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Item 7. Management’s Discussion and Analysis

2023-02-14 compared with 2022-02-11 · 343 added, 374 removed, 259 unchanged (73% of the section changed)

3 unchanged sentences

Financial Statements and Supplementary Data of this Annual Report on Form 10-K.

The year 2021 represented a period of record financial performance in our Company's 174-year history.

The advantages of our unique, vertically integrated business model as well as the immediate benefits of the transformational acquisitions we completed in 2020 were on full display during the year as we achieved these phenomenal results.

Our commercial actions, along with a healthy demand environment for steel, drove substantially higher selling prices for the majority of products we sell, and we adjusted production to meet the needs of our order book.

Combined with this, we believe we were able to manage costs better than our peers due to our vertically integrated footprint, which reduces the impact of material price inflation on our major cost inputs.

As a result, we produced record revenues, record net income, record Adjusted EBITDA and record operating cash flow in 2021.

The HRC index averaged $1,573 per net ton for 2021, a record year that was also 174% higher than 2020.

The record prices for steel products in 2021 resulted from both supply and demand factors, each driven by a rapid recovery from the impacts of the COVID-19 pandemic.

Stay-at-home mandates and fiscal stimulus drove strong demand for consumer goods, such as HVAC products and appliances.

Demand from machinery and equipment producers has also been robust.

The demand for light vehicles was also strong;

however, automotive supply chain difficulties have limited the demand for steel from automotive manufacturers.

On the supply side, spot steel availability was limited throughout the year.

We expect healthy demand to continue into 2022 as we start to see the impacts of the Infrastructure and Jobs Act of 2021, growing environmentally-focused capital projects, healthy economic conditions and pent-up automotive demand, as supply chain issues begin to show signs of waning.

With strong demand and steel prices in the U.S.

reaching all-time highs in 2021, we were well positioned to negotiate our fixed price contracts, which represent approximately 45% of our volumes, at favorable levels, which should enable us to deliver strong financial results and free cash flow in 2022, even if HRC pricing falls considerably.

As a result of our healthy free cash flow in 2021, we were able to complete several strategic and financial transactions, including the FPT Acquisition.

FPT is one of the largest processors of prime scrap in the country, representing approximately 15% of the entire U.S.

merchant market.

We believe this acquisition is a complementary addition to our footprint, as prime scrap demand is expected to grow with new flat-rolled EAF capacity set to come online over the next five years and as the worldwide focus on decarbonization continues.

We expect to be able to leverage our long-standing flat-rolled automotive and other customer relationships into recycling partnerships to further grow our prime scrap presence.

Additionally, FPT allows us to optimize productivity at our existing EAFs and BOFs and furthers our commitment to environmentally-friendly, low-carbon intensity steelmaking with a cleaner materials mix.

Another use of our robust cash flow was the complete redemption of our Series B Participating Redeemable Preferred Stock for $1,343 million during the third quarter of 2021.

This transaction reduced our diluted share count by approximately 10%, providing a meaningful return to our shareholders.

During February 2021, we executed a series of favorable debt and equity capital market transactions in an effort to extend our average debt maturity profile and increase our ratio of unsecured debt to secured debt.

We also completed additional financing transactions, including the redemption of all $396 million aggregate principal amount of our 5.750% 2025 Senior Notes in June 2021, and provided notice of our election to redeem all remaining $294 million aggregate principal amount of our 1.500% 2025 Convertible Senior Notes in December 2021, which was completed in January 2022.

In 2021, we reached full run-rate nameplate annual capacity at our state-of-the-art direct reduction plant in Toledo, Ohio.

This facility produces high-quality HBI and is the first of its kind in the Great Lakes region.

While we originally expected to be a merchant seller of HBI, following the 2020 Acquisitions, we have instead maximized the value of our HBI by utilizing it primarily in our blast furnaces, which allows us to improve costs and productivity while reducing our coke rates and reducing our carbon emissions.

As a result of our internal usage of HBI, coupled with our ongoing evaluation of coke use strategies, we idled our coke facility at Middletown Works in 2021 and we intend to permanently idle our Mountain State Carbon coke plant in 2022.

Along with these notable accomplishments, we have been able to continue successfully navigating through the COVID-19 pandemic while preserving the health and safety of both our workforce and our Company for the long term.

The health and safety of our employees has always been our top priority.

In an effort to best protect our workforce and our Company, we launched a vaccine incentive program in July 2021 that was developed in partnership with our labor unions.

Throughout the 45 days the program was in place, the vaccination rate more than doubled, and we achieved a total vaccination rate of over 75% throughout our workforce.

The initiative resulted in a payout of $45 million in total cash incentives to our vaccinated workforce.

The successful vaccination program allowed us to operate efficiently and safely throughout the remainder of 2021 and into 2022.

Management's Discussion and Analysis of Financial Condition and Results of Operations included in this report discusses our financial condition and results of operations as of and for the years ended December 31, 2022 and 2021.

A discussion related to our financial condition and results of operations for 2021 as compared to 2020 can be found in Part II, Item 7., "Management's Discussion and Analysis of Financial Condition and Results of Operations," of our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 11, 2022.

Throughout 2022, we continued to position the Company for long-term success as we generated record revenues, executed our commercial initiatives by improving our average selling prices, revamped our operational footprint, secured multi-year labor agreements with the majority of our USW employees, displayed the unique advantage of our U.S.-centric, internally sourced feedstock and continued to improve our balance sheet.

2022 HIGHLIGHTS

• Record revenues of $23 billion

• Second-highest Adjusted EBITDA in company history (second only to 2021)

• Reduced net pension and OPEB liabilities by $2.1 billion

• Reduced outstanding debt by $1.1 billion, including $351 million of open market repurchases

• Increased year-over-year average steel selling price despite significantly lower commodity flat-rolled steel pricing

• Improved commercial contracts by generating substantial increases for our fixed price contracts

• Agreed to 4-year labor agreements with the USW covering 14,000 total employees

• Completed major maintenance cycle, including the reline of the Cleveland #5 blast furnace

• Benefited from vertically integrated footprint amidst raw material shortages related to the Russian invasion of Ukraine

• Returned $240 million in capital to shareholders through share repurchase program

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• Continued progress toward our goal of reducing GHG emissions

• Celebrated 175th anniversary as a company

We also continued our best practices from both a safety and environmental standpoint.

During 2022, our safety TRIR (including contractors) was 1.36 per 200,000 hours worked.

Throughout 2021, we made continued progress towards our goal of reducing GHG emissions with our increased usage of HBI and scrap in our facilities, as well as more efficient recycling of gases at certain facilities.

We are also partnering with the U.S.

Department of Energy as part of the Better Climate Challenge initiative, as we aim to build on our GHG emission reduction progress.

Recent Developments

Acquisition of FPT

On November 18, 2021, we completed the acquisition of FPT, a leading prime ferrous scrap processor in the U.S.

These operations consist of 22 scrap processing facilities, primarily in the Midwest region of the U.S.

Refer to NOTE 3 - ACQUISITIONS for additional information.

Financing Transactions

On December 1, 2021, we issued a notice of redemption for all $294 million in aggregate principal amount outstanding of the 1.500% 2025 Convertible Senior Notes.

The 1.500% 2025 Convertible Senior Notes were redeemed on January 18, 2022, through a combination settlement, with the aggregate principal amount of $294 million paid in cash, and 24 million common shares delivered to noteholders, with a fair value of $499 million in settlement of the premium due per the terms of the indenture, plus cash in respect of the accrued and unpaid interest of the 1.500% 2025 Convertible Senior Notes to, but not including, the redemption date per the terms of the indenture.

On December 17, 2021, we entered into the Third ABL Amendment.

The Third ABL Amendment modified our ABL Facility to, among other things, increase the amount of tranche A revolver commitments available thereunder by an additional $1 billion and exchange $150 million of tranche B revolver commitments available thereunder for tranche

A revolver commitments.

After giving effect to the Third ABL Amendment, the aggregate principal amount of tranche A revolver commitments under our ABL Facility is $4.5 billion and there are no longer any tranche B revolver commitments.

This action increased our liquidity by $1.0 billion.

The increase is a result of a larger projected borrowing base driven by more favorable market conditions.

Share Repurchase Program

On February 10, 2022, our Board of Directors authorized a program to repurchase our outstanding common shares in the open market or in privately negotiated transactions, which may include purchases pursuant to Rule 10B5-1 plans or accelerated share repurchases, up to a maximum of $1 billion.

We are not obligated to make any purchases and the program may be suspended or discontinued at any time.

The share repurchase program does not have a specific expiration date.

Results of Operations

Our total revenues, net income (loss), diluted EPS and Adjusted EBITDA were as follows:

See "— Results of Operations — Adjusted EBITDA" below for a reconciliation of our Net Income (loss) to Adjusted EBITDA.

The results for 2021 include the FPT operations subsequent to November 18, 2021 and full-year results for all other operations.

The results for 2020 include AK Steel operations subsequent to March 13, 2020, ArcelorMittal USA operations subsequent to December 9, 2020, and our results from operations previously reported as part of our historical Mining and Pelletizing segment.

During the year ended December 31, 2021, our consolidated Revenues increased by $15,090 million, compared to 2020.

The increase was primarily due to the addition of 12.1 million net tons of steel shipments from our Steelmaking segment resulting from the 2020 Acquisitions, along with an increase in the average steel product selling price of $240 per net ton.

Revenues by Product Line

The following represents our consolidated Revenues by product line for the years ended:

The change in product mix for 2021, compared to 2020, is due primarily to the inclusion of full-period results for the 2020 Acquisitions.

Revenues by Market

The following table represents our consolidated Revenues and percentage of revenues attributable to each of the markets we supply:

(In Millions)

Throughout 2022, we made continued progress towards our goal of reducing GHG emissions with our optimal utilization of HBI and scrap throughout our facilities, as well as more efficient power generation through recycling of off-gases.

We have also formed a partnership with the DOE as part of the Better Climate Challenge initiative, as we aim to build on our GHG emission reduction progress.

We continue to pursue opportunities such as carbon capture and the use of hydrogen within our facilities.

Additionally, we have started forming partnerships to develop renewable energy sources - such as wind, solar and hydrogen - which will benefit our own environmental footprint while combating the global impacts of climate change.

FINANCIAL SUMMARY

Total Revenue Net Income (Loss) Adjusted EBITDA Diluted EPS

See "— Non-GAAP Financial Measures" below for a reconciliation of our Net income (loss) to Adjusted EBITDA.

