Do we? And I think we're going to be okay at the end. That's all I can tell you. And then could you talk maybe about what you're seeing on the input cost side? I mean, you're obviously well integrated on metallics and Coke, but curious what else you're seeing in terms of alloying materials and the like and any supply chain issues you're focused mitigating from a procurement perspective. Yes, look, supply chain issues are Realty. One of the most important parts of the new Cleveland Cliffs is the logistics business. It sits under Keith Cusi and he said my Executive Vice President of Logistics, Chris Buhle. We designed the company this way Because we anticipate that we would have to do a lot of work specifically on that, we are not So we just need to work very hard to make sure that we have the trucks, we have the rail cars, we have access to everything that we need in a timely fashion. We just case in point, we just conclude the repair of Indiana Harbor No. 7. It's a big beast. We started the day we planned it and we finished 24 hours ahead of schedule. And everything came in a timely way and we didn't have any problems with parts and Things that were involved in the repair. So yes, it's there, but it's like the current way of doing business and we are not losing any sleep over that. As far as costs, We hedge a lot of things and we have the financial expertise to do a good job on that. So we are not exposed. Selsun has been doing this for a while and He continues to do so. So I don't have anything specific to report on that front, Michael. Okay, great. Thank you. Thank you. Thank you. Our next question is coming from Lucas Pipes of B. Riley Securities. Please go ahead. And good morning, everyone. Lorenzo and team, congratulations on the strong quarter and outlook and Selsa, congratulations to you as well, specifically. Look, Lorenzo, really appreciated your prepared remarks on metallics and how that market is continuing to evolve. And on that, I wanted to ask you about how you see the spread between prime scrap and HRC over the coming years. Would really appreciate your perspective on that. Thank you. Thanks Lucas. First of all, this language of spread is not my language. We are not a melter of scrap. We are steelmakers. So we start from our work. So and with iron ore, we produce pellets. And with pellets, we load 100% of our iron needs with pellets Until we no longer do that because we load a lot of HBI that we produce from our own belts. So It's not heavy HPI or direct reduction capacity. You have to have the capacity. You have to have access to iron ore. Otherwise, you're going to have Our capacity sitting idle like we have a bunch of plants, mid racks plant and other supply of plants City Island in the Middle East right now because they can't have access to Doctor grade pelts. We don't have that problem. So anyway, I don't play the language of spread. But I will talk about the 2 components that go to this spread. 1 is prime scrap. If you understand that prime scrap comes from manufacturing, the manufacturing has moved to Asia And right now resides in China. The United States is no longer the United States of the 20th century when we were a real powerhouse In terms of manufacturing, we want to bring that back, but we're not there yet. So we are still play around with China and China is where manufacturing is. So we don't have the support for the manufacturing base, very stable around broadening. If consumption is growing, You don't need to be economic genius to understand that you have more demand and you don't have more supply, prime scrap will become more expensive. And because I want more prime scrap for my own use in our U. S. We went ahead and bought the best company that we could find to have access to prime scrap. So if things are not really nice in terms of prime scrap for the ones that depend on prime scrap, Things will get worse because now we have a big beast of Cleveland Cliffs going into the market to put our hands around as much prime scrap as we can. And on top of that, keep in mind a lot of actually the vast majority of prime scrap that is generated in the United States and out of mold and things like that comes from my steel. So talk about a closed loop, that's exactly what we're going to do. We're going to reclaim our scrap because it's our scrap that comes from our steel, not somebody else's deal. That's a real closed loop. So the situation for private scrap Shortages, higher prices, that's what we are seeing and that's how we're going to play the game. As far as the price of Rockwell Off Road, it's all about the service centers. I have never seen a group of people that like so much to suffer. I was a CEO of a service center company for 10 years and I was fighting that from the inside. Now I'm a supplier. It's unbelievable for people that leave out of the value of their inventory, How much they work against themselves to feed the press with the bad information, to sit on their hands where they should be buying And then they come back and forth material and that's what pushed prices up. We could have a business that would be more stable If service centers learn how to play the inventory game, but I have been trying To communicate that for too long, I don't think I will be able to do so. So whatever hot rolled prices will end is whatever the service centers We'd like the hot rolled price to land, but at the end of the day, this scrap component, we are taking care of that. I covered everything you'd like to know, but