Bill Peterson: Yeah. Hi, good morning and thanks for taking the questions. You’ve spoken a lot about decarbonization in auto. I was hoping if you can provide some color on some demand outside of auto and in particular, how you’re thinking about the demand showing up for the various buckets of policy support, whether it be, the IAJ or IRA, maybe as it relates to solar business or chip stack and how those various pipelines could evolve in the — how they have evolved since the start of the year and how they could evolve into next year.
Lourenco Goncalves: Yeah. Look, the biggest thing so far this year has been military, and in a world that is now with wars in two fronts and the potential of a third front in Asia, that’s always looming in the background between China and Taiwan and the South China Sea. We have a lot of demand for military uses. We can’t discuss too much. We are a big supplier of military steel for the DoD, so we’re not going to be able to elaborate much on that. But it has been a very, very important portion of our business here at Cleveland-Cliffs. Infrastructure is started to pick up and things related to alternatives, clean sources of energy as well, particularly wind and solar, solar panels have been one of our greatest, bright spots in our mix of sales.
And if I want to elaborate a little more in terms of demand, I will emphasize one more time that demand coming from service centers is coming back, will come back because they don’t have it, or they’ll go out of business. That’s another option for them too. They are starting to become more and more irrelevant for the supply chain because they don’t care inventory. When prices are going down, they don’t care inventory. When prices are going up because price will go down after they go up. So that’s a pretty difficult position to be in. So I have serious questions if we really need service centers. We are having service center coming to us and asking for us to expedite orders. That’s outrageous. That’s beyond ridiculous. So anyway, this is a group of companies that need to take some type of religion and change the way they do business.
And I believe they will, because I’m a very optimistic person. And I believe that that will be a big source of supply coming into Q4 and even more in Q1.
Bill Peterson: Yeah. Thanks for that color. Another kind of bigger picture question. So we’ve read recent reports that the US and Europe are discussing the EU tariff rate quotas, may potentially allowing more imports. But I guess, how do you see this impacting the US steel market? What is your kind of view on that topic?
Lourenco Goncalves: Yeah. I think that ship has sail for now. The discussions didn’t conclude with a solution for the request of the European Union. The situation has been maintained. The TRQs, the tariff rate quotas are still in place. And the alternative to the TRQs are Section 232 and Section 232 has not been revoked. What we did in the world is more free trade, but we need more free trade both ways. The United States need to export some steel to Europe. You have a highly subsidized European steel industry, like for example, the UK that is controlled by an Indian company and a Chinese company. And we only hear about more and more money being given by the government to decarbonize the breach steel industry and do this and that.
It’s just the government subsidizing the replacement of equipment with replacing blast furnace, BOFs with the EAFs firing two-thirds of the workforce and claiming that they are decarbonizing, greening the steel. It’s all BS and this is all Chinese taking advantage of the bridge. So I believe that earlier rather than later we’ll be able to export some steel to the UK and high quality steel and create a free trade the other way from the US to Europe. That’s my plan.
Bill Peterson: Yeah. Great. Thanks for that color.
Operator: Thank you. Our next question come from the line of Tristan Gresser with BNP Paribas. Please proceed with your question.
Tristan Gresser: Yes. Hi. Thank you for taking my questions. The first one is on capital allocation. I think for a number of quarters the focus has really been on deleveraging and then returning cash to shareholders and sometime both at the same time. What has really changed in our view of the strategy to look more maybe favorably at large M&A? How should we think about Cliff moving forward regardless of the bid, is the priority now more towards growth? If you can discuss a little bit the strategy there, that’d be great.
Celso Goncalves: Yeah. Sure. Hey, Tristan. We’ve been pretty clear in terms of our capital allocation priorities. And we’ve reduced debt by a large amount. And we feel like we’re in a position now that we have the flexibility to go in other directions. Whether that be accelerating share buybacks at the right time or introducing a dividend. We won’t stop paying down debt, but we have the flexibility with the capital structure that we have to go in different directions. From an M&A standpoint, the flat-rolled market remains fragmented. There are many avenues that we could pursue toward further consolidation. We’ve been very successful in M&A in the past. We’ve executed well-timed acquisitions that we haven’t overpaid for. And that’s what we’re going to continue doing going forward.
Our net debt target of one time through the cycle EBITDA will remain regardless of what we do from an M&A standpoint. But we feel good where we are right now. We’ve paid down. We’ve got back to back quarters of $500 million of net debt reduction. You can look through Q4 and see how much cash we’re going to generate. We’ll continue using that cash toward paying down debt, toward buying back shares when appropriate, and being aggressive and opportunistic with M&A opportunities.
Tristan Gresser: All right. That’s very clear. Thank you. And maybe a second question is a bit more bigger picture on aluminum. I think you mentioned a little bit the threat and the growing market share that aluminum is having against flat roll. Yeah. We’d like to have your thought on the debate around the future of steel intensity in cars, notably versus aluminum. Yeah, that’s my question. Thank you.
Lourenco Goncalves: Yeah. Look, aluminum has been a threat for steel for a long, long time. And with the mixed results, mixed successes, keep in mind, beverage cans one day were all tinplate and now they’re all aluminum. So check that box for can making. They won. On the other hand, for cars they have penetration, but it’s not that big success that people talk about. We have situations like the F-150 that was supposed to bring then the F-250, the F-350, the explored the expedition, and so far, it’s only the F-150. And if the F-150, we at Cleveland-Cliffs have a huge participation of the F-150 on high strength, low-alloy, structural steels and everything that’s inside the car and beyond the hood. So with my intention with that the F-150 is taking aluminum out and I believe I will, so going forward.
So it’s a fight and we’ll continue to fight. It’s another competitive threat that we have to continue to take seriously. And now we even have a steel company that’s building an aluminum company, so building an aluminum mill to compete against us right here in the United States. So I don’t believe that this will be a homerun, but I don’t take these things lightly. We are going to compete and we’re going to win, but we’re going to have to fight. It’s a competitor and we will compete.
Tristan Gresser: All right. Thank you. Thanks a lot for the color.
Lourenco Goncalves: Thanks.
Operator: Thank you. Our next question come from the line of Lucas Pipes with B. Riley Securities. Please proceed with your question.
Lucas Pipes: Thank you very much, operator. Thank you for taking my follow-up question. Lorenzo, I wanted to ask a little bit about cost reductions for 2024. Great job on the coal side. You mentioned there are cost reductions including coal, and I wondered if you could maybe expand a little bit on the other cost drivers that may move to your advantage in 2024. Thank you very much.
Lourenco Goncalves: Celso will take that, Lucas. Please go ahead, Celso.