ECONOMIC OVERVIEW

Steel market conditions in 2022 were notably volatile, driven by disruptions due to the conflict between Russia and Ukraine, continued supply chain issues, significantly higher energy prices and declines in demand as a result of recessionary fears.

The price for domestic HRC, the most significant index impacting our revenues and profitability, averaged $1,011 per net ton for 2022, 36% lower than 2021, but well above the prior ten-year average of $712 per net ton.

HRC prices receded below $700 per net ton in the fourth quarter of 2022, the lowest level since October 2020.

The large decline in spot steel prices was driven by service center destocking, interest rate hikes driving caution on new business and declining metallics prices, which were driven by lower domestic steel production and excess raw material inventory.

Continued automotive supply chain difficulties also limited the demand for steel from automotive manufacturers.

Looking forward, we expect domestic steel demand to improve as imports have become less attractive, service centers restock inventory, automotive supply chain issues ease and incremental steel demand from the Infrastructure and Jobs Act is realized.

The recently passed CHIPS Act and Inflation Reduction Act should provide meaningful support for overall domestic steel demand in the coming years.

Our extensive portfolio of products should result in increased steel demand from some of our end markets.

The CHIPS Act promotes semiconductor manufacturing in the U.S., which should help support non-residential construction.

Additionally, on-shoring manufacturing in the U.S.

should reduce risk of supply chain issues in the future.

The Inflation Reduction Act provides a tax credit for consumers who buy new EVs, which further incentivizes consumers to purchase vehicles in an environment where pent-up demand is still very strong from recent supply chain issues and low dealer inventory levels.

In addition, the Inflation Reduction Act provides incentives for the use of domestic steel for investments in clean energy projects, including wind and solar projects, which consume a substantial amount of steel.

Additional projects from the legislation could create incremental demand for our galvanized, GOES, NOES and other steel products.

We expect to benefit from the spending related to the recently passed legislation in 2023 and beyond.

The largest market for our steel products is the automotive industry in North America, which makes light vehicle production a key driver of demand.

During 2022, North American light vehicle production was approximately 14.3 million units, the highest annual production volume since 2019.

While we have seen modest improvement, automotive production remains below historical levels and continues to be adversely affected by the global semiconductor shortage, as well as other material shortages and supply chain disruptions.

This has caused several outages amongst light vehicle manufacturers.

The long-term outlook for the automotive industry remains positive as pent-up demand is strong due to ongoing production and supply chain issues.

Inventory levels have recently reached the highest level since April 2021, with 1.7 million units of gross stock at the end of 2022, but remain significantly below historical average inventory levels of 2.5 to 3.0 million units of gross stock.

Additionally, the average age of cars on the road in the U.S.

reached an all-time high during 2022, which should support demand as older vehicles need to be replaced.

As the largest supplier of automotive-grade steel in the U.S., we expect to benefit from increased vehicle production in coming years.

The ongoing conflict between Russia and Ukraine has disrupted raw material sourcing for our EAF competitors and has further increased the volatility in their steelmaking input costs.

Approximately two-thirds of all U.S.

imported pig iron, an important feedstock for flat-rolled steel producing EAFs, has historically been sourced from Russia and Ukraine.

Imported pig iron prices

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averaged $687 per metric ton during 2022, which is significantly above the historical average of $440 per metric ton from September 2017 to December 2021.

The recent decline from record levels in pricing is primarily due to lower domestic steel production and surplus raw material inventory as competitors purchased excess raw materials at the beginning of the conflict between Russia and Ukraine to ensure sufficient supply in a time of uncertainty.

Higher than historical imported pig iron costs should continue to support a higher HRC price.

Unlike other flat-rolled producers, we are not reliant on imported pig iron as we produce it in-house at our blast furnaces, using our own iron ore as the primary raw material.

The price for busheling scrap, a necessary input for flat-rolled steel production in EAFs in the U.S., averaged well above the historical ten-year average of $380 per long ton in 2022 and 2021.

The busheling price averaged $533 per long ton in 2022 and $602 per long ton in 2021.

Pricing fell to $350 per long ton during the fourth quarter of 2022, as domestic steel capacity utilization rates declined below 80% and competitors worked through excess raw material inventory.

As prime scrap is a replacement to imported pig iron, we expect the busheling scrap price will continue to average at or above historical levels as the availability of imported pig iron from Russia and Ukraine remains disrupted.

We expect the supply of busheling scrap to further tighten due to decreasing prime scrap generation from original equipment manufacturers and the growth of EAF capacity in the U.S., along with a push for expanded scrap use globally.

As we are fully integrated and have primarily a blast furnace footprint, increased prices for busheling scrap in the U.S.

bolster our competitive advantage, as we source the majority of our iron feedstock from our stable-cost mining and pelletizing operations in Minnesota and Michigan.

As for iron ore, the Platts 62% price averaged $120 per metric ton in 2022, which is 23% higher than the historical ten-year average.

While higher iron ore prices play a role in increased steel prices, we also directly benefit from higher iron ore prices for the portion of iron ore pellets we sell to third parties.

Federal Reserve has pushed interest rates to the highest level in 15 years in an attempt to slow demand and reduce inflation.

Though we are a firm believer that the U.S.

is the most resilient manufacturing economy in the world, rising interest rates could cause a significant economic downturn and impact various end markets that we serve and overall domestic steel demand.

While we believe there is strong pent-up demand for light vehicles in the U.S., automotive sales could be negatively impacted due to higher interest rates.

The non-residential construction market could also see delays in construction as increased rates drive caution on new business.

If continued rising rates in the U.S.

result in a recession, we believe that end-user demand for steel intensive products could be negatively impacted as a recession would likely result in higher unemployment, lower wages and less disposable income for consumers.

During 2022, we experienced higher costs than the prior year due to inflationary pressures on input and energy costs, as well as lower production volume and higher repair and maintenance spending.

We expect to benefit from lower costs in 2023 and beyond as most inflationary items have started to ease, production volume improves, and repair and maintenance expenses normalize.

STEELMAKING RESULTS

COMPARISON OF 2022 TO 2021

The following is a summary of our Steelmaking segment results included in our consolidated financial statements for the years ended December 31, 2022 and 2021.

The results for 2021 include the FPT operations subsequent to November 18, 2021 and full-year results for all other Steelmaking operations.

The following is a summary of the Steelmaking segment operating results:

Total Revenue Gross Margin Adjusted EBITDA Steel Shipments (nt)

2021 2022 2021 2022 2021 2022 2021 2022

STEEL PRODUCT REVENUE:

GROSS MARGIN %:

ADJUSTED EBITDA %:

AVERAGE SELLING PRICE PER TON OF STEEL PRODUCTS:

$18,850 $ 20,054 23% 11% 27% 14% $1,187 $1,360

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The following tables represent our steel shipments by product and total sales by market:

Year Ended December 31,

Revenue % Revenue %

Automotive $ 5,152 25 % $ 2,391 45 %

(In thousands of net tons) Volume % Volume % % Change

Steel shipments by product:

Hot-rolled steel 4,326 29 % 4,886 31 % (11) %

Cold-rolled steel 2,286 16 % 2,790 18 % (18) %

Coated steel 4,730 32 % 5,056 32 % (6) %

Stainless and electrical steel 763 5 % 674 4 % 13 %

Plate 880 6 % 1,020 6 % (14) %

Slab and other steel products 1,766 12 % 1,460 9 % 21 %

Total steel shipments by product 14,751 15,886 (7) %

Year Ended December 31,

(In millions) Revenue % Revenue % % Change

Steelmaking revenues by market:

Direct automotive $ 6,661 30 % $ 4,726 24 % 41 %

Infrastructure and manufacturing 5,869 26 % 5,380 27 % 9 %

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Steel producers 3,465 15 % 2,124 11 % 63 %

Total revenues $ 20,444 $ 5,354

The change in percentages of net revenues to each market in 2021 compared to 2020 was driven primarily by the AM USA Transaction, which increased overall sales to automotive customers, but reduced the total percentage exposure, increased exposure to infrastructure and manufacturing and distributors and converters customers, and drove more in-house iron ore sales, which reduced the percentage of sales to steel producers.

Automotive Market

The largest end user for our steel products is the automotive industry in North America, which makes light vehicle production a key driver of demand.

During 2021, North American light vehicle production was approximately 13.0 million units, the same as the prior year.

Production the past two years has been down approximately 3.0 million units compared to the prior ten-year average, primarily due to the global semiconductor shortage, as well as other material shortages and supply chain disruptions resulting from the COVID-19 pandemic.

This has caused several outages amongst light vehicle manufacturers despite strong consumer demand.

In light of these production outages, we have been able to redirect certain volumes originally intended for this end market to the spot market, where demand has been strong and pricing has reached all-time highs.

The percentage of sales to the automotive market should increase in 2022 as fixed price contract prices increase and volumes expand as the material shortage issues ease.

During 2021, light vehicle sales in the U.S.

were 15.1 million units, representing a 3% increase over the prior year.

These improved sales, combined with continued production difficulties, brought light vehicle inventories to an all-time low of 22 days' supply during the third quarter of 2021.

Infrastructure and Manufacturing

We sell a variety of our steel products, including plate, carbon, stainless, electrical, tinplate and rail, to the infrastructure and manufacturing market.

This market includes sales to manufacturers of HVAC, appliances, power transmission and distribution transformers, storage tanks, ships and railcars, wind towers, machinery parts, heavy equipment, military armor, food preservation, and railway lines.

Domestic construction activity and the replacement of aging infrastructure directly affects sales of steel to this market.

Residential construction spending surged in 2021 due to overwhelming demand for new houses.

Nonresidential construction spending was slightly down in 2021;

however, the sector saw a surge in spending in the second half of the year that will likely continue into 2022 with the passing of the Infrastructure and Jobs Act of 2021.

The Infrastructure and Jobs Act of 2021 is also expected to increase demand for steel products related to renewable energy as well as the modernization of the U.S.

electrical grid.

Our plate products can be used in windmills, which we estimate contain 130 metric tons of steel per megawatt of electrical generating capacity.

Additionally, we estimate solar panels consume 40 metric tons of steel per megawatt of electrical generating capacity.

We also expect to see an increase in charging stations for EVs, which we will benefit from as we are the sole producer of electrical steel in the U.S.