that's my take on this difference I appreciated your comments, especially in regards to the circular loop. And one quick follow-up question on that. If I recall correctly, you will have about 15% or FTP at about 15% share of PrimeScrap. What's your ultimate goal in terms of market share? Can you articulate that? Yes, look, this 15% is what comes with the company as is as we acquired the company. But we are already communicating with our clients that would like to acquire our own scrap back. And our proposition To our clients, it's very compelling because it's not only, look, I want to acquire your scrap bag to melt for you again, So they like that because that kind of confines chemical composition to what they really have, they really need and they really want. That's number 1. But second, because I scrap is still secondary in my matrix of raw materials, It's not my primary source of raw material. So I can offer to this client a proposal to pay for their scrap more than they are receiving today. So it's a double dip. It's good for the business and it's good for the market. So I believe we are going to grow this percentage from 50% to a higher number. How big? I don't know, but it will be bigger. Super helpful. Thank you. Thank you, Loren. And changing topics, you bought back a lot of stock during the quarter. You commented on The exhaustion of the NOLs, remember my Corporate Finance 101 class kind of as it makes debt incrementally more attractive. How do you think about buybacks here, especially where the stock is trading? Really appreciate your perspective on that. Yes. Look, what we did with the preferred was really taking advantage of a very unique situation. Stock buybacks are always a double edged sword. Even though they are very tax efficient way to return money to the shareholders. It's also an invitation to bring the stock price down in the next cycle, no matter the cycle, 1 week, 1 month or 1 quarter. So it happened again. So I don't have really a one size fits all opinion on share buybacks. I want to reward the shareholders. I'm a big shareholder myself. I bought stock of this company in the open market close to 20 times, I think 17 times or something like that since I came to the company 7 years ago. So I'm a shareholder myself. So I like shareholder friendly actions even because I am a shareholder myself. This being said, I'm not going to commit with share buybacks or Things like that because things evolve. I believe that we're doing for the shareholders It's so much better, so much bigger and so much efficient. They just pay a meager dividend or do a share buyback that will Compromise our cash position that really doesn't really matter at the end of the day. What company can say 2 years ago I was $2,000,000,000 in revenue, now I'm $281,000,000,000 in revenue. 2 years ago, I was making $50,000,000 give or take $100,000,000 EBITDA quarter. Now I'm making $1,900,000,000 of EBITDA a quarter. So, very few, you're going to be in that, you're going to be in advertisements, you're going to be producing yoga events in order to do that. We are doing that with steel, with manufacturing. So we are changing our business completely. Shareholders are rewarded if they understand that and play along. Lorenzo and team, keep up all the great work and best of luck. Thank you very much. Thanks Lucas. Thank you. Our next question is coming from Emily Chang of Goldman Sachs. Please go ahead. Good morning, Lorenzo and Salso. My first question is around the prime scrap or HBI usage that you mentioned in your Glass Furnaces. Maybe can you discuss a little bit about how much less Coke you can use here if you increase that higher quality raw material input? And then Babs is there a rule of thumb to think about what the percentage increase in volumes could you could potentially see from using more PrimeScrub there? Yes. We have 2 things. We are using primarily the HBI and blast furnaces and we're using the PrimeScrap exclusively in BOS, just to make sure that we are on the same page on where things go. The HBI Family used in blast furnaces is pre reduced art. So when it will pellets Or Sika, like they do in China to pollute the world and create global warming. We don't do that here in the United States. We use pellets. Pellets in blast furnaces make for extremely environmentally friendly blast furnace. But when you load the pellets, You are loading and I'm going to simplify this a lot. You are loading Fe203. So you are loading an oxide. So you load coke to reduce that E2O3 and reducing the opposite of oxide. So we're removing the oxygen with the coke to create FTE metallic. And that's why you need the coke over there. Well, when you load a big portion and we're loading a big portion of HPI in the furnace, We are no longer loading a big portion of FE-two zero three, you are loading a big portion of FE already metallics. So to reduce that portion of the metallic burden, you don't need Coke. So We can we are at this point very reducing to the order of 20% corporate. We are going to go further. We are going to continue to increase. Indiana Harbor 7, for example, The biggest platforms in North America hasn't used massive amounts of HBI just yet because Indiana Harbor But now in the other half, we said it's brand new. So in the other half, we will start to eat HPI a lot and that will push our total tonnage consumption of coal and coke in this company to a much lower level. I don't know yet the numbers because Iberiau came back to operation on October 14. So we are too early in the game and the product is stable already. We are starting to use HBI. We will generate that. At the next conference call, I will have a lot of information about Indiana, our users of HBI. And we will continue to use HBI in other blast furnaces. That's the HPI portion of the blast furnace. Are you with me on that so far? Because now I'm going to move to the BOS. Okay. So in the field we are using prime scrap and prime scrap is exactly the steel that we want to produce. So it's already done. You only need to melt. So when you add scrap, you are basically melting Like the EAF, melt, scrap, we also melt scrap in the BOF. While we use more brine scrap, we are melting more. When you are melting more, you need less tonnage of what we call hot pepper. That's a big iron that comes from the blast furnace into the BOS. So less Big iron for the same ton of steel produced, we increased the yield of the big iron, you stretch the big iron to produce the same amount of steel. Therefore, you're using less pig iron, less coke to produce the same amount of steel. So the 2 components, more HBI in the blast furnace, more scrap in the BOF, altogether massive reduction of coal and coke and less emissions because coke and coke are C and C plus O2 is what generates the CO2 and that those are the emissions we'd like to avoid. Thanks. That was a good chemistry lesson. Maybe my second question there is just coming back to with the average selling prices that you alluded to being high next year. Can you remind us really quickly what percentage of your book is contracted at fixed prices? And then in your discussions, your contract renegotiations, any changes to sort of length of contract and appetite for floating versus fixed going forward. Yes, as well as just because you mentioned my chemistry lesson, now I'm compelled To give you a little bit of an accounting lesson, your number of your share count in your first model this morning was wrong. That's why your EPS number was wrong. So please go ahead and fix that, Emily. As far as My percentage of fixed contracts is around 45%. That's very helpful. Appreciate it. Did you fix the share count already or not yet? We will certainly be looking into it. No, it's wrong. Just fix it. You used the wrong number and you need to fix that because when you use the wrong number in the share count, you calculate the wrong EPS for the same net income. That's Matt. Thanks, Lorenzer. Thank you. Thank you. Our next question is coming from Carlos De Alba of Morgan Stanley. Please go ahead. Yes. Hello. Good morning. Thank So in the press release, you alluded to $21,000,000,000 in revenues for the year. So basically that suggests around $6,000,000,000 in 4th quarter revenues, which I take is going to come from a combination of slightly lower volumes and higher prices. Could you mention what do you expect for cost and EBITDA given relatively stable revenues in the Q4 implicitly in your comments. Carlos, you already put all the numbers on the table. And now the EBITDA is just a consequence of everything that you have just said. Right. You said the revenues, you said how we're going to get there and yes, you have it. Yes. I'm not changing My guidance at this point because that's another fool's exercise. You change the guidance and you are set yourself for freedom. So I got that. So not changing anything. All right. Fair enough. So is it fair to say then that the price increases that you expect will more than offset The cost pressures. Oh, they will more than offset. They will more than offset. Okay, I will give you a few indications. Our team lead business, for example, which you have already renegotiated with all the clients. They are increasing between 2021, 2020 Price wise, 100%. In other words, we are doubling the price of our team plate. So because their costs are not increased, not even marginally close, so it's a fraction of that. So we are going to have a meaningful bigger contribution from Timberlake. Another one that I'll give to you, Electrical Steels. Electrical Steel has been a problem and were a problem until this year until supply chain problems showed the clients that we're eager to import and use Dumping Ground in Mexico and Dumping Ground in Canada to try to disrupt The transformers market here in the United States have proved them to be naked because the same ports that bring goods and gadgets from China are the ports that bring the stuff to the United States as far as electrical steels. So we protected the clients that are not importing and we punished the ones that were importing. So we are heading to next year with much higher prices in the electrical steels, our full order book and we are privileging the clients that were with us during the times that others were importing. Now we're still selling to the ones that were importing, but we're selling to them at a much higher price Think of the spot prices of hot rolled that went down $5 yesterday or went up $2 today, We don't care about that to be honest with you. We are contract business type of operation and we are always looking 12 months ahead. Not necessarily calendar year Carlos, but 12 months ahead. Right. That makes sense and it's clear. And talking about imports, how do you see the potential impact if Europe comes out of Section 232 and that is replaced, the 25% import tariff is replaced by a quota system. Is there enough still in Europe that could come to the U. S. Even when China may be reducing exports. China is reducing exports by the