Distributors and Converters

Virtually all of the grades of steel we produce are sold to the steel distributors and converters market.

This market generally represents downstream steel service centers, which source various types of steel from us and fabricate it according to their customers' needs, which also includes automotive customers.

Our steel is typically sold to this market on a spot basis or under short-term contracts linked to steel pricing indices.

Demand and pricing for this market can be highly dependent on a variety of factors outside our control, including global and domestic commodity steel production capacity, the relative health of countries’ economies and whether they are consuming or exporting excess steel production, the provisions of international trade agreements and fluctuations in international currencies and, therefore, are subject to market changes in steel prices.

The price for domestic HRC, which is an important attribute in the profitability of this end market, averaged $1,573 per net ton for the year ended December 31, 2021, 174% higher than the prior year.

The record prices for steel products in 2021 resulted from both supply and demand factors, each driven by a rapid recovery since the onset of the COVID-19 pandemic in 2020.

Steel Producers Market

The steel producers market represents third-party sales to other steel producers, including those who operate blast furnaces and EAFs.

It includes sales of raw materials and semi-finished and finished goods, including iron ore pellets, coal, coke, HBI, scrap and steel products.

The increase in revenues from the steel producers market for 2021, as compared to 2020, is primarily due to the inclusion of full-period results for the AK Steel and ArcelorMittal USA operations.

This was partially offset by a decrease in iron ore product revenues during 2021, as compared to 2020, primarily as a result of the 2020 Acquisitions, as our iron ore pellet production is now predominately consumed internally and the respective intercompany revenue is eliminated in consolidation.

The largest component of sales to this market during the year ended December 31, 2021 was third-party slab sales, which are primarily made under a long-term supply agreement that was initiated in connection with the closing of the AM USA Transaction.

Additionally, while it has fallen from peak 2021 levels in recent months, the price of iron ore has also risen dramatically over the past year, which, along with strong demand, has been an important factor in rising steel prices globally.

The Platts 62% Price averaged $159 per metric ton during 2021, a 46% increase compared to the prior year.

While higher iron ore prices play a role in increased steel prices, we also directly benefit from higher iron ore prices for the portion of iron ore pellets we sell to third parties.

Operating Costs

Cost of goods sold

Cost of goods sold increased by $10,808 million for the year ended December 31, 2021, as compared to 2020, primarily due to the addition of 12.1 million net tons of steel shipments resulting from the 2020 Acquisitions.

Total steelmaking revenues by market $ 22,383 $ 19,901 12 %

Revenues increased by 12% during the year ended December 31, 2022, as compared to the prior-year, primarily due to:

• An increase in the direct automotive market of $1,935 million, or 41%, predominantly due to increases in selling prices as a result of favorable renewals of annual fixed price contracts.

• An increase in sales to the steel producers market of $1,341 million, or 63%, which was primarily driven by the inclusion of full-year results from the FPT Acquisition.

• These increases were partially offset by a decrease in the distributors and converters market of $1,283 million, or 17%, predominantly due to service center destocking, interest rate hikes driving caution on new business and pricing for metallics declining, which caused weaker demand from service centers for our steel products and large declines in spot steel pricing.

Gross margin decreased by $2,053 million, or 45%, during the year ended December 31, 2022, as compared to the prior-year, primarily due to:

• Increased costs of production (approximately $3.6 billion impact) driven by higher raw materials and utility costs, including natural gas, coal, coke, alloys and scrap, coupled with increased investment in maintenance and labor costs;

• A decrease in sales volumes (approximately $700 million impact) predominantly driven by lower shipments to the distributors and converters end market due to weaker demand.

• This was partially offset by an increase in selling prices (approximately $2.5 billion impact) driven by favorable renewals of annual sales contracts.

ADJUSTED EBITDA

Adjusted EBITDA from our Steelmaking segment for the year ended December 31, 2022, decreased by $2,191 million, as compared to 2021, primarily due to the decreased gross margin from our operations.

Additionally, our Steelmaking Adjusted EBITDA included $439 million and $392 million of Selling, general and administrative expenses for the years ended December 31, 2022 and 2021, respectively.

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CONSOLIDATED RESULTS

COMPARISON OF 2022 TO 2021

REVENUES & GROSS MARGIN

During the year ended December 31, 2022, our consolidated Revenues increased by $2,545 million, compared to 2021.

The increase was primarily due to the increase in the average steel product selling price of $173 per net ton and the inclusion of full-year results from the FPT Acquisition, partially offset by the decrease of 1.1 million net tons of steel shipments from our Steelmaking segment.

During the year ended December 31, 2022, our consolidated gross margin decreased by $2,016 million, as compared to 2021.

See "— Steelmaking Results" above for further detail on our operating results.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

As a result of the 2020 Acquisitions, our Selling, general and administrative expenses increased by $178 million during the year ended December 31, 2021, as compared to 2020.

Acquisition-related costs

The following table represents the components of Acquisition-related costs:

(In Millions)

Year Ended December 31,

2021 2020 2019

Severance $ (15) $ (38) $ (2)

Third-party expenses (5) (52) (7)

Total $ (20) $ (90) $ (9)

Refer to NOTE 3 - ACQUISITIONS for further information on the acquisitions.

Selling, general and administrative expenses increased by $43 million during the year ended December 31, 2022, as compared to 2021.

The increase primarily relates to the inclusion of full-year results for the FPT Acquisition in 2022.

Additionally, there were increases related to salaries and benefits and external service costs, partially offset by lower incentive compensation.

MISCELLANEOUS – NET

Miscellaneous – net increased by $30 million for the year ended December 31, 2022, as compared to 2021.

The increase in miscellaneous expense was primarily due to the acquisition-related loss on equity method investment during 2021.

Other Income (Expense)

The increase in miscellaneous expense was primarily due to the $29 million asset impairment charge associated with the permanent closure of Mountain State Carbon and an increase in idle expenses.

These increases were partially offset by the acquisition-related loss on equity method investment during 2021, which was not repeated in 2022.

INTEREST EXPENSE, NET

Interest expense, net increased by $99 million for the year ended December 31, 2021, as compared to the prior year.

The increase during 2021 was primarily due to borrowings on our ABL Facility, a decrease in capitalized interest during 2021 due to the completion of our Toledo direct reduction plant in December 2020 and the full-year interest on the incremental debt that we incurred in connection with the AK Steel Merger.

Gain (loss) on extinguishment of debt

Interest expense, net decreased by $61 million for the year ended December 31, 2022, as compared to the prior year.

The decrease was primarily due to debt reduction activities during 2021 and 2022, which reduced interest expense on our senior notes.

The decrease was partially offset by an increase in the ABL Facility interest expense primarily as a result of rising interest rates.

LOSS ON EXTINGUISHMENT OF DEBT

The loss on extinguishment of debt of $75 million for the year ended December 31, 2022 primarily resulted from the redemption of all $607 million aggregate principal amount of our outstanding 9.875% 2025 Senior Secured Notes in April 2022 and the redemption of all $294 million aggregate principal amount of our outstanding 1.500% 2025 Convertible Senior Notes in January 2022.

The losses were partially offset by the net gain on extinguishment for the repurchase of $417 million aggregate principal amount of our outstanding IRBs and senior notes of various series.

The loss on extinguishment of debt of $88 million for the year ended December 31, 2021 primarily resulted from the redemption of $396 million aggregate principal amount of 5.750% 2025 Senior Notes, $395 million aggregate principal amount of 4.875% 2024 Senior Secured Notes and $347 million aggregate principal amount of 9.875% 2025 Senior Secured Notes.

This compares to a gain on extinguishment of debt of $130 million for the year ended December 31, 2020 primarily related to the repurchase of $748 million aggregate principal amount of our outstanding senior notes of various series using the net proceeds from the issuance of an additional $555 million aggregate principal amount of our 9.875% 2025 Senior Secured Notes on April 24, 2020 and other sources of cash.

Refer to NOTE 8 - DEBT AND CREDIT FACILITIES for further details.

Net periodic benefit credits (costs) other than service cost component

The increase of $156 million in Net periodic benefit credits (costs) other than service cost component primarily relates to the expected return on assets component.

The higher return is primarily attributable to the full-year effect of additional pension and OPEB plan assets acquired in the 2020 Acquisitions.

Refer to NOTE 10 - PENSIONS AND OTHER POSTRETIREMENT BENEFITS for further details.

Our effective tax rate is affected by permanent items, primarily depletion.

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The following represents a summary of our tax provision and corresponding effective rates:

(In Millions)

Year Ended December 31,

Income tax benefit (expense) $ (773) $ 111

(In millions) 2022 2021

Income tax expense $ (423) $ (773)

Effective tax rate 23 % 20 %

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A reconciliation of our income tax attributable to continuing operations compared to the U.S.

federal statutory rate is as follows:

(In Millions)

Year Ended December 31,

(In millions) 2022 2021

statutory rate $ 377 21 % $ 799 21 %

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Percentage depletion in excess of cost depletion (49) (3) (99) (3)

Non-taxable income related to noncontrolling interests (9) — (9) 4

State taxes, net 71 4 86 2

Federal & state provision to return 27 1 (2) —

Other items, net (3) — (11) —

Provision for income tax expense (benefit) and effective income tax rate including discrete items $ 773 20 % $ (111) 57 %

The increase in income tax expense in 2021, as compared to the prior year, is directly related to the increase in the pre-tax book income year-over-year.

Provision for income tax expense and effective income tax rate including discrete items $ 423 23 % $ 773 20 %

The decrease in income tax expense in 2022, as compared to the prior year, is directly related to the decrease in the pre-tax book income year-over-year.

See NOTE 11 - INCOME TAXES for further information.

CASH FLOW, LIQUIDITY AND CAPITAL RESOURCES

Our capital allocation decision-making process is focused on preserving healthy liquidity levels while maintaining the strength of our balance sheet and creating financial flexibility to manage through the cyclical demand for our products and volatility in commodity prices.

We are focused on maximizing the cash generation of our operations, reducing debt, returning capital to shareholders and aligning capital investments with our strategic priorities and the requirements of our business plan, including regulatory and permission-to-operate related projects.

The following table provides a summary of our cash flows:

Year Ended December 31,

(In millions) 2022 2021

Cash flows provided by (used in):

Operating activities $ 2,423 $ 2,785

Investing activities (936) (1,379)

Financing activities (1,509) (1,470)

Net decrease in cash and cash equivalents $ (22) $ (64)

Free cash flow 1

$ 1,480 $ 2,080

1 See "— Non-GAAP Financial Measures" for a reconciliation of our free cash flows.

The recent market environment has provided us opportunities to reduce our debt and return capital to shareholders with our own free cash flow generation.