way. China is reducing its exports. That's probably the first time I say that in several years, China is reducing its ports. China is trying to knock down pollution And that's a good thing for the world, for global warming. But the problem with the Europeans that Day 1 is like the same thing with the Japanese and the South Koreans. But the South Koreans and the Japanese I can understand. They are too close to China geographically. But Europe is an enigma to me because they had no business to play both sides of their mouth. China and South Korea, they do that all the time. They want to be friends with the United States. They don't want to upset China. But the Europeans, They need to work with us and not to try to work with us and still smile to Xi Jinping. They need to understand that if They are with us. They should not be with China. Australia that has a much more geographical compromised position and the growth understands that better than the Europeans. So every time I have a chance To convey my message to the Biden administration, I keep saying, pay attention to these friends in Europe. They are not our friends. They just like to take advantage. So I am in support of a tariff rate quota as long as The quarter is fair and the tariff that kicks in after the quarter is high. Anything else, we're going to be very vocal in opposing and expressing our opinion. And another thing that needs to be taken into consideration, among our 25,000 employees, we have 20,000 plus employees that are unionized and the unions share the same opinion that I have just expressed. So even though I don't speak for the USW or the UAW or the Machinist, I've been talking to them all the time. So we are going to be extremely vocal if the negotiators on behalf of the United States Don't play our side of the game and play the European side of the game. That's one of the very few things that I believe that unifies This industry, this country, Democrats, Republicans, every party understands that we need to protect ourselves at this point and not allowing the Europeans to take advantage of us in the negotiation table is extremely important. All right. And then last question, if I may. How does switching to Menorca would help or could help the DRI cash cost? And how much is the royalty component? We need to go down a lot because the royalty component that NorthShore is uncertainly high. Even with uncertainly high Costs out of Northshore. You saw the number I reported for the all in cash cost of production of HBI of $187 per net ton. So even though it's not prohibitive, it could be a lot less. And that's why we are moving from the North Shore with a bad, very bad royalty structure to Menorca. That will be big savings in terms of cash cost from the royalty standpoint. But still even with Northshore, It was $187 per net. We are good, but we can be better. We are always looking for better costs and that's why we're going to Menorca. By the way, phenomenal plant, great plant, great equipment. The general manager has things under full control. Rob, doing a great job leading with Orca integrating into our Cleveland Cliffs way of doing business And they are very excited with the opportunity to produce the upgrade belt that they just started. And also the General Manager of Northshore, Paul Carson, was the guy that developed the grade pellets for us first as General Manager of Technology and then as General Manager of Northshore. So he is helping and you continue to help. So I have my Northshore people working to help our Menorca people to move their great pellets from North Shore to Menorca and we're going to have a much better royalty structure, lower payments for royalty. We're going to keep North Shore idle every now and then. That's what we're going to do. All right. Excellent. Thank you very much. All the best in the quarter and next year. Thanks, Carlos. Really appreciate it. Thank you. Ladies and gentlemen, we're showing time for one final question today. Our final question will be coming from Alex Hacking of Citi. Please go ahead. Hi, Lorenzo. Good morning and so Alex, Alex. Yes. You can do Don already said that will be the last question. I'm going to take a question from Tristan and Matthew Fields that I'm seeing in the queue. So please don't just go ahead. We have time. Sorry, Juanette, please. Yes, no, no. I didn't know if you were You're going to cancel my question or not. No, no, no, no. I just think that because I don't want to take that. I would have the other 2 that Lines up to ask questions. They would probably disconnect. I don't want them to disconnect. I'll take their questions as well. Just trying to be respect I appreciate you guys joining the call and asking the questions. This is very helpful for us as well. So please go ahead, Yes. And we appreciate all your candor and straightforward talk, Lorenzo. So I guess as you look at the your cash that's coming in, right, if we look at going to be a lot of free cash flow next quarter, going to be a lot of free cash flow next year. Where are you looking to reinvest in the business, sort of upgrading capabilities? I mean, you've been clear that you're not going to add capacity, but today, but obviously there are other kind of investments that you could make. So far we've seen you invest in raw material on the raw material side. Are there any sort of significant investments that you're looking to make? And how are you thinking about what CapEx is going to be over the next couple of years? Thanks. Yes, look, it's a great question. Like I explained, I believe I explained clearly during my prepared remarks, we don't have Because we have modern capabilities to produce high end steels, we don't have yet we have a very environmentally friendly footprint at this point with pellets, Yeah, let's cook everything that I explained during the call. We don't have the massive needs of CapEx that other companies are expressing and they're committed to deploy. We don't have that. So our CapEx will always be CapEx for the existing footprint. So in CapEx for our existing footprint at this point, we are seeing something between, let's call, $750,000,000 to $850,000,000 every year. That's more or less what we are envisioning at this point going forward. So it's not something to really take our breath away at this point. The biggest project that we have in mind right now is not in mind, it's being planned as we speak Is the reline of Cleveland Blast Furnace 5 and that will be give or take $100,000,000 type of project. So it's a little more than what we would expect for a furnace that's not That big, but that's a furnace that we need of things to allow the furnace to take more HBI, to use more natural gas, to reduce cook rate, all the things that I have been we have been implementing in other points. So But that's already included in this 750 to 85 that I gave to you. What else was in your question, Alex? Sorry, Did I miss something? No, no, that answered the question. I guess just one very small follow-up. I mean, you've talked about the importance of decarbonization in the steel sector. And I guess, what kind of investments are you Digging Cliffs making over the next few years in terms of decarbonization. Any thoughts on the most promising technology there. Thank you. Look, we are actually the only company that I know of in the United States or abroad that has already spent more than $1,000,000,000 to decarbonize. We put $1,000,000,000 in our HBI plan and we improved our capabilities at Northshore to produce Doctor grade pellets at Northshore to the level of production that would beat the plant. Little I know at the time that I made that investment that I would be able to acquire Milorca inside the transaction of Barcelona Metal. If I had a crystal ball, I would not have invested that $100,000,000 but the fact of the matter is that I did. At the time that Northshore was the only one that I could use to produce their grade pellets. So we have already applied $1,100,000,000 to decarbonize just in these two projects, $1,000,000,000 for Toledo $100,000,000 for Northshore. That's real money. Am I going to do HBI-two? At this point, the answer is no. There is no plan to put HBI-two and the main reason for that is I don't need it because We changed course. We are no longer selling HBI to the market. We changed course. We are not going to continue to sell pellets to the market beyond the expiration of the last contract. It will be all internal and we changed course. We acquired a scrap company. Am I going to acquire new scrap companies? Maybe, but I believe that our growth can be organic and we might not even need to buy Scrap Conference. What I like the most about FPT is not only the fact that they have already control over a lot of prime scrap, But also the management team is phenomenal. And we are excited about the people that are coming with the company and the mindset and how we're going to grow the business under Keith Kosy, who by the way is My role to guide for these things for 15 years. We have been doing this together since Metals USA. So Keith's cozy in 2 months, you went from not knowing the market by being the go to person in this market at this point in scrap. And knowing everything and finding the right target on FPT and guiding through and working with Celso to get this thing closed in a record period, not closed, signed definitive agreement in a short period of time and Everything is lined up for closing in Q4, record time, great performance, perfect solution for us. So we are not going to go and buy spree of scrap companies because if we find something that fits maybe, but we don't need We're going to go to the organic growth and that's the way we want to do. So long story short, Alex, we don't have big projects to To build new plants, build capacity, oh my gosh, this mistake has been made for so many times, U. S. Steel, Badlands keep going And it's sad to see the same mistake being made again, but it's not going to be made by Cleveland Cliffs. Alex? Yes. Thank you. Thanks. And best of luck. All right. Appreciate it. Donna, Next one. Thank you. Our next question is coming from Tristan Gerstner of Exane BNP Paribas. Please go ahead. Yes. Hi. Thanks for taking my questions. First one, a quick one. I may have missed it, but just wanted to clarify. The prior full year 'twenty one EBITDA guidance you provided is still valid. Q1, dollars 5,500,000,000 Okay. Thank you. You know what, it It will be higher, but I just don't want to give a number, because I commit with a number and then everybody pops up and then They find a way for me to miss. So I always miss. If I don't miss the numbers, I'll miss a comma In my prepared remarks or something like that or my accent is not good. So I'm tired of missing. So That's why I'm tired of updating guidance. We do these things at the end of the day to help your new guys model. And then you guys say, oh, they missed against my model. No, your model missed against reality. That's what happens. So it's not you alone Tristan, it's