We also continue to look at the composition of our debt, as we are interested in both extending our average maturity length and increasing our ratio of unsecured debt to secured debt, which can be accomplished with cash provided by operating activities.

During 2022, we took action in alignment with our capital allocation priorities, as follows:

• We redeemed all $294 million in aggregate principal amount outstanding of our 1.500% 2025 Convertible Senior Notes,$66 million aggregate principal amount outstanding of the IRBs and $607 million remaining aggregate principal amount outstanding of our 9.875% 2025 Senior Secured Notes;

• We repurchased $351 million in aggregate principal amount of our outstanding senior notes of various series at an average price of 92% of par.

• Additionally, we returned capital to shareholders through our share repurchase program, repurchasing 12.5 million common shares at a cost of $240 million in the aggregate.

These actions give us additional financial flexibility and will better prepare us to navigate more easily through potentially volatile industry conditions in the future, while also prudently reducing our common share count.

47 | CLF 2022 FORM 10-K

OPERATING ACTIVITIES

Year Ended December 31,

(In millions) 2022 2021 Variance

Net income $ 1,376 $ 3,033 $ (1,657)

Non-cash adjustments to net income 1,218 1,949 (731)

Income taxes (22) (136) 114

Pension and OPEB payments and contributions (204) (343) 139

Working capital (receivables, inventories, payables and other liabilities) 55 (1,718) 1,773

Net cash provided by operating activities $ 2,423 $ 2,785 $ (362)

The variance was driven by:

• A $1,657 million increase in net income after adjustments for non-cash items due to lower gross margins from lower steel sales volume and higher costs.

See "— Steelmaking Results" above for further detail on our operating results.

• A $139 million decrease in payments and contributions relating to pension and OPEB plans resulting from improvements to our pension plans' funded status.

The 2021 pension contributions also included $118 million in deferred 2020 pension contributions in connection with the CARES Act.

• A $1,773 million decrease in cash used for working capital primarily driven by lower increases in accounts receivable and inventories.

In 2021, accounts receivable increased due to the unwind of the ArcelorMittal USA factoring agreement as well as rising revenue.

Inventories also increased more in 2021 due to the global semiconductor shortage as well as higher raw material costs.

During 2022, our inventory units declined but this was predominantly offset by higher costs.

INVESTING ACTIVITIES

Year Ended December 31,

(In millions) 2022 2021 Variance

Purchase of property, plant and equipment $ (943) $ (705) $ (238)

Acquisitions, net of cash acquired (31) (707) 676

Other 38 33 5

Net cash used by investing activities $ (936) $ (1,379) $ 443

The variance was driven by:

• A $238 million increase in cash used for capital expenditures primarily relating to sustaining capital expenditures, including the completion of a reline of blast furnace #5 at Cleveland Works during the third quarter of 2022.

Sustaining capital spend includes infrastructure, mobile equipment, fixed equipment, product quality, environmental and health and safety.

• A $676 million decrease in cash used for acquisitions primarily relating to the FPT Acquisition made in 2021.

FINANCING ACTIVITIES

Year Ended December 31,

(In millions) 2022 2021 Variance

Series B Redeemable Preferred Stock redemption $ — $ (1,343) $ 1,343

Net repayments of debt (1,358) (372) (986)

Net borrowings under credit facilities 255 73 182

Net issuance (repurchase) of common shares (240) 322 (562)

Other (166) (150) (16)

Net cash used by financing activities $ (1,509) $ (1,470) $ (39)

The variance was driven by:

• A $1,343 million decrease in cash used in 2022 resulting from the Series B Redeemable Preferred Stock redemption in 2021.

• A $804 million increase in cash used resulting from higher net repayments of debt in 2022, partially offset by increased borrowings on our ABL Facility, as compared to the prior-year.

• A $562 million increase in cash used to repurchase 12.5 million common shares in 2022, compared to 20.0 million common shares issued in 2021.

48 | CLF 2022 FORM 10-K

LIQUIDITY AND CAPITAL RESOURCES

Our primary sources of liquidity are Cash and cash equivalents, cash generated from our operations, availability under the ABL Facility and access to capital markets.

We generally maintain minimal cash balances and utilize our access to our ABL Facility to cover fluctuations in our cash requirements.

Cash and cash equivalents, which totaled $26 million as of December 31, 2022, include cash on hand and on deposit.

The combination of cash and availability under our ABL Facility gives us $2.5 billion in liquidity as of December 31, 2022.

We believe our liquidity and access to capital markets will be adequate to fund our cash requirements for the next 12 months and for the foreseeable future.

The ABL Facility, which matures in March 2025, has a maximum borrowing base of $4.5 billion, determined by applying customary advance rates to eligible accounts receivable, inventory and certain mobile equipment.

The ABL Facility includes a $555 million sublimit for the issuance of letters of credit and a $200 million sublimit for swingline loans.

As of December 31, 2022, outstanding letters of credit totaled $150 million, which reduced availability.

We issue standby letters of credit with certain financial institutions in order to support business obligations, including, but not limited to, workers' compensation, employee severance, insurance, operating agreements and environmental obligations.

The ABL Facility agreement contains various financial and other covenants.

As of December 31, 2022, we were in compliance with all of our ABL Facility covenants.

We have the capability to issue additional unsecured notes and, subject to the limitations set forth in our existing senior notes indentures, additional secured debt, if we elect to access the debt capital markets.

However, our ability to issue additional notes could be limited by market conditions.

We intend from time to time to seek to redeem or repurchase our outstanding senior notes with cash on hand, borrowings from existing credit sources or new debt financings and/or exchanges for debt or equity securities, in open market purchases, privately negotiated transactions or otherwise.

Such redemptions or repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors, and the amounts involved may be material.

Refer to NOTE 8 - DEBT AND CREDIT FACILITIES for more information on our ABL Facility and debt.

MATERIAL CASH REQUIREMENTS

We have material cash requirements for known contractual obligations and commitments for the following:

CAPITAL EXPENDITURES

We anticipate total cash used for capital expenditures during the next 12 months to be between $700 and $750 million, which primarily consists of sustaining capital spend.

With our facilities and equipment in the best shape since the acquisition, we do not expect any major investments until at least 2025.

PURCHASE OBLIGATIONS

In the normal course of business, we are a party to certain off-balance sheet arrangements that are not reflected on our Statements of Consolidated Financial Position.

These arrangements include minimum "take or pay" purchase commitments, such as minimum electric power demand charges, minimum coal, diesel and natural gas purchase commitments, minimum railroad transportation commitments and minimum port facility usage commitments.

Refer to NOTE 20 - COMMITMENTS AND CONTINGENCIES for further information.

We have principal long-term debt of $4,306 million with maturities starting in 2025.

Refer to NOTE 8 - DEBT AND CREDIT FACILITIES for further information on our long-term debt and interest.

LEASE OBLIGATIONS

We have future minimum lease payments under noncancellable finance and operating leases.

As of December 31, 2022, the current and long-term liabilities for our lease obligations were $136 million and $317 million, respectively.

Refer to NOTE 12 - LEASE OBLIGATIONS for further information.

POST-RETIREMENT EMPLOYEE BENEFITS

We make both required and discretionary pension contributions.

Required contributions are based on minimum funding requirements pursuant to ERISA regulations.

We expect to make $32 million in contributions in 2023.

Contributions in future years can significantly change and will depend on the actual returns on assets, discount rates, government regulations, changes to employee benefits through labor agreements and other demographic factors.

The cash requirements for our OPEB plans consist of VEBA contributions and direct payments from corporate assets primarily for medical and drug costs.

During 2022, we negotiated favorable Medicare Advantage Prescription Drug healthcare rates, which went into effect January 1, 2023.

We also paused the contribution requirement to the Cleveland-Cliffs Steel LLC VEBA plan as part of the 2022 USW labor negotiations.

The reduction in retiree healthcare rates and pause on the VEBA funding requirements is expected to reduce our use of cash from $198 million in 2022 to $73 million in 2023.

Refer to NOTE 9 - PENSIONS AND OTHER POSTRETIREMENT BENEFITS for further information.

ENVIRONMENTAL AND ASSET RETIREMENT OBLIGATIONS

Refer to NOTE 20 - COMMITMENTS AND CONTINGENCIES and NOTE 13 - ASSET RETIREMENT OBLIGATIONS for further information on our environmental and asset retirement obligations.

49 | CLF 2022 FORM 10-K

SHARE REPURCHASE PROGRAM

On February 10, 2022, our Board of Directors authorized a program to repurchase outstanding common shares in the open market or in privately negotiated transactions, which may include purchases pursuant to Rule 10b5-1 plans or accelerated share repurchases, up to a maximum of $1 billion.

As of December 31, 2022, there was $760 million remaining under the authorization.

We are not obligated to make any purchases and the program may be suspended or discontinued at any time.

The share repurchase program does not have a specific expiration date.

NON-GAAP FINANCIAL MEASURES

ADJUSTED EBITDA

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The following table provides a reconciliation of our Net income (loss) to Adjusted EBITDA:

(In Millions)

Year Ended December 31,

(In millions) 2022 2021 2020

Net income (loss) $ 1,376 $ 3,033 $ (81)

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EBITDA from noncontrolling interests 1

$ 74 $ 75 $ 56

Gain (loss) on extinguishment of debt (75) (88) 130

Severance costs (15) (38)

Acquisition-related costs excluding severance costs (5) (52)

Acquisition-related loss on equity method investment (31) —

Amortization of inventory step-up (161) (96)

Impact of discontinued operations 3 1

Acquisition-related expenses and adjustments (1) (197) (148)

Asset impairment (29) — —

Other, net (29) (27) (37)

Total Adjusted EBITDA $ 3,169 $ 5,277 $ 353

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The following table provides a summary of our Adjusted EBITDA by segment:

(In Millions)

Year Ended December 31,

(In millions) 2022 2021

Adjusted EBITDA:

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Total Adjusted EBITDA $ 3,169 $ 5,277

Adjusted EBITDA from our Steelmaking segment for the year ended December 31, 2021, increased by $4,989 million, as compared to 2020.

The results were favorably impacted by the operating results of the acquired steelmaking operations.