everybody. We don't miss anything. We do what we have to do. You guys eventually miss and ladies Eventually missed because your motto is not good. Sometimes it's just share count. Like I was talking today respectfully with Emily Chang. If you use the wrong share count, your EPS will be wrong and your quota miss. That's absurd. Go ahead, Tristan, please. Yes. No second question maybe on energy. I think your energy mix is 40% natural gas. Have you seen any meaningful increase in energy costs in the quarter? And can you remind us a bit of your procurement strategy for natural gas? Do you have any Contracts and Hedges in Safety. Yes, look, we use a lot of natural gas and we love natural gas. Actually, I have been trying to educate the U. S. Government about how relevant Natural Gas is for us not only as the support for the manufacturing that we have today, But also as the support for the manufacturing of the future. For example, our use of natural gas in Toledo in our direct reduction plan is Actually, the real use of hydrogen to reduce ore because we the natural gas that we use inside The direct reduction plan is reformed gas. And reformed gas is basically H2 and the CO2 stays in the loop Just to keep the gas hot, the reduction becomes a issue that's developed by the process of reforming natural gas. So we buy a lot of natural gas. The impact in cost is Not meaningful, we do a lot of hedging. So also talk a little bit about the hedge on pension gains, please. Yes, sure. Hey, Tristan. Just to give you some data points, We consume about 190,000,000 MMBtus of natural gas per year across our entire footprint. And Very simplistically, our goal is to be half hedged, 50% hedged for the next 12 month period. So we use a number of different instruments to do that. So the impact of the increase in price is pretty muted based on the fact that we have those hedges in place. And I think it's important to note as well that higher natural gas prices tend to lead to more drilling, which helps Steel demand in the long run. So we don't see this as a big impact for us going into next year. All right. That's really helpful. And my last question maybe on low carbon steel. I mean, you lay up Well, the competitive advantage versus flat roll mini mills and raw materials and better grades capabilities. But How do you see the efforts by certain players in the U. S. To gain market share on autos by selling low carbon steel product? Do you see that as a risk or how do you plan to mitigate that and what OEMs tell you about that topic in contract negotiations? Well, we sell today $5,000,000 like I said of steel to the auto boarded. So there's a big opportunity for these folks to grab a lot of market share even because I believe that 5,000,000,000 tons is excessive. The problem is that when I cut tonnage. I'm not going to cut tonnage a little bit here and a little bit there. I'm going to take 1 car manufacturer and say to this car manufacturer, I'm not selling to you anymore. So let's assume that I cut that with 1 car manufacturer that I sell 1,000,000 tons. And by the way, I have more than 1 that I saw 1,000,000 tons. And that makes us go from 5 to 4. We are still with 4, twice as much as the 2nd largest, with 4, not with 5. In fiber more than twice. And there's a huge opportunity for this type of steels. Let's put like that. But the car manufacturer have to do everything with that type of steel. I don't think it's a good proposition. I don't think that they will entertain that. And that's how I do business. So they like it, great. They don't like it, be my guest. I will be the next microchip. You understand my point, Tristan. Yes. No, that's helpful. Thanks a lot. That's helpful? So let's try one more time. The Europeans, you are in London, right? You work out of London. Is that correct? Yes, I don't think my location has anything to do with the question, but thanks for the answer. Your location is a question that I ask you. Are you in an undisclosed location? Are you A person that can disclose where you're at. Do you work for a company that's headquartered in Europe or not? I need to know because I'm going to give you an explanation on something I would like to know. Can you share with us? Yes, of course, I mean, you asked last time, I mean Europe. Okay. So we're in Europe. So the Europeans have been playing They're steelmakers for a long time, European car manufacturers. And the European car manufacturers have been doing a great job making dense leaps of the car manufacturers. Well, here in the United States, The biggest supplier of steel to car manufacturers does not accept this role. And that's guiding all of our negotiations with them. We want to be treated in an equal footing. We don't want to be the bully, But we are not going to be bullied and we are not going to accept lip service. If we're going to be buying. Still with a brand of being environmentally compliant, Please make sure that the ones that are really reducing emissions like we are and investing a lot of money to reduce emissions like we are going to be treated the same way at the very least. And that's the thing. So I'm not being threatened by this type of stills. We are actually just to give you a few examples. We are actually working on carbon capture here in Indiana Harbor and That's pretty much a well known thing that we are the ones that are developing carbon capture technologies and Steelmaking for the entire United States and this thing will be used for the rest of the world. Also we are Starting to work with 1 of the upcoming company, our outstarts that are trying to develop a breakthrough technology called Boston Mero. We are working with Post O'Mearo to develop their components inside one of our plants here in the United States, Barnes Harbor to see if their technology will work in Silvik, which I Truly believe it can be a breakthrough technology. But these things Tristan, breakthrough technologies and Europe is trying to make breakthrough technologies to sound like well established technologies. They are not. You cannot supply $15,000,000 of automotive steel and based on your tank in breakthrough technologies. If that was the case, Japan would be doing that because they don't have our own war. They don't have coal, but they have a lot of blast furnace. Do you know what? Because they have a lot of autobodies. South Korea, same thing, because they have no iron ore, No call, but they have a lot of platforms. Do you know why? Because they have a lot of automotive. I'm talking about Toyota, Honda, Nissan, Subara, that's Japan and Kia Hyun Dae in South Korea. So you know the names, same thing here in United States. So you know the names of the car manufacturers And you now know the name of the biggest supplier for the Carbon Affairs, it's called Cleveland Cliffs. And we are not only supplying environmentally friendly steel today, but we are going to be at the cutting edge for producing the next generation of steels because we're already working on. You don't see the press releases because I tend to only Put the press release out when we have results. We don't brag and then we try to do. We try to do, we work hard, then we brag. Thank you. Our next question is coming from Matthew Fields of Bank of America. Please go ahead. Hey, Lorenzo. Thanks for reserving time. I Appreciate it. And Salsa, congratulations on the promotion, well deserved. Hey, Matt. Appreciate that. But just a question for you. Where are you located? New York. Good. I love New York. Just to make sure that It's not an undisclosed location. Not important enough for an undisclosed location. Just a quick one about Menorca first. Is there any kind of construction or project CapEx associated with that transition? Or Because it's so close to North Shore, you can kind of use that Doctor plant facility for the Menorca Culott? Yes. We can do a lot of things there, but one thing I will not use, I will now introduce our offer on the Peter Beitche Mine in Beitche, Minnesota, because I don't want to pay that royalty. And it's my decision to use the ROR from another location. So I'll use ROR from another location. Okay. Great. And then that mine sort of Got a 3,000,000 ton LE's capacity. So is that essentially just going to be feeding the HBI plant and sort of no Doctor pellets on the merchant side or No Doctor pilots outside of what gets flown through the HBI plant? That's correct. Of course, I will comply with all the context that we have in place, but these countries will go away and when they go away, we'll no longer supply. And we will concentrate Menorca for their grade pellets. We are moving Mustang pellets to United because we've under the previous configuration where producing Mustang pellets half at United and half at Menorca. There is no reason for that. We can concentrate Mustang pellets. Mustang pellets are the ones that go Indiana Harbor 7, the SuperFlex pellets. So we can concentrate Mustang pellets into United 100 percent, so free up Menorca ForteA Great Belt and make North Shore our swing operation using as needed. Okay, great. Thank you very much. And then you've already sort of talked about metallic today. And you're obviously a few years ahead of your peers on the kind of shortage of metallics coming To this country with the HBI investment and whatnot. But can you talk a little bit about the balances that you have to thread between and you already said you might sort of grow your appetite for scrap organically, and I appreciate that. But What are the kind of the balance points that you have to hit? The benefits from the increased yield from using more scrap On the it can actually on the con side, the prime scrap can be a little bit expensive compared to your internal pellet production. And then ultimately, is there a ceiling on the amount that you can use of scrap as a percentage of the batch with when you get up to kind of losing quality between flexibility and strength on the ultimate end product, like what are the constraints that you kind of see for your footprint hitting all those points. That's a great question. But the very first thing to consider, Matt, is that we Are way below what would be the theoretical point of Thermal equilibrium, above what we can't use more scrap. I mean, we have furnaces, BOS vessels today, converters that we are using 82% cost better. We can go down to 75%, 74% with no fear, with no problem. I actually when I was a BOS General Manager long ago, I used to do 75% hot metal because and 25% scrap because that was a good practice in terms of stretching my hot melt. So we're implementing that. Another thing that over time changed for gross reasons in order to save The payments was the replacement of good scrap, what's prime scrap with obsolete scrap. I would like to free up So these scraps were the ones that produce rebar and to produce other things that are Less sophisticated. There will be high demand with the infrastructure build. We're going to be building back better in this country hopefully And there will be a lot of rebar, a