Our Steelmaking Adjusted EBITDA included $232 million of Selling, general and administrative expenses for the year ended December 31, 2021.

Adjusted EBITDA from Corporate and eliminations primarily relates to Selling, general and administrative expenses at our Corporate headquarters.

The discussion of our Consolidated Results of Operations for 2020 compared to 2019 can be found in Part II, Item 7., "Management's Discussion and Analysis of Financial Condition and Results of Operations," of our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on February 26, 2021.

The following is a summary of our Steelmaking segment results included in our consolidated financial statements for the years ended December 31, 2021 and 2020.

The results for 2021 include the FPT operations

subsequent to November 18, 2021 and full-year results for all other Steelmaking operations.

The results for 2020 include the AK Steel operations subsequent to March 13, 2020, the ArcelorMittal USA operations subsequent to December 9, 2020, and our results from operations previously reported as part of our Mining and Pelletizing segment.

The following is a summary of the Steelmaking segment operating results:

Year Ended December 31,

Operating Results - In Millions

Revenues $ 19,901 $ 4,965

Cost of goods sold $ (15,379) $ (4,749)

Selling Price - Per Ton

Average net selling price per net ton of steel products $ 1,187 $ 947

The following table represents our segment Revenues by product line:

(Dollars In Millions,

Sales Volumes In Thousands)

FREE CASH FLOW

Free cash flow is a non-GAAP measure defined as operating cash flows less purchase of property, plant and equipment.

Management believes it is an important measure to assess the cash generation available to service debt, strategic initiatives or other financing activities.

50 | CLF 2022 FORM 10-K

The following table provides a reconciliation of our operating cash flows to free cash flows:

Year Ended December 31,

Revenue Volume 1

Hot-rolled steel $ 5,615 4,886 $ 386 633

Cold-rolled steel 3,186 2,790 490 682

Coated steel 5,864 5,056 1,747 1,911

Stainless and electrical steel 1,622 674 868 416

Plate 1,316 1,020 46 62

Other steel products 1,247 1,460 46 79

Other 1,051 N/A 1,382 N/A

Total $ 19,901 $ 4,965

1 All steel product volumes are stated in net tons.

Operating Results

Steelmaking revenues for 2021 increased by $14,936 million as compared to 2020, primarily due to the addition of sales following the 2020 Acquisitions.

Results for the year ended December 31, 2021 were also impacted positively by the increase in the price for domestic HRC, which is the most significant index driving our revenues and profitability.

The HRC index averaged $1,573 per net ton for 2021, 174% higher than 2020.

The price of HRC reached an all-time high in 2021, as a direct result of favorable supply-demand dynamics driven by a rapid recovery since the onset of the COVID-19 pandemic in 2020.

We have also benefited from higher steel shipments due to stronger demand.

Cost of goods sold for 2021 increased by $10,630 million as compared to 2020, predominantly due to additional sales as discussed above.

As a result, Adjusted EBITDA was $5,422 million for the year ended December 31, 2021, compared to $433 million for the prior year.

Adjusted EBITDA for 2021 was positively impacted by the addition of sales following the 2020 Acquisitions, the increase in the price for HRC and the higher demand for steel products, as discussed above.

Our steelmaking facilities produced a total of 18 million net tons of raw steel during the year ended December 31, 2021.

Due to the timing of the 2020 Acquisitions and the idling of facilities in response to impacts of the COVID-19 pandemic, our steelmaking facilities produced a total of 4 million net tons of raw steel during the year ended December 31, 2020.

Liquidity, Cash Flows and Capital Resources

Our primary sources of liquidity are Cash and cash equivalents and cash generated from our operations, availability under the ABL Facility and other financing activities.

Our capital allocation decision-making process is focused on preserving healthy liquidity levels, while maintaining the strength of our balance sheet and creating financial flexibility to manage through the inherent cyclical demand for our products and volatility in commodity prices.

We are focused on maximizing the cash generation of our operations, reducing debt, and aligning capital investments with our strategic priorities and the requirements of our business plan, including regulatory and permission-to-operate related projects.

Following the onset of the COVID-19 pandemic in the U.S.

in 2020, our primary focus was to maintain adequate levels of liquidity to manage through a potentially prolonged economic downturn.

Now that business conditions have improved, allowing us to generate a healthy free cash flow during 2021, we have had the ability to make investments to both improve and grow our business, particularly as it pertains to scrap metal.

We entered into the scrap business on November 18, 2021 with the FPT Acquisition.

We were also able to reduce our diluted share count and effectively return capital to shareholders via the cash redemption of all of the outstanding shares of our Series B Participating Redeemable Preferred Stock during the third quarter of 2021.

In December 2021, we also increased our liquidity by amending our ABL Facility to increase the aggregate revolver commitments from $3.5 billion to $4.5 billion.

Additionally, we expect to be able to return capital to shareholders in 2022 through our share repurchase program, which was authorized by our Board on February 10, 2022.

In addition, we anticipate that the current strong market environment will provide us ample opportunities to reduce our debt with our own free cash flow generation.

On January 18, 2022, we took action to reduce our debt by redeeming all of our then-outstanding 1.500% 2025 Convertible Senior Notes.

The notes were redeemed through a combination settlement, with the aggregate principal amount of $294 million paid in cash, and 24 million common shares delivered to noteholders per the terms of the indenture.

In furtherance of these goals, we also consummated the following financing transactions during 2021:

On February 11, 2021, we sold 20 million common shares at a price per share of $16.12, in an underwritten public offering.

We used the net proceeds from the offering, plus cash on hand, to redeem $322 million aggregate principal amount of our outstanding 9.875% 2025 Senior Secured Notes.

Prior to such use, the net proceeds were used to temporarily reduce the outstanding borrowings under our ABL Facility.

On February 17, 2021, we issued $500 million aggregate principal amount of 4.625% 2029 Senior Notes and $500 million aggregate principal amount of 4.875% 2031 Senior Notes in an offering that was exempt from the registration requirements of the Securities Act.

We used the net proceeds from the notes offering to redeem all of the outstanding 4.875% 2024 Senior Secured Notes and 6.375% 2025 Senior Notes issued by Cleveland-Cliffs Inc.

and all of the outstanding 7.625% 2021 AK Senior Notes, 7.500% 2023 AK Senior Notes and 6.375% 2025 AK Senior Notes issued by AK Steel Corporation (n/k/a Cleveland-Cliffs Steel Corporation), and pay fees and expenses in connection with such redemptions, and reduce borrowings under our ABL Facility.

Additionally, on June 28, 2021, we redeemed the entirety of our outstanding 5.750% 2025 Senior Notes using available liquidity.

Pursuant to the terms of the indenture governing the 5.750% 2025 Senior Notes, we paid $415 million, including $396 million aggregate principal amount, plus make-whole premiums and accrued and unpaid interest to, but not including, the redemption date.

These actions give us additional financial flexibility and will better prepare us to navigate more easily through potentially volatile industry conditions in the future.

Based on our outlook for the next 12 months, which is subject to continued changing demand from customers and volatility in domestic steel prices, we expect to have ample liquidity through cash generated from operations and availability under our ABL Facility sufficient to meet the needs of our operations, service and repay our debt obligations and return capital to shareholders.

The following discussion summarizes the significant items impacting our cash flows during 2021 and comparative years as well as expected impacts to our future cash flows over the next 12 months.

Refer to the Statements of Consolidated Cash Flows for additional information.

Operating Activities

Net cash provided by operating activities was $2,785 million for the year ended December 31, 2021, compared to net cash used by operating activities of $258 million for the year ended December 31, 2020.

The year-over-year improvement was driven by improved operating results, partially offset by changes in working capital.

Changes in working capital included increases in inventory primarily related to the global semiconductor shortage and increased raw material and production costs, as well as increases in receivables primarily related to rising prices.

Additionally, we had incremental pension and OPEB payments and contributions of $268 million, which included $118 million of deferred 2020 pension contributions in connection with the CARES Act.

Investing Activities

Net cash used by investing activities was $1,379 million and $2,042 million for the years ended December 31, 2021 and 2020, respectively.

During the year ended December 31, 2021, we had net cash outflows of $761 million related to the FPT Acquisition, net of cash acquired.

We had total capital expenditures of $705 million and $525 million for the years ended December 31, 2021 and 2020, respectively.

Included in the total capital expenditures, we had cash outflows for expansion capital expenditures relating to the development of our Toledo direct reduction plant of $64 million and $348 million for the years ended December 31, 2021 and 2020, respectively.

Additionally, included in the total capital expenditures, we spent $641 million and $177 million primarily on sustaining capital expenditures during the years ended December 31, 2021 and 2020, respectively.

Sustaining capital spend includes infrastructure, mobile equipment, fixed equipment, product quality, environment, health and safety.

During the year ended December 31, 2020, we had net cash outflows of $658 million related to the AM USA Transaction, net of cash acquired.

Additionally, during the year ended December 31, 2020, we had net cash outflows of $869 million related to the AK Steel Merger, net of cash acquired, which included $590 million used to repay the former AK Steel Corporation revolving credit facility and $324 million used to purchase outstanding 7.500% 2023 AK Senior Notes.

We anticipate total cash used for capital expenditures during the next 12 months to be between $800 and $900 million.

Financing Activities

Net cash used by financing activities was $1,470 million for the year ended December 31, 2021, compared to net cash provided by financing activities of $2,059 million for the year ended December 31, 2020.

Cash outflows from financing activities for the year ended December 31, 2021 included the redemption of all 583,273 shares outstanding of our Series B Participating Redeemable Preferred Stock at a redemption price of $1,343 million during the third quarter of 2021, along with $1.4 billion for repayments of debt.

We used available liquidity to redeem all $396 million aggregate principal amount outstanding of our 5.750% 2025 Senior Notes.

We used the net proceeds from the issuance of the 20 million common shares, and cash on hand, to redeem $322 million in aggregate principal amount of 9.875% 2025 Senior Secured Notes.

We used the net proceeds from the issuances of the 4.625% 2029 Senior Notes and 4.875% 2031 Senior Notes to redeem all of the outstanding 4.875% 2024 Senior Secured Notes, 6.375% 2025 Senior Notes, 7.625% 2021 AK Senior Notes, 7.500% 2023 AK Senior Notes and 6.375% 2025 AK Senior Notes, and pay fees and expenses in connection with such redemptions, and reduce borrowings under our ABL Facility.

Cash inflows from financing activities for the year ended December 31, 2021 included the issuances of $500 million aggregate principal amount of 4.625% 2029 Senior Notes, $500 million aggregate principal amount of 4.875% 2031 Senior Notes and 20 million common shares for proceeds of $322 million, along with net borrowings of $73 million under credit facilities.

Net cash provided by financing activities for the year ended December 31, 2020 primarily related to the issuances of $845 million aggregate principal amount of 6.750% 2026 Senior Secured Notes, $955 million aggregate principal amount of 9.875% 2025 Senior Secured Notes and net borrowings of $1,510 million under our ABL Facility.

The net proceeds from the initial issuance of $725 million aggregate principal amount of the 6.750% 2026 Senior Secured Notes, along with cash on hand, were used to purchase $373 million aggregate principal amount of 7.625% 2021 AK Senior Notes and $367 million aggregate principal amount of 7.500% 2023 AK Senior Notes and to pay for the $44 million of debt issuance costs in the first quarter of 2020.

The net proceeds from the additional issuance of $555 million aggregate principal amount of the 9.875% 2025 Senior Secured Notes were used to repurchase $736 million aggregate principal amount of our outstanding senior notes.

The discussion of our Liquidity, Cash Flows and Capital Resources results for 2020 compared to 2019 can be found in Part II, Item 7., "Management's Discussion and Analysis of Financial Condition and Results of Operations," in our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on February 26, 2021.

The following represents our future cash commitments and contractual obligations as of December 31, 2021:

Payments Due by Period (In Millions)

Total Less than

Years More than 5 Years

Long-term debt 1

$ 5,369 $ — $ 36 $ 3,355 $ 1,978

Interest on debt 1

1,497 262 453 361 421

Operating lease obligations 378 68 103 74 133

Finance lease obligations 345 105 127 47 66

Purchase obligations:

Open purchase orders 374 328 1 — 45

Minimum "take or pay" purchase commitments 2

8,590 2,785 2,947 1,493 1,365

Total purchase obligations 8,964 3,113 2,948 1,493 1,410

Other long-term liabilities:

Pension funding minimums 3

132 4 61 67 —

OPEB claim payments 3

613 138 242 233 —

Environmental and asset retirement obligations 655 54 76 30 495

Other 91 4 24 18 45

Total other long-term liabilities 1,491 200 403 348 540

Total $ 18,044 $ 3,748 $ 4,070 $ 5,678 $ 4,548

1 Refer to NOTE 8 - DEBT AND CREDIT FACILITIES for additional information regarding our debt and related interest rates.

2 Includes minimum railroad and vessel transportation obligations, minimum electric power demand charges, minimum diesel and natural gas obligations and minimum port facility obligations.

Additionally, includes our coke purchase commitments related to our coke supply agreement with SunCoke Middletown.

3 Estimates beyond five years for pension and OPEB contributions and payments are not included due to the uncertainty of future investment performance, funding legislation, discount rates, healthcare costs, plan design and other factors.

Refer to NOTE 10 - PENSIONS AND OTHER POSTRETIREMENT BENEFITS for additional information regarding our pension and OPEB obligations.

Refer to NOTE 20 - COMMITMENTS AND CONTINGENCIES for additional information regarding our future commitments and obligations.

Capital Resources

We expect to fund our business obligations from available cash, current and future operations and existing and future borrowing arrangements.

We also may pursue other funding strategies in the capital markets to strengthen our liquidity, extend debt maturities and/or fund strategic initiatives.

The following represents a summary of key liquidity measures:

(In millions) 2022 2021

Cash and cash equivalents $ 48

Available borrowing base on ABL Facility 1

Borrowings (1,609)

Letter of credit obligations (175)

Borrowing capacity available $ 2,716

1 As of December 31, 2021, the ABL Facility had a maximum borrowing base of $4.5 billion, determined by applying customary advance rates to eligible accounts receivable, inventory and certain mobile equipment.

Our primary sources of funding are cash and cash equivalents, which totaled $48 million as of December 31, 2021, cash generated by our business, availability under our ABL Facility and other financing activities.

Cash and cash equivalents include cash on hand and on deposit.

The combination of cash and availability under our ABL Facility gives us $2.8 billion in liquidity entering the first quarter of 2022, which is expected to be adequate to fund operations, letter of credit obligations, capital expenditures and other cash commitments for at least the next 12 months.

As of December 31, 2021, we were in compliance with the ABL Facility liquidity requirements and, therefore, the springing financial covenant requiring a minimum Fixed Charge Coverage Ratio of 1.0 to 1.0 was not applicable.

We believe that the cash on hand and our ABL Facility provide us sufficient liquidity to support our operating, investing and financing activities.

However, our ability to issue additional notes could be limited by market conditions.

We intend from time to time to seek to retire or repurchase our outstanding senior notes with cash on hand, borrowings from existing credit sources or new debt financings and/or exchanges for debt or equity securities, in open market purchases, privately negotiated transactions or otherwise.

Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors, and the amounts involved may be material.

Off-Balance Sheet Arrangements

In the normal course of business, we are a party to certain arrangements that are not reflected on our Statements of Consolidated Financial Position.

and financial instruments with off-balance sheet risk, such as bank letters of credit and bank guarantees.

Operating cash flows $ 2,423 $ 2,785

Purchase of property, plant and equipment (943) (705)

Free cash flows $ 1,480 $ 2,080

INFORMATION ABOUT OUR GUARANTORS AND THE ISSUER OF OUR GUARANTEED SECURITIES

The accompanying summarized financial information has been prepared and presented pursuant to SEC Regulation S-X, Rule 3-10, “Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered,” and Rule 13-01 "Financial Disclosures about Guarantors and Issuers of Guaranteed Securities and Affiliates Whose Securities Collateralized a Registrant's Securities." Certain of our subsidiaries (the "Guarantor subsidiaries") have fully and unconditionally, and jointly and severally, guaranteed the obligations under (a) the 5.875% 2027 Senior Notes, the 7.000% 2027 Senior Notes, the 4.625% 2029 Senior Notes and the 4.875% 2031 Senior Notes issued by Cleveland-Cliffs Inc.

on a senior unsecured basis and (b) the 6.750% 2026 Senior Secured

Notes and the 9.875% 2025 Senior Secured Notes on a senior secured basis.

on a senior unsecured basis and (b) the 6.750% 2026 Senior Secured Notes on a senior secured basis.

See NOTE 8 - DEBT AND CREDIT FACILITIES for further information.

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Refer to Exhibit 22 , incorporated herein by reference, for the detailed list of entities included within the obligated group as of December 31, 2022.

The guarantee of a Guarantor subsidiary with respect to Cliffs' 6.750% 2026 Senior Secured Notes, the 5.875% 2027 Senior Notes, the 7.000% 2027 Senior Notes, the 9.875% 2025 Senior Secured Notes, the 4.625% 2029 Senior Notes and the 4.875% 2031 Senior Notes will be automatically and unconditionally released and discharged, and such Guarantor subsidiary’s obligations under the guarantee and the related indentures (the “Indentures”) will be automatically and unconditionally released and discharged, upon the occurrence of any of the following, along with the delivery to the trustee of an officer’s certificate and an opinion of counsel, each stating that all conditions precedent provided for in the applicable Indenture relating to the release and discharge of such Guarantor subsidiary’s guarantee have been complied with:

The guarantee of a Guarantor subsidiary with respect to Cliffs' 6.750% 2026 Senior Secured Notes, the 5.875% 2027 Senior Notes, the 7.000% 2027 Senior Notes, the 4.625% 2029 Senior Notes and the 4.875% 2031 Senior Notes will be automatically and unconditionally released and discharged, and such Guarantor subsidiary’s obligations under the guarantee and the related indentures (the “Indentures”) will be automatically and unconditionally released and discharged, upon the occurrence of any of the following, along with the delivery to the trustee of an officer’s certificate and an opinion of counsel, each stating that all conditions precedent provided for in the applicable Indenture relating to the release and discharge of such Guarantor subsidiary’s guarantee have been complied with:

(a) any sale, exchange, transfer or disposition of such Guarantor subsidiary (by merger, consolidation, or the sale of) or the capital stock of such Guarantor subsidiary after which the applicable Guarantor subsidiary is no longer a subsidiary of the Company or the sale of all or substantially all of such Guarantor subsidiary’s assets (other than by lease), whether or not such Guarantor subsidiary is the surviving entity in such transaction, to a person which is not the Company or a subsidiary of the Company;

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(In millions) 2022 2021

December 31, 2021 December 31, 2020

Current assets $ 7,063 $ 6,539

2 unchanged sentences

Non-current liabilities (6,630) (9,081)

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The following table is summarized combined financial information from the Statements of Condensed Consolidated Operations of the obligated group:

(In Millions)

December 31, 2021

(In millions) December 31, 2022

Revenues $ 21,376

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(In millions) 2022 2021

December 31, 2021 December 31, 2020

Balances with non-Guarantor subsidiaries:

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We attempt to mitigate these risks by aligning fixed and variable components in our customer pricing contracts, supplier purchasing agreements and derivative financial instruments.

Some customer contracts have fixed-pricing terms, which increase our exposure to fluctuations in raw material and energy costs.

Some customer contracts have fixed-pricing terms, which increases our exposure to fluctuations in raw material and energy costs.

To reduce our exposure, we enter into annual, fixed-price agreements for certain raw materials.

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In these circumstances, we would attempt to negotiate agreements for new purchase quantities.

There is a risk, however, that we would not be successful in reducing

purchase quantities, either through negotiation or litigation.

There is a risk, however, that we would not be successful in reducing purchase quantities, either through negotiation or litigation.

If that occurred, we would likely be required to purchase more of a particular raw material in a particular year than we need, negatively affecting our results of operations and cash flows.

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There is a risk, however, that the variable-price mechanisms in the sales contracts may not necessarily change in tandem with the variable-price mechanisms in our purchase agreements, negatively affecting our results of operations and cash flows.

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Our strategy to address volatile natural gas rates and electricity rates includes improving efficiency in energy usage, identifying alternative providers and utilizing the lowest cost alternative fuels.

If we are unable to align fixed and variable components between customer contracts and supplier purchase agreements, we use cash-settled commodity price swaps and options to hedge the market risk associated with the purchase of certain of our raw materials and energy requirements.

If we are unable to align fixed and variable components between customer contracts and supplier purchase agreements, we use cash-settled commodity price swaps to hedge the market risk associated with the purchase of certain of our raw materials and energy requirements.