lot of white plate beans that will need to soothe scrap. We're going to free up that for them. Yes, the money used prime scrap where prime scrap belongs. And I'm glad to hear that the flat rolled EAFs are in the process of replacing prime scrap with obsolete scrap. Good for them and good for me because then I'll have more prime scrap to use to produce highly specified materials That's what we do. We don't produce steel for the 4 of the cars. We produce steel for everything from the door rings to the The skin is the exposed part, so pretty much everything. So we did private scrap for ourselves. But we are far from the theoretical breakeven point It's a thermal balance problem, not a cost thing. Okay. So in theory, over the next couple of years or whatnot, we should look to kind of You growing that scrap business either organically or inorganically. Yes, we are going to grow by reclaiming Our own scrap from our own clients, let's put it like this. And because again, because it's not my main source of Well, feedstock, I can either be a little more flexible with the clients and pay the clients a little more Because it's not my cost, it's my it's in order to produce better steel. So it will go back to the other end with us producing and supplying these very same customers with better steel. Matt, I'm not sure if I'm being clear with that Because of course, private scrap costs a little more than what we are paying today. But on the other hand, Everything you gain in terms of higher yields, less rejects, things like that, we will accept The fact that we are increasing $1 or $2 per ton, you know what I'm saying? So in the big scheme of things, this is nothing. And that's how technological this business used to be in the past. And over time, it kind of It started to go away from the technological center of things. We're bringing this back because it's a very technological moment right now. We want to produce the same high quality steels with a lot less admissions. And that's what we are doing instead of just throwing press release and saying, We're going to do things, we're going to do that, we are doing and we're doing in technological cooperation with the car manufacturer, primarily with car manufacturer, Other Clay Wolf consumers as well. No, that's helpful. I mean, it's a complex system of raw materials that you're feeding to optimize along more constraints than the steel business is used to having with especially with carbon emissions now becoming a bigger constraint. So Helpful for us to get kind of where you're coming from on all of it. Yes. And I apologize to There was in the call that we got to it's too much of nitty gritty details of the chemistry. But at the end of the day, you guys are going to have to be prepared for that because when we talk about emissions, we are talking about chemistry. You're no longer talking about cost accounting. You're no longer talking about the average price of HRC. You're going to have to view The research analyst community will have to prepare yourselves to get this conversation to the next level Because the phase of announcements and bombastic declarations and trade remarks and things like that will pass because after you do a little bit of that, everybody including the clients and yourselves. We will say, okay, where is the beef? How many tons of this thing you are producing? Where is this still going? It is in the door of the Ford Explorer and I'm making this up. It's the first car model that came to my mind. Where is this being used and what for? So I'll tell you, we produce 5,000,000 tons of Steel to the Carman factors. I would love to produce less because I still believe that's too much of automotive exposure Even though it's less than half of what I had when I only had a case deal. So the biggest synergy nobody asked about synergies today, By the way, the biggest synergy from the acquisition of Bose NK Steel and ArcelorMittal USA, Matt, What the fact that you could bring back technological sanity to this business. And we are also Translating this technological sanity into much higher revenues, much higher profits, EBITDA Margins That Were Unheard of Before. By the way, I don't know if you guys noticed, for the companies that reported so far, We reported the highest EBITDA margin among them all. So we are doing all that in a profitable way and we will continue to do so. Next year will be better because of the way we do business with this contract pricing situations that will protect the customer and will protect Cleveland Cliffs and the rest we will play around with the market. All right, Matt, appreciate the questions a lot. Lorna, I think we're done. Yes, sir, do you have any additional or closing comments today? I already did. We had a brief Thanksgiving. I've not been talking to you before. There's a lot to be to thank for. And here at Cleveland Cliffs, We thank every day. Let's continue to try to reunite America to show that we are the best country in the world, particularly when you are no longer just talking and we are doing things. Let's continue to do things for the betterment of life of the American people. Let's think about the people, about the employees, not only to pay lip service to safety. Let's Space and Better. That's 2 things that can improve the lives of average Americans. That will bring peace to discuss. Thanks a lot. Bye now. Ladies and gentlemen, thank you for your participation and interest in Cleveland Cliffs. You may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.