Additionally, we routinely use these derivative instruments to hedge a portion of our natural gas and zinc requirements.

During 2022, we initiated hedging programs for electricity and tin.

Our hedging strategy is designed to protect us from excessive pricing volatility.

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(In millions)

Positive or Negative Effect on

Pre-tax Income

Commodity Derivative 10% Increase or Decrease 25% Increase or Decrease

Commodity Derivative 10% Change 25% Change

Natural gas $ 54 $ 136

Electricity 3 6

Any resulting changes in fair value would be recorded as adjustments to AOCI, net of income taxes, or recognized in net earnings, as appropriate.

These hypothetical losses would be partially offset by the benefit of lower prices paid for the related commodities.

VALUATION OF GOODWILL AND OTHER LONG-LIVED ASSETS

We assign goodwill arising from acquired companies to the reporting units that are expected to benefit from the synergies of the acquisition.

Goodwill is tested on a qualitative basis for impairment at the reporting unit level on an annual basis (October 1) and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value.

Goodwill is tested on a qualitative or quantitative basis for impairment at the reporting unit level on an annual basis (October 1) and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value.

These events or circumstances could include a significant change in the business climate, legal factors, operating performance indicators, competition, or sale or disposition of a significant portion of a reporting unit.

As necessary, should our qualitative test indicate that it is more likely than not that the fair value of a reporting unit is less than its carry amount, we perform a quantitative test to determine the amount of impairment, if any, to the carrying value of the reporting unit and its associated goodwill.

We have an unconditional option to bypass the qualitative test for any reporting unit in any period and proceed directly to performing the quantitative test.

Should our qualitative test indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying value, we perform a quantitative test to determine the amount of impairment, if any, to the carrying value of the reporting unit and its associated goodwill.

Application of the goodwill impairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units, assignment of goodwill to reporting units and if a quantitative assessment is deemed necessary in determination of the fair value of each reporting unit.

The fair value of each reporting unit is estimated using a discounted cash flow methodology, which considers forecasted cash flows discounted at an estimated weighted average cost of capital.

The fair value of each reporting unit is estimated using the guideline public company method, the discounted cash flow methodology, or a combination of both, which considers forecasted cash flows discounted at an estimated weighted average cost of capital.

Assessing the recoverability of our goodwill requires significant assumptions regarding the estimated future cash flows and other factors to determine the fair value of a reporting unit, including, among other things, estimates related to forecasts of future revenues, expected Adjusted EBITDA, expected capital expenditures and working capital requirements, which are based upon our long-range plan estimates.

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Changes in these assumptions could materially affect the determination of fair value for each reporting unit.

No impairment charges were identified in connection with our annual goodwill impairment test with respect to our identified reporting units.

However, our Tooling and Stamping reporting unit fair value was not substantially in excess of its carrying values as of December 31, 2022.

A slower than anticipated resolution of the supply chain issues related to the global semiconductor shortages that have hampered the automotive industry, higher than expected capital requirements, and/or an increase in the discount rate could result in future impairment indicators.

We determined that our other identified reporting units were not at risk of failing the goodwill impairment test as of December 31, 2022.

OTHER LONG-LIVED ASSETS

Long-lived assets are reviewed for impairment upon the occurrence of events or changes in circumstances that would indicate that the carrying value of the assets may not be recoverable.

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a sustained, significant decline in market pricing;

a significant

adverse change in legal or environmental factors or in the business climate;

a significant adverse change in legal or environmental factors or in the business climate;

changes in estimates of our recoverable reserves;

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We estimate fair value using a market approach, an income approach or a cost approach.

For the year ended December 31, 2021, we concluded that an event triggering the need for an impairment assessment did not occur.

For the year ended December 31, 2022, we concluded that there were no additional triggering events resulting in the need for an

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impairment assessment except for the announcement of the permanent closure of Mountain State Carbon, which resulted in a $29 million asset impairment charge.

INTEREST RATE RISK

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For example, a 100 basis point change to interest rates under our ABL Facility at the December 31, 2022 borrowing level would result in a change of $19 million to interest expense on an annual basis.

Additionally, a portion of our borrowing capacity and outstanding indebtedness under the ABL Facility bears interest at a variable rate based on LIBOR.

For a discussion of the attendant risk, see Part I - Item 1A, Risk Factors - III.

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Assets acquired and liabilities assumed in a business combination are recognized and measured based on their estimated fair values at the acquisition date, while the acquisition-related costs are expensed as incurred.

Any excess of the purchase consideration when compared to the fair value of the net tangible and intangible assets acquired, if any, is recorded as goodwill.

We engaged independent valuation specialists to assist with the

determination of the fair value of assets acquired, liabilities assumed, noncontrolling interest, and goodwill, for the acquisitions.

Any excess of the purchase consideration when compared to the fair value of the net tangible and intangible assets acquired is recorded as goodwill.

We engaged independent valuation specialists to assist with the determination of the fair value of assets acquired, liabilities assumed, noncontrolling interest, and goodwill, for the acquisitions.

If the initial accounting for the business combination is incomplete by the end of the reporting period in which the acquisition occurs, an estimate will be recorded.

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Technological progress could alleviate such factors or increase capacity of mineral reserves.

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We use our mineral reserve estimates, combined with our estimated annual production levels, to determine the mine closure dates utilized in recording the fair value liability for asset retirement obligations for our active operating mines.

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Since the liability represents the present value of the expected future obligation, a significant change in mineral reserves or mine lives could have a substantial effect on the recorded obligation.

We also utilize mineral reserves for evaluating potential impairments of mine asset groups as they are indicative of future cash flows and in determining maximum useful lives utilized to calculate depreciation, depletion and amortization of long-lived mine assets and in determining the estimated fair value of mineral reserves established through the purchase price allocation in a business combination.

We also utilize mineral reserves for evaluating potential impairments of goodwill and mine asset groups as they are indicative of future cash flows and in determining maximum useful lives utilized to calculate depreciation, depletion and amortization of long-lived mine assets.

The consolidated asset retirement obligation balance was $520 million as of December 31, 2022, of which $196 million related to active iron ore mine operations.

The total asset balance associated with our Steelmaking reportable segment was $18,326 million as of December 31, 2021, of which $1,622 million related to long-lived assets associated with our combined iron ore mine asset groups, and is inclusive of $231 million related to iron ore mineral reserves acquired through the AM USA Transaction.

The total goodwill balance associated with our Steelmaking reportable segment was $956 million as of December 31, 2022.

The total asset balance associated with our Steelmaking reportable segment was $18,070 million as of December 31, 2022, of which $1,559 million related to long-lived assets associated with our combined iron ore mine asset groups.

Depreciation, depletion and amortization expense for our combined iron ore mine asset groups was $161 million for the year ended December 31, 2022.

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The closure dates for a majority of our steelmaking facilities are indefinite, and as such, the asset retirement obligations are recorded at present values using estimated ranges of the economic lives of the underlying assets.

Changes in the base estimates of legal and contractual closure costs due to changes in legal or contractual requirements, available technology,

inflation, overhead or profit rates also could have a significant impact on the recorded obligations.

Changes in the base estimates of legal and contractual closure costs due to changes in legal or contractual requirements, available technology, inflation, overhead or profit rates also could have a significant impact on the recorded obligations.

Refer to NOTE 13 - ASSET RETIREMENT OBLIGATIONS, for further information.

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At December 31, 2022 and 2021, we had a valuation allowance of $390 million and $409 million, respectively, against our deferred tax assets.

Of these amounts, $70 million and $439 million relate to the U.S.

deferred tax assets at December 31, 2021 and 2020, respectively, and $339 million and $397 million relate to foreign deferred tax assets, respectively.

At December 31, 2022 and 2021, our U.S.

deferred tax assets were $48 million and $70 million, respectively, and our foreign deferred tax assets were $342 million and $339 million, respectively.

Our losses in Luxembourg in recent periods represent sufficient negative evidence to require a full valuation allowance against the deferred tax assets in that jurisdiction.

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income tax reform legislation may differ from our current estimates due to changes in the interpretations and assumptions made as well as additional regulatory guidance that may be issued.

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Accounting for uncertainty in income taxes recognized in the financial statements requires that a tax benefit from an uncertain tax position be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on technical merits.

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EMPLOYEE RETIREMENT BENEFIT OBLIGATIONS

We offer defined benefit pension plans, defined contribution pension plans and OPEB plans, primarily consisting of retiree healthcare benefits, to most employees in North America as part of a total compensation and benefits program.

The following is a summary of our U.S.

defined benefit pension and OPEB funding and expense:

Funding Expense (Benefit) Funding Expense (Benefit)

2019 $ 16 $ 22 $ 4 $ (2)

2020 50 (31) 25 8

163 (189) 180 86

2022 (Estimated) 4 (179) 138 72

1 The 2021 pension funding includes $118 million that was deferred as a result of the CARES Act.

Assumptions used in determining the benefit obligations and the value of plan assets for defined benefit pension plans and OPEB plans, primarily consisting of retiree healthcare benefits, that we offer are evaluated periodically by management.

Critical assumptions, such as the discount rate used to measure the benefit obligations, the expected long-term rate of return on plan assets, the medical care cost trend, and the rate of compensation increase are reviewed annually.

The following represents weighted-average assumptions used to determine benefit obligations and net benefit costs:

Pension Other Benefits

December 31, December 31,

2021 2020 2021 2020

Discount rate 2.75 % 2.34 % 3.01 % 2.71 %

Compensation rate increase 2.52 2.56 3.00 3.00

Expected return on plan assets 6.84 7.69 5.20 6.82

For the pension plans, the weighted-average expected return on plan assets for 2022 is 6.87%, an increase from 6.84% in 2021.

For the OPEB plans, the weighted-average expected return on plan assets for 2022 is 4.86%, a decrease from 5.20% in 2021.

The following represents assumed weighted-average health care cost trend rates:

Health care cost trend rate assumed for next year 2.36 % 6.05 %

Ultimate health care cost trend rate 4.50 4.59

Year that the ultimate rate is reached 2031 2031

We sponsor various defined benefit pension plans and OPEB plans for certain current employees and retirees.

For accounting purposes, we use various actuarial assumptions and methodologies to measure the plan obligations, assets and related net periodic benefit expense at the end of each year.

These assumptions include discount rates, expected return on plan assets, mortality rates, rates of compensation increase, healthcare trend rates and certain demographic assumptions.

Assumptions and calculations are reviewed by management and reflect our best estimates and judgment.

Future changes in assumptions or differences between actual and expected can significantly impact the future funded status of our plans as well as their related net periodic benefit expense.

We believe discount rates and expected return on assets are the most critical assumptions.

The discount rates used to measure plan liabilities as of the December 31 measurement date are determined individually for each plan.

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Discount rates for expense are calculated using the granular approach for each plan.

Depending on the plan, we use either company-specific base mortality tables or tables issued by the Society of Actuaries.

We use the Pri-2012 mortality tables from the Society of Actuaries with adjustments for blue collar, white collar or no collar depending on the plan.

On December 31, 2021, the assumed mortality improvement projection was updated from generational scale MP-2020 to generational scale MP-2021 for the Pri-2012 mortality tables.

Following are sensitivities of potential further changes in these key assumptions on the estimated 2022 pension and OPEB expense and the pension and OPEB obligations as of December 31, 2021:

(In Millions)

Increase (Decrease) in Expense Increase in

Benefit Obligation

Pension OPEB Pension OPEB

The expected return on plan assets are calculated on a plan-by-plan basis and take into account each plan's strategic asset allocation.

The calculation of rates by asset class are based primarily on our future expected returns and take into consideration the duration of the cash flows, active management and fees.

The difference between our expected return on plan assets assumptions and the actual returns are recorded in AOCI and ultimately affects future earnings in subsequent years.

Although our actual returns will likely differ from our estimate on any given year, the returns over the long term are expected to match our assumptions.

In 2023, our weighted average expected return on assets for pension and OPEB plans will increase from 6.87% to 7.66% and from 4.86% to 5.87%, respectively.

The increase is primarily related to a shift in investment strategy and asset mix for $2.9 billion of our pension and OPEB assets, to further align to the Company-wide investment strategy.

Cumulative actuarial gains and losses will be amortized to expense using the corridor method, where gains and losses are recognized if they exceed 10% of the greater of the fair value of plan assets or the plans' benefit obligations.

The amortization period will vary by plan.

The following are sensitivities of potential further changes in these key assumptions on the estimated 2023 pension and OPEB expense and the pension and OPEB obligations as of December 31, 2022:

Increase (Decrease) in Expense Increase in Benefit Obligation

(In millions) Pension OPEB Pension OPEB

Decrease discount rate 0.25% $ (2) $ 2 $ 92 $ 28

Decrease return on assets 1.00% 41 7 N/A N/A

Changes in actuarial assumptions, including discount rates, employee retirement rates, mortality, compensation levels, plan asset investment performance and healthcare costs, are determined based on analyses of actual and expected factors.

Changes in actuarial assumptions and/or investment performance of plan assets may have a significant impact on our financial condition due to the magnitude of our retirement obligations.

Refer to NOTE 9 - PENSIONS AND OTHER POSTRETIREMENT BENEFITS for further information.

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Uncertainties and risk factors that could affect our future performance and cause results to differ from the forward-looking statements in this report include, but are not limited to:

• disruptions to our operations relating to the ongoing COVID-19 pandemic, including the heightened risk that a significant portion of our workforce or on-site contractors may suffer illness or otherwise be unable to perform their ordinary work functions;

• continued volatility of steel, iron ore and scrap metal market prices, which directly and indirectly impact the prices of the products that we sell to our customers;

• uncertainties associated with the highly competitive and cyclical steel industry and our reliance on the demand for steel from the automotive industry, which has been experiencing a trend toward light weighting and supply chain disruptions, such as the semiconductor shortage, that could result in lower steel volumes being consumed;

• potential weaknesses and uncertainties in global economic conditions, excess global steelmaking capacity, oversupply of iron ore, prevalence of steel imports and reduced market demand, including as a result of the prolonged COVID-19 pandemic;

• severe financial hardship, bankruptcy, temporary or permanent shutdowns or operational challenges, due to the ongoing COVID-19 pandemic or otherwise, of one or more of our major customers, including customers in the automotive market, key suppliers or contractors, which, among other adverse effects, could lead to reduced demand for our products, increased difficulty collecting receivables, and customers and/or suppliers asserting force majeure or other reasons for not performing their contractual obligations to us;

• uncertainties associated with the highly competitive and cyclical steel industry and our reliance on the demand for steel from the automotive industry, which has been experiencing supply chain disruptions, such as the semiconductor shortage, and higher consumer interest rates, which could result in lower steel volumes being demanded;

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• severe financial hardship, bankruptcy, temporary or permanent shutdowns or operational challenges of one or more of our major customers, including customers in the automotive market, key suppliers or contractors, which, among other adverse effects, could disrupt our operations or lead to reduced demand for our products, increased difficulty collecting receivables, and customers and/or suppliers asserting force majeure or other reasons for not performing their contractual obligations to us;

• disruptions to our operations relating to an infectious disease outbreak or the COVID-19 pandemic, including workforce challenges and the risk that novel variants will prove resistant to existing vaccines or that new or continuing pandemic lockdowns in China will impact our ability to source certain critical supplies in a timely and predictable manner;

• risks related to U.S.

government actions with respect to Section 232, the USMCA and/or other trade agreements, tariffs, treaties or policies, as well as the uncertainty of obtaining and maintaining effective antidumping and countervailing duty orders to counteract the harmful effects of unfairly traded imports;

• impacts of existing and increasing governmental regulation, including potential environmental regulations relating to climate change and carbon emissions, and related costs and liabilities, including failure to receive or maintain required operating and environmental permits, approvals, modifications or other authorizations of, or from, any governmental or regulatory authority and costs related to implementing

improvements to ensure compliance with regulatory changes, including potential financial assurance requirements;

• potential impacts to the environment or exposure to hazardous substances resulting from our operations;

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• our ability to reduce our indebtedness or return capital to shareholders within the currently expected timeframes or at all;

• adverse changes in credit ratings, interest rates, foreign currency rates and tax laws;

• the outcome of, and costs incurred in connection with, lawsuits, claims, arbitrations or governmental proceedings relating to commercial and business disputes, environmental matters, government investigations, occupational or personal injury claims, property damage, labor and employment matters, or suits involving legacy operations and other matters;

• supply chain disruptions or changes in the cost or quality of energy sources, including electricity, natural gas and diesel fuel, or critical raw materials and supplies, including iron ore, industrial gases, graphite electrodes, scrap metal, chrome, zinc, coke and metallurgical coal;

• adverse changes in credit ratings, interest rates, foreign currency rates and tax laws, including adverse impacts as a result of the Inflation Reduction Act;

• the outcome of, and costs incurred in connection with, lawsuits, claims, arbitrations or governmental proceedings relating to commercial and business disputes, antitrust claims, environmental matters, government investigations, occupational or personal injury claims, property damage, labor and employment matters, or suits involving legacy operations and other matters;

• uncertain availability or cost, due to inflation or otherwise, of critical manufacturing equipment and spare parts;

• supply chain disruptions or changes in the cost, quality or availability of energy sources, including electricity, natural gas and diesel fuel, or critical raw materials and supplies, including iron ore, industrial gases, graphite electrodes, scrap metal, chrome, zinc, coke and metallurgical coal;

• problems or disruptions associated with transporting products to our customers, moving manufacturing inputs or products internally among our facilities, or suppliers transporting raw materials to us;

• the risk that the cost or time to implement a strategic or sustaining capital project may prove to be greater than originally anticipated;

• uncertainties associated with natural or human-caused disasters, adverse weather conditions, unanticipated geological conditions, critical equipment failures, infectious disease outbreaks, tailings dam failures and other unexpected events;

• disruptions in, or failures of, our information technology systems, including those related to cybersecurity;

• liabilities and costs arising in connection with any business decisions to temporarily idle or permanently close an operating facility or mine, which could adversely impact the carrying value of associated assets and give rise to impairment charges or closure and reclamation obligations, as well as uncertainties associated with restarting any previously idled operating facility or mine;

• our ability to realize the anticipated synergies and benefits of our recent acquisition transactions and to successfully integrate the acquired businesses into our existing businesses, including uncertainties associated with maintaining relationships with customers, vendors and employees and known and unknown liabilities we assumed in connection with the acquisitions;

• cybersecurity incidents relating to, disruptions in, or failures of, information technology systems that are managed by us or third parties that host or have access to our data and systems, including the loss, theft or corruption of sensitive or essential business or personal information and the inability to access or control systems;

• liabilities and costs arising in connection with any business decisions to temporarily or indefinitely idle or permanently close an operating facility or mine, which could adversely impact the carrying value of associated assets and give rise to impairment charges or closure and reclamation obligations, as well as uncertainties associated with restarting any previously idled operating facility or mine;

• our level of self-insurance and our ability to obtain sufficient third-party insurance to adequately cover potential adverse events and business risks;

• uncertainties associated with our ability to meet customers’ and suppliers’ decarbonization goals and reduce our GHG emissions in alignment with our own announced targets;

• challenges to maintaining our social license to operate with our stakeholders, including the impacts of our operations on local communities, reputational impacts of operating in a carbon-intensive industry that produces GHG emissions, and our ability to foster a consistent operational and safety track record;

• our ability to successfully identify and consummate any strategic capital investments or development projects, cost-effectively achieve planned production rates or levels, and diversify our product mix and add new customers;

• our actual economic mineral reserves or reductions in current mineral reserve estimates, and any title defect or loss of any lease, license, easement or other possessory interest for any mining property;

• availability of workers to fill critical operational positions and potential labor shortages caused by the ongoing COVID-19 pandemic, as well as our ability to attract, hire, develop and retain key personnel;

• our ability to maintain satisfactory labor relations with unions and employees;

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• unanticipated or higher costs associated with pension and OPEB obligations resulting from changes in the value of plan assets or contribution increases required for unfunded obligations;

• uncertain availability or cost of skilled workers to fill critical operational positions and potential labor shortages caused by experienced employee attrition or otherwise, as well as our ability to attract, hire, develop and retain key personnel;

• the amount and timing of any repurchases of our common shares;

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You are urged to carefully consider these risk factors.

Forward-looking and other statements in this Annual Report on Form 10-K regarding our GHG reduction plans and goals are not an indication that these statements are necessarily material to investors or required to be disclosed in our filings with the SEC.

In addition, historical, current and forward-looking GHG-related statements may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve and assumptions that are subject to change in the future.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS and is incorporated by reference and made a part hereof.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis