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Item 2. Management’s Discussion and Analysis

2023-10-25 compared with 2023-07-26 · 170 added, 152 removed, 404 unchanged (44% of the section changed)

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FINANCIAL SUMMARY

The following is a summary of our consolidated results for the three and six months ended June 30, 2023 and 2022 (in millions, except for diluted EPS):

The following is a summary of our consolidated results for the three and nine months ended September 30, 2023 and 2022 (in millions, except for diluted EPS):

Total Revenue Net Income Adjusted EBITDA Diluted EPS

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STEEL MARKET OVERVIEW

During the first half of 2023, we saw improving steel market conditions compared to the second half of 2022, which was led by the highest quarterly light vehicle production in North America since 2019, low inventory levels at service centers and a stronger than

historical raw materials market.

Although we have seen sequentially improved market conditions, the price for domestic HRC, the most significant index impacting our revenues and profitability, averaged $1,065 per net ton for the second quarter of 2023, 19% lower than the second quarter of 2022, but well above the prior annual ten-year average of approximately $750 per net ton and $875 per net ton during the first quarter of 2023.

Demand for steel from automotive manufacturers improved as supply chain issues continued to ease and light vehicle sales increased, reducing the availability of steel supply to the spot market.

During the second quarter of 2023, service center inventories reached their lowest level since the first quarter of 2021, with only 1.5 months of inventory on hand.

These low inventory levels should generate significant demand for steel throughout the remainder of 2023 as service centers will need to meet the continued strong demand from their end-use customers.

Additionally, steel imports remained unattractive for the majority of the first half of 2023.

Looking forward, we expect domestic steel demand to remain healthy to the extent that these conditions persist.

The CHIPS Act and Inflation Reduction Act should provide meaningful support for overall domestic steel demand throughout 2023 and beyond.

Steel market conditions in 2023 have been marked by notable volatility, driven by both improved light vehicle production but also inconsistent service center buying behavior.

The price for domestic HRC, the most significant index impacting our revenues and profitability, averaged $792 per net ton for the third quarter of 2023, 5% lower than the third quarter of 2022, but above the prior annual ten-year average of approximately $750 per net ton.

Demand for steel from automotive manufacturers has improved in 2023 as supply chain issues continued to ease and light vehicles sales have increased.

In 2023, the automotive industry had the highest light vehicle production through the first nine months of a year since 2019.

Demand for steel from service centers was adversely impacted during the third quarter of 2023 due to the anticipation of and ultimate UAW strike at certain domestic automotive producers.

During the third quarter of 2023, service center inventories were as low as 1.6 months of inventory on hand, significantly lower than the prior ten-year average of 2.2 months of inventory on hand.

These low inventory levels should generate significant demand for steel throughout the remainder of 2023 and beyond as service centers will need to meet the continued healthy demand from their end-use customers.

Additionally, steel imports have remained unattractive for the majority of the first nine months of 2023 due to low pricing spreads between the U.S.

and other regions.

Looking forward, we expect domestic steel demand to remain healthy as an eventual resolution of the UAW strike should provide meaningful support for steel demand.

The CHIPS Act and Inflation Reduction Act should provide meaningful support for overall domestic steel demand through the remainder of 2023 and beyond.

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

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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 lower than historical dealer inventory levels.

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 a low unemployment rate, recent supply chain issues and lower than historical dealer inventory levels.

The Inflation Reduction Act also 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.

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

We expect to benefit from the spending related to this recently passed legislation for years to come.

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

During the second quarter of 2023, North American light vehicle production was approximately 4.1 million units, the highest quarterly production volume since 2019.

During the third quarter of 2023, North American light vehicle production was approximately 4.0 million units, down from 4.1 million units in the second quarter of 2023, but higher than any quarterly production volume in 2021 or 2022.

Full-year 2023 North American light vehicle production is estimated to exceed 15 million units, which would also be the highest level since 2019.

During the first six months of 2023, light vehicle sales in the U.S.

North American light vehicle production in 2024 is estimated to exceed 16 million units, implying that any negative impact to production due to the UAW strike is a deferral of demand rather than lost production.

During the first nine months of 2023, light vehicle sales in the U.S.

saw an average seasonally adjusted annualized rate of 15.5 million units sold, representing a 14% increase compared to the same period for 2022.

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

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

is at an all-time high of 12.5 years, 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 over the coming years.

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

The price for busheling scrap, a necessary input for flat-rolled steel production in EAFs in the U.S., has continued to average well above the prior annual ten-year average of $380 per long ton since 2021.

The busheling price averaged $515 per long ton during the second quarter of 2023.

The busheling price averaged $446 per long ton during the third quarter of 2023 and $491 per long ton through the first nine months of 2023.

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

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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 $111 per metric ton in the second quarter of 2023, which is 14% higher than the prior annual ten-year average.

As for iron ore, the Platts 62% price averaged $114 per metric ton in the third quarter of 2023, which is 18% higher than the prior annual ten-year average.

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

OTHER FACTORS

Federal Reserve has pushed interest rates to the highest level in more than 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.

On September 14, 2023, the UAW announced a simultaneous labor strike against three domestic automotive manufacturers, as each of the individual companies have been unable to come to terms on a new labor agreement.

The strike originally impacted one assembly plant at each company and was further expanded to additional facilities, including certain parts-distribution centers for each company.

Steel demand has remained strong from the automotive industry as the strike has been limited to certain facilities, allowing the automotive manufacturers to continue production at other facilities within their footprint.

While we have not yet experienced a meaningful impact from the UAW strike, an expanded or prolonged strike could have negative impacts on demand for automotive steel or domestic automotive production.

In January 2023, we announced that we partnered with the USW and filed antidumping and countervailing duty petitions against eight countries related to unfairly traded tin and chromium coated sheet steel products.

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Department of Commerce announced its preliminary affirmative determination in the countervailing duty investigation of tin mill products from China and imposed subsidy rates ranging from 89.02% to 542.55%, based on the exporter.

Favorable rulings from the U.S.

Department of Commerce will positively impact our ability to continue to produce tin mill products at our Weirton facility, which employs approximately 900 people, the majority of whom are USW-represented.

On August 17, 2023, the U.S.

Commerce Department announced that it had set preliminary antidumping duties on imports of tin and chromium-coated sheet steel products from Canada, China and Germany.

The department determined that imports of these tin mill products were sold to the United States at less than normal value.

The department set preliminary antidumping tariffs ranging from 5.29% to 111.98%.

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 started to benefit from lower costs in the first half of 2023 and expect that to continue throughout 2023 and beyond, as many inflationary pressures have started to ease, production volume has improved, and repair and maintenance expenses have begun to normalize.

We started to benefit from lower costs during the first nine months of 2023 and expect that to continue through the rest of 2023 and through 2024, as many inflationary pressures have started to ease, production volume has improved, and repair and maintenance expenses have begun to normalize.

COMPETITIVE STRENGTHS

As the largest flat-rolled steel producer in North America, we benefit from having the size and scale necessary in a competitive, capital intensive business.

As the leading flat-rolled steel producer in North America, we benefit from having the size and scale necessary in a competitive, capital intensive business.

Our sizeable operating footprint provides us with the operational leverage and flexibility to achieve competitive margins throughout the business cycle.

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Our primary competitive strength lies within our automotive steel business.

We are the largest supplier of automotive-grade steel in the U.S.

We are a leading supplier of automotive-grade steel in the U.S.

Compared to other steel end markets, automotive steel is generally higher quality, more operationally and technologically intensive to produce, and requires significantly more devotion to customer service than other steel end markets.

This dedication to service and the infrastructure in place to meet our automotive customers’ demanding needs took decades to develop and we believe is unmatched in our industry.

We have continued to invest capital and resources to meet the requirements needed to serve the automotive industry and intend to maintain our position as the industry leader going forward.

This dedication to service and the infrastructure in place to meet our automotive customers’ demanding needs took decades to develop.

We have continued to invest capital and resources to meet the requirements needed to serve the automotive industry and intend to maintain our position as an industry leader going forward.

Due to its demanding nature, the automotive steel business typically generates higher through-the-cycle margins, making it a desirable end market.

Over the past two years, we have been able to increase the fixed prices for our automotive contracts significantly.

Demand for our automotive-grade steel is expected to increase in the coming years as a result of pent-up automotive demand arising out of supply chain issues and the replacement of older vehicles.

Our integrated footprint provides us with a significant competitive advantage in supplying automotive and other highly demanding end markets, as we are able to produce a wide range of high-quality products.

Our integrated facilities utilize domestic internally sourced iron ore as the primary feedstock, which allows us to produce a higher quality product with low residual content.

We also operate EAF facilities, which gives us insight into the limitations of our competitors who predominantly operate only EAF facilities.

Companies that are primarily EAF producers are limited in their product range as their equipment is designed to utilize scrap as the main feedstock, which often contains high residual or impure content, such as copper, limiting their ability to produce certain high grades of steel that demand virgin iron.

We also believe companies that primarily operate EAFs do not possess our breadth and depth of customer service, technical support, and research and development capabilities.

Demand for our automotive-grade steel is expected to remain strong in the coming years as a result of low unemployment, pent-up automotive demand arising out of supply chain issues and the replacement of older vehicles.

Our footprint provides us with a competitive advantage in supplying automotive and other highly demanding end markets, as we are able to produce a wide range of high-quality products.

Our integrated facilities utilize domestic internally sourced iron ore as the primary feedstock, which allows us to produce a high quality product with low residual content.

We also possess the breadth and depth related to customer service, technical support, and research and development, which are necessary to supply the demanding needs of the automotive industry.

Since the acquisition of our steelmaking assets, we have dedicated significant resources to maintain and upgrade our facilities and equipment.

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Our fixed price contracts mitigate pricing volatility and support us in achieving healthy margins through the cycle.

We were able to achieve consecutive fixed price contract increases in 2022 and 2023.

We expect to have continued success in resetting our annual fixed price contracts throughout the remainder of 2023 and in the coming years.

Our ability to source our primary feedstock domestically and internally is a competitive strength.

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The ongoing conflict between Russia and Ukraine has displayed the importance of our U.S.-centric footprint, as our competitors who primarily operate EAF facilities rely on imported pig iron to produce flat-rolled steel, the supply of which has been disrupted by that conflict.

The best example is our legacy business of producing iron ore pellets.

The best example is our legacy business of producing iron ore

By controlling our iron ore pellet supply, our primary steelmaking raw material feedstock can be secured at a stable and predictable cost and not be subject to as many factors outside of our control.

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Across the quality spectrum and the supply chain, our customers can frequently find the solutions they need from our product selection.

Our broad range of product offerings also gives us a competitive advantage in commercial negotiations as our customers can source the majority, if not all, of their steel product needs from us.

We are currently the only producer of electrical steels referred to as GOES and NOES in the U.S.

We are currently a leading producer of electrical steels referred to as GOES and NOES in the U.S.

In November 2021, the Infrastructure and Jobs Act was passed in the U.S., which provides funding to be used for the modernization of the electrical grid and the infrastructure needed to allow for increased EV adoption, both of which require electrical steels.

As a result, with increased demand for both transformers and motors for EVs, we expect to benefit from this position in what is currently a rapidly growing market.

In 2023, our electrical steel business is expected to post the highest profitability in over a decade.

We also recently commissioned our NOES expansion at our Zanesville facility, which will ultimately increase our capacity by approximately 70,000 net tons.

As a result, we expect to benefit from this position in what we forecast as a rapidly growing market.

Our electrical steel business is expected to achieve strong profitability throughout the remainder of 2023 and in the coming years.

We also recently commissioned our NOES expansion at our Zanesville facility, which will ultimately increase our annual capacity by approximately 70,000 net tons.

We are the first and the only producer of HBI in the Great Lakes region.

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We offer a full suite of flat steel products encompassing all steps of the steel manufacturing process.

We have an industry-leading market share in the automotive sector, where our portfolio of high-end products delivers a broad range of differentiated solutions for this highly sought after customer base.

We are a leading supplier to the automotive sector, where our portfolio of high-end products delivers a broad range of differentiated solutions for this highly sought after customer base.

As a result of our exposure to these high-end markets, we have the highest fixed price contractual volumes in our industry.

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These contracts reduce volatility and allow for more predictable through-the-cycle margins.

Our fixed-price contract values are expected to significantly improve throughout 2023 compared to 2022.

In addition to our fixed price contracts, we anticipate having more volumes under index-linked contracts in 2023 and beyond, which should reduce our reliance on spot sales and allow us to improve our efficiency with increased volumes.

Our fixed-price contract values significantly improved throughout 2023 compared to 2022.

In addition to our fixed price contracts, we also sell significant volumes under index-linked contracts, which reduces our reliance on spot sales and allows us to improve our efficiency with increased volumes.

Our unique capabilities, driven by our portfolio of assets and technical expertise, give us an advantage in our flat-rolled product offering.

We offer products that have superior formability, surface quality, strength and corrosion resistance for the automotive industry.

We are also the only producer of GOES and NOES in the U.S.

In addition, our state-of-the-art Research and Innovation Center in Middletown, Ohio gives us the ability to collaborate with our customers and create new products and develop new and efficient steel manufacturing processes.

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We also recently introduced our C-STAR™ protection steel, which was developed for the purpose of providing battery support in EVs, but can be used in any type of light vehicle.

These unique product offerings and customer service capabilities enable us to remain the leading steel supplier to the automotive industry.

These unique product offerings and customer service capabilities enable us to remain a leading steel supplier to the automotive industry.

TAKE ADVANTAGE OF OUR U.S.-CENTRIC, INTERNALLY SOURCED SUPPLY CHAIN

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While competitors are forced to rely on suppliers who are subject to unpredictable disruptions in their ability to supply materials, we are able to take advantage of our vertically integrated footprint.

We began construction of our HBI plant in 2017, in part because of the uncertainty of the industry sourcing metallics from Russia and Ukraine.

We began construction of our Toledo direct reduction plant in 2017, in part because of the uncertainty of the industry sourcing metallics from Russia and Ukraine.

Russia had previously invaded the Crimea peninsula in 2014, and we saw a need for more on-shore metallics capacity in the U.S.

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We have ample access to scrap along with internally sourced iron ore pellets and HBI.

Our ability to optimize use of these raw materials in our blast furnaces and BOFs ultimately boosts liquid steel output, reduces coke needs and lowers carbon emissions from our operations.

Our ability to optimize use of these raw materials in our blast furnaces and BOFs ultimately boosts liquid steel output, reduces coke needs and lowers carbon emissions

from our operations.

As a result of successful operational improvements, we announced the indefinite idle of the Indiana Harbor #4 blast furnace in the first quarter of 2022.

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We are seeking to expand our customer base with the rapidly growing and desirable EV market.

At this time, we believe the North American automotive industry is approaching a structural inflection point, with the adoption of electrical motors in passenger vehicles.

At this time, we believe the North American automotive industry is at a structural inflection point, with the adoption of electrical motors in passenger vehicles.

As this market grows, it will require more advanced steel applications to meet the needs of EV producers and consumers.

These features include the already existing sophisticated steel supply for internal combustion engine vehicle parts, along with the

added need for steel-based battery enclosures in EVs.

These features include the already existing sophisticated steel supply for internal combustion engine vehicle parts, along with the added need for steel-based battery enclosures in EVs.

With our unique technical capabilities and leadership in the automotive industry, we believe we are positioned better than any other North American steelmaker to supply the steel and parts necessary to fill these needs.

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We estimate solar panels consume 40 tons of steel per megawatt of electricity.

We are currently the sole producer of electrical steel in the U.S., which can facilitate the modernization of the U.S.

We are currently a leading producer of electrical steel in the U.S., which can facilitate the modernization of the U.S.

electrical grid.

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Our 2022 absolute Scope 1 and Scope 2 GHG emissions were below our reduction goal well ahead of our 2030 target year.

On a per ton basis, we reduced our integrated Scope 1 and Scope 2 GHG intensity from 1.67 per metric ton of crude steel produced in 2021 to 1.60 in 2022.

Since 2017, we have reduced our absolute emissions by 32% from 44 million metric tons to 30 million metric tons of CO 2 e in 2022.

We plan to further our efforts towards our GHG emissions reduction goal by focusing on actionable, commercially viable technologies and solutions while supporting research for breakthrough technologies for the primary iron and steel sector.

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

With the U.S.

government funding toward the development of regional hydrogen hubs throughout the country, we expect to dramatically increase our use of hydrogen gas as both a reducing agent and energy source as the clean hydrogen production facilities come online.

In May 2023, we completed a successful blast furnace hydrogen injection trial at Middletown Works.

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In this trial, hydrogen served as a partial substitute for the fossil fuels necessary for iron reduction, ultimately replacing the release of CO 2 with the release of H 2 O (water vapor) with no impact to product quality or operating efficiency.

Additionally, we support the development of alternative energy sources - such as wind and solar - which will benefit our own environmental footprint while combating the global impacts of climate change.

In October 2023, the U.S.

Department of Energy announced the intention to award funding under the Bipartisan Infrastructure Law for seven regional hydrogen hubs, including the Midwest Alliance for Clean Hydrogen.

This hub covering Illinois, Indiana and Michigan was selected for $1 billion in funding and is near our two largest steel plants, Indiana Harbor and Burns Harbor.

We are currently constructing a pipeline to bring hydrogen to our Indiana Harbor blast furnace #7.

The use of hydrogen within our blast furnace is expected to partially displace the release of CO2 with H2O, reducing our overall emissions.

Our future GHG emissions reductions are expected to be driven by the use of direct reduced iron in blast furnaces, the stretching of hot metal with additional scrap, driving more productivity out of fewer blast furnaces, implementing hydrogen use where possible, utilizing carbon capture, procuring more clean energy and operating with higher energy efficiency.

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Since the acquisition of our steelmaking assets, we have demonstrated our ability to generate healthy free cash flow and use it to reduce substantial amounts of debt, return capital to shareholders through our share repurchase program and make investments to both improve and grow our business.

During the second quarter of 2023, we reduced the principal amount of outstanding debt by $588 million while returning $94 million in capital to shareholders via share repurchases.

We have also shown our ability to take advantage of volatility in the debt markets and repurchase notes at a discount.

During the third quarter of 2023, we reduced the principal amount of outstanding debt by $508 million while returning $58 million in capital to shareholders via share repurchases.

We have also historically shown our ability to take advantage of volatility in the debt markets and repurchase notes at a discount.

During 2022, we repurchased $351 million aggregate principal amount of assorted series of notes at an average price of 92% of par.

Given healthy market conditions, we expect to have ample opportunities to reduce our debt with our own free cash flow generation through the remainder of 2023 and in the coming years.

On April 14, 2023, we issued $750 million aggregate principal amount of our 6.750% 2030 Senior Notes at par.

The net proceeds from the 6.750% 2030 Senior Notes issuance were used to repay a portion of the borrowings under our ABL Facility.

The transaction increased our financial flexibility and liquidity, extended our debt maturity profile, and was effectively leverage and interest expense neutral.

As of June 30, 2023, we maintained in excess of $800 million in pre-payable debt under our ABL Facility and another $1.5 billion in callable notes that we expect to continue to reduce with our free cash flow generation.

On June 9, 2023, we announced that we amended and extended our ABL Facility pursuant to the Fourth ABL Amendment.

The Fourth ABL Amendment extends the maturity date of our ABL Facility to June 9, 2028.

The overall size of our ABL Facility was increased to $4.75 billion, which added $250 million of liquidity.

Additionally, the Fourth ABL Amendment enables us to increase our borrowing base by including assets of Ferrous Processing and Trading Company.

Following the transaction, we extended our debt maturity runway and have no debt maturities until 2026.

Our liquidity as of June 30, 2023 is the highest in our Company’s history.

We expect to have ample opportunities to reduce our debt with our own free cash flow generation through the remainder of 2023 and in the coming years.

It is also important for us to maintain sufficient liquidity.

Pursuant to the Fourth ABL Amendment, certain assets of Ferrous Processing and Trading Company were pledged as collateral to secure borrowings under the ABL Facility during the third quarter of 2023.

Our liquidity as of September 30, 2023 is the highest in our Company’s history.

STEELMAKING RESULTS

The following is a summary of our Steelmaking segment operating results for the three and six months ended June 30, 2023 and 2022 (dollars in millions, except for average selling price and shipments in thousands of net tons):

The following is a summary of our Steelmaking segment operating results for the three and nine months ended September 30, 2023 and 2022 (dollars in millions, except for average selling price and shipments in thousands of net tons):

Total Revenue Gross Margin Adjusted EBITDA Steel Shipments (nt)

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(In thousands of net tons) 2023 2022 % Change 2023 2022 % Change

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(In millions) 2023 2022 % Change 2023 2022 % Change

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Total Steelmaking revenues by market $ 5,443 $ 5,511 (1) % $ 16,377 $ 17,481 (6) %

Revenues decreased by 6% during the three months ended June 30, 2023, as compared to the prior-year period, primarily due to:

• A decrease of $399 million, or 22%, in revenues from the distributors and converters market, predominantly due to the average HRC price declining $245 per net ton, which was partially offset by increased hot-rolled steel shipments.

Revenues decreased by 1% during the three months ended September 30, 2023, as compared to the prior-year period, primarily due to:

• A decrease of $147 million, or 10%, in revenues from the distributors and converters market, predominantly due to the average HRC price declining, which was partially offset by increased hot-rolled steel shipments;

• A decrease of $110 million, or 13%, in revenues from the steel producers markets, predominantly due to the decrease in pricing indices for slabs and busheling scrap.

• These decreases were partially offset by an increase in the direct automotive market of $224 million, or 13%, primarily due to increases in selling prices as a result of favorable renewals of annual fixed-price contracts and an increase in shipments.

Revenues decreased by 9% during the six months ended June 30, 2023, as compared to the prior-year period, primarily due to:

• A decrease of $970 million, or 26%, in revenues from the distributors and converters market, predominantly due to the average HRC price declining $292 per net ton, which was partially offset by increased hot-rolled steel shipments.

Revenues decreased by 6% during the nine months ended September 30, 2023, as compared to the prior-year period, primarily due to:

• A decrease of $1,117 million, or 22%, in revenues from the distributors and converters market, predominantly due to the average HRC price declining, which was partially offset by increased hot-rolled steel shipments;

• A decrease of $506 million, or 18%, in revenues from the steel producers markets, predominantly due to the decrease in pricing indices for slabs and busheling scrap.

• These decreases were partially offset by an increase in revenues from the direct automotive market of $823 million, or 17%, predominantly due to increases in selling prices as a result of favorable renewals of annual fixed-price contracts and an increase in shipments.

Gross margin decreased by $338 million, or 35%, during the three months ended June 30, 2023, as compared to the prior-year period, primarily due to:

• A decrease in selling prices (approximately $800 million impact) predominantly due to lower spot prices, which was partially offset by favorable renewals of annual fixed price contracts.

• This decrease was partially offset by an increase in sales volume (approximately $200 million impact);

Gross margin increased by $129 million, or 38%, during the three months ended September 30, 2023, as compared to the prior-year period, primarily due to:

• A decrease in costs of production (approximately $500 million) driven by lower raw materials and utilities costs, including natural gas, coal, coke, alloys and scrap, coupled with decreased maintenance costs;

Gross margin decreased by $1,466 million, or 67%, during the six months ended June 30, 2023, as compared to the prior-year period, primarily due to:

• An increase in sales volume (approximately $100 million impact).

• These increases in gross margin were partially offset by a decrease in selling prices (approximately $400 million impact), predominantly due to lower spot prices, which was partially offset by favorable renewals of annual fixed price contracts.

Gross margin decreased by $1,337 million, or 53%, during the nine months ended September 30, 2023, as compared to the prior-year period, primarily due to:

• A decrease in selling prices (approximately $2.4 billion impact) predominantly due to lower spot prices, which was partially offset by favorable renewals of annual fixed price contracts.

• This decrease was partially offset by an increase in sales volume (approximately $600 million impact);

• A decrease in costs of production (approximately $400 million) driven by lower raw materials and utilities costs, including natural gas, coal, coke, alloys and scrap, coupled with decreased maintenance costs.

ADJUSTED EBITDA

Adjusted EBITDA from our Steelmaking segment for the three months ended June 30, 2023, decreased by $344 million, as compared to the three months ended June 30, 2022, primarily due to the decreased gross margin from our operations.

Additionally, our Steelmaking Adjusted EBITDA included $141 million and $100 million of Selling, general and administrative expenses for the three months ended June 30, 2023 and 2022, respectively.

Adjusted EBITDA from our Steelmaking segment for the six months ended June 30, 2023, decreased by $1,528 million, as compared to the six months ended June 30, 2022, primarily due to the decreased gross margin from our operations.

Additionally, our Steelmaking Adjusted EBITDA included $260 million and $214 million of Selling, general and administrative expenses for the six months ended June 30, 2023 and 2022, respectively.

Adjusted EBITDA from our Steelmaking segment for the three months ended September 30, 2023, increased by $156 million, as compared to the three months ended September 30, 2022, primarily due to the increased gross margin from our operations.

Additionally, our Steelmaking Adjusted EBITDA included $138 million and $117 million of Selling, general and administrative expenses for the three months ended September 30, 2023 and 2022, respectively.

Adjusted EBITDA from our Steelmaking segment for the nine months ended September 30, 2023, decreased by $1,372 million, as compared to the nine months ended September 30, 2022, primarily due to the decreased gross margin from our operations.

Additionally, our Steelmaking Adjusted EBITDA included $398 million and $331 million of Selling, general and administrative expenses for the nine months ended September 30, 2023 and 2022, respectively.

RESULTS OF OPERATIONS

REVENUES & GROSS MARGIN

During the three and six months ended June 30, 2023, our consolidated Revenues decreased by $353 million and $1,013 million, respectively, compared to the prior-year periods.

The decrease for the three months ended June 30, 2023, was primarily due to the decrease in the average steel product selling price of $232 per net ton, partially offset by the increase of 0.6 million net tons of steel shipments from our Steelmaking segment.

The decrease for the six months ended June 30, 2023, was primarily due to the decrease in the average steel product selling price of $273 per net ton, partially offset by the increase of 1.0 million net tons of steel shipments from our Steelmaking segment.

During the three and six months ended June 30, 2023, our consolidated gross margin decreased by $337 million and $1,487 million, respectively, as compared to the prior-year periods.

During the three and nine months ended September 30, 2023, our consolidated Revenues decreased by $48 million and $1,061 million, respectively, compared to the prior-year periods.

The decrease for the three months ended September 30, 2023, was primarily due to the decrease in the average steel product selling price of $157 per net ton, partially offset by the increase of 0.5 million net tons of steel shipments from our Steelmaking segment.

The decrease for the nine months ended September 30, 2023, was primarily due to the decrease in the average steel product selling price of $235 per net ton, partially offset by the increase of 1.5 million net tons of steel shipments from our Steelmaking segment.

During the three and nine months ended September 30, 2023, our consolidated gross margin increased by $132 million and decreased by $1,355 million, respectively, as compared to the prior-year periods.

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

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

During the three and six months ended June 30, 2023, Selling, general and administrative expenses increased by $42 million and $47 million, respectively, as compared to the prior-year periods.

During the three and nine months ended September 30, 2023, Selling, general and administrative expenses increased by $20 million and $67 million, respectively, as compared to the prior-year periods.

The increases were primarily related to higher employment-related costs and outside legal fees.

MISCELLANEOUS - NET

During the three and six months ended June 30, 2023, Miscellaneous – net decreased by $22 million and $52 million, respectively, as compared to the prior-year periods.

The decrease in miscellaneous expense for the three months ended June 30, 2023, was primarily related to the expense in 2022 related to our asset retirement obligation, which was caused by rising electricity costs associated with water management systems at our closed coal mines in Pennsylvania, which was not repeated during 2023.

The decrease in miscellaneous expense for the six months ended June 30, 2023 was also impacted by an impairment expense in 2022, which was not repeated during 2023.

During the three and nine months ended September 30, 2023, miscellaneous expense decreased by $26 million and $78 million, respectively, as compared to the prior-year periods.

The decrease in miscellaneous expense for the three months ended September 30, 2023, was primarily related to lower idle expenses and loss on disposal of assets as compared to the prior-year period.

The decrease in miscellaneous expense for the nine months ended September 30, 2023, was also impacted by the higher expenses in 2022 related to our asset retirement obligation, which was caused by rising electricity costs associated with water management systems at closed coal mines in Pennsylvania and an impairment expense, both of which were not repeated during 2023.

Our effective tax rate is impacted by state income tax expense and permanent items, primarily depletion.

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(In millions) 2023 2022 2023 2022

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Effective tax rate 10 % 6 % 17 % 20 %

The decrease in income tax expense for the three and six months ended June 30, 2023, as compared to the prior-year periods, is directly related to the change in pre-tax income.

Our 2023 estimated annual effective tax rate before discrete items at June 30, 2023 is 22%.

This estimated annual effective tax rate exceeds the U.S.

statutory rate of 21%, as state income tax expense exceeds the percentage depletion in excess of cost depletion.

The 2022 estimated annual effective tax rate before discrete items at June 30, 2022 was 22%.

The changes in income tax expense and the effective tax rate for the three and nine months ended September 30, 2023, as compared to the prior-year periods, are primarily related to the changes in pre-tax income.

Additionally, for the nine months ended September 30, 2023, we had $18 million of discrete benefit, as compared to $3 million of discrete expense for the nine months ended September 30, 2022.

Our 2023 estimated annual effective tax rate before discrete items at September 30, 2023 is 19%.

This estimated annual effective tax rate is less than the U.S.

statutory rate of 21%, as state income tax expense is less than the percentage depletion in excess of cost depletion.

The 2022 estimated annual effective tax rate before discrete items at September 30, 2022 was 20%.

LIQUIDITY, CASH FLOWS AND CAPITAL RESOURCES

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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:

Six Months Ended

The following table provides a summary of our cash flow:

Nine Months Ended

September 30,

(In millions) 2023 2022

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Financing activities (1,140) (1,199)

Net increase (decrease) in cash and cash equivalents $ 8 $ (1)

Net increase in cash and cash equivalents $ 5 $ 8

Free cash flow 1

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

$ 1,134 $ 1,218

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

The recent market environment has provided us opportunities to reduce our debt and return capital to shareholders with our 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 the first six months of 2023, we took action in alignment with our capital allocation priorities, as follows:

During the first nine months of 2023, we took action in alignment with our capital allocation priorities, as follows:

• We issued $750 million aggregate principal amount of our 6.750% 2030 Senior Notes.

The net proceeds from the 6.750% 2030 Senior Notes issuance were used to repay a portion of the borrowings under our existing ABL Facility.

The net proceeds from the 6.750% 2030 Senior Notes issuance were used to repay a portion of the borrowings under our ABL Facility.

The transaction increased our financial flexibility and liquidity, extended our debt maturity profile, and was effectively leverage and interest expense neutral.

• We entered into the Fourth ABL Amendment, which, among other things, extended the maturity date of our ABL Facility to June 9, 2028, and increased the overall size of our ABL Facility to $4.75 billion, which added $250 million of liquidity.

• We used our free cash flow to reduce the total principal of our long-term debt by $789 million.

This includes a reduction of borrowings under the ABL Facility of $508 million during the third quarter of 2023.

• Additionally, we returned capital to shareholders through our share repurchase program, repurchasing 10.4 million common shares at a cost of $152 million in the aggregate.

This includes repurchasing 3.9 million common shares at a cost of $58 million during the third quarter of 2023.

These actions with respect to our debt give us additional financial flexibility and liquidity, along with extending our average maturity date, which will better prepare us to navigate more easily through potentially volatile industry conditions in the future.

Additionally, we expect to have opportunities to continue to reduce our debt and return capital to shareholders with our free cash flow generation during the remainder of 2023.

As of June 30, 2023, we maintained in excess of $800 million in pre-payable debt under our ABL Facility and another $1.5 billion in callable notes.

As of June 30, 2023, there was $666 million remaining under the authorization of our share repurchase program.

As of September 30, 2023, we maintained in excess of $300 million in pre-payable debt under our ABL Facility and another $1.5 billion in callable notes.

As of September 30, 2023, there was $608 million remaining under the authorization of our share repurchase program.

OPERATING ACTIVITIES

Six Months Ended

Nine Months Ended

September 30,

(In millions) 2023 2022 Variance

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The variance was driven by:

• A $1,413 million decrease in net income after adjustments for non-cash items primarily due to lower gross margins from lower steel sales prices.

• A $1,216 million decrease in net income after adjustments for non-cash items primarily due to lower gross margins resulting from a decrease in selling prices for our steel products, which was partially offset by an increase in sales volumes and a decrease in costs of production.

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

• A $897 million decrease in cash used for working capital.

This was primarily due to a decrease in inventories, as a result of higher sales volumes and lower production costs during the six months ended June 30, 2023, as compared to the prior-year period.

Additionally, working capital was impacted by a decrease in repair and maintenance costs during the six months ended June 30, 2023.

This was primarily due to a decrease in inventories, as a result of higher sales volumes and lower production costs during the nine months ended September 30, 2023, as compared to the prior-year period.

Cash used for OPEB payments and contributions decreased as well due to reductions in retiree healthcare costs and the pause on the VEBA trust plans funding requirements as part of the 2022 USW labor negotiations.

Additionally, working capital was impacted by a decrease in repair and maintenance costs during the nine months ended September 30, 2023.

INVESTING ACTIVITIES

Six Months Ended

Nine Months Ended

September 30,

(In millions) 2023 2022 Variance

Purchase of property, plant and equipment $ (481) $ (716) $ 235

Acquisitions, net of cash acquired — (31) 31

Other 11 20 (9)

Net cash used by investing activities $ (470) $ (727) $ 257

Our cash used for capital expenditures decreased $149 million due to the completion of our major maintenance cycle in 2022.

Cash used for capital expenditures decreased $235 million due to the completion of our major maintenance cycle in 2022.

Included within cash used for capital expenditures was $21 million for the nine months ended September 30, 2023, compared to $11 million for the nine months ended September 30, 2022, related to our non-owned SunCoke Middletown VIE.

Our capital expenditures primarily relate to sustaining capital spend, which includes infrastructure, mobile equipment, fixed equipment, product quality, environmental, and health and safety.

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FINANCING ACTIVITIES

Six Months Ended

Nine Months Ended

September 30,

(In millions) 2023 2022 Variance

Proceeds (repayments) of debt $ 750 $ (1,319) $ 2,069

Proceeds (repayments) of senior notes $ 750 $ (1,355) $ 2,105

Net borrowings (repayments) under credit facilities (1,539) 481 (2,020)

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The variance was driven by:

• A $402 million decrease in cash used during the six months ended June 30, 2023, resulting from lower net repayments of debt, partially offset by increased repayments on our ABL Facility, as compared to the prior-year period.

• A $59 million decrease in cash used during the nine months ended September 30, 2023, primarily resulting from lower net repayments of senior notes, partially offset by increased repayments on our ABL Facility, as compared to the prior-year period.

LIQUIDITY AND CAPITAL RESOURCES

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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 $34 million as of June 30, 2023, include cash on hand and on deposit.

The combination of cash and availability under our ABL Facility gives us $3.83 billion in liquidity as of June 30, 2023.

Cash and cash equivalents, which totaled $31 million as of September 30, 2023, include cash on hand and on deposit.

The combination of cash and availability under our ABL Facility gives us $4.36 billion in liquidity as of September 30, 2023.

During the second quarter of 2023, we issued $750 million in aggregate principal amount of our 6.750% 2030 Senior Notes.

We used the net proceeds from the offering to repay a portion of the borrowings under our ABL Facility, increasing our liquidity.

Additionally, we entered into the Fourth ABL Amendment to our ABL Facility, increasing our liquidity by $250 million.

Additionally, during the second quarter of 2023, we entered into the Fourth ABL Amendment to our ABL Facility, increasing our liquidity by $250 million.

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.

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

As of June 30, 2023, outstanding letters of credit totaled $117 million, which reduced availability.

As of September 30, 2023, outstanding letters of credit totaled $94 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, operating agreements, employee severance, environmental obligations and insurance.

Our ABL Facility agreement contains various financial and other covenants.

As of June 30, 2023, we were in compliance with all of our ABL Facility covenants.

As of September 30, 2023, 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 and ABL Facility, additional secured notes, if we elect to access the debt capital markets.

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(In millions) 2023 2022 2023 2022

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$ 20 $ 22 $ 60 $ 57

Loss on extinguishment of debt — (66) — (80)

Gain (loss) on extinguishment of debt — 4 — (76)

Asset impairment — — — (29)

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(In millions) 2023 2022 2023 2022

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FREE CASH FLOW

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

Free cash flow is a non-GAAP financial measure defined as operating cash flow 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.

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

Six Months Ended

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

Nine Months Ended

September 30,

(In millions) 2023 2022

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Purchase of property, plant and equipment (481) (716)

Free cash flows $ 529 $ 930

Free cash flow $ 1,134 $ 1,218

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") as of June 30, 2023 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, the 6.750% 2030 Senior Notes, and the 4.875% 2031 Senior Notes issued by Cleveland-Cliffs Inc.

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") as of September 30, 2023 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, the 6.750% 2030 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 issued by Cleveland-Cliffs Inc.

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(parent company and issuer of the guaranteed obligations) and the Guarantor subsidiaries, collectively referred to as the obligated group.

Transactions between the obligated group have been eliminated.

between the obligated group have been eliminated.

Information for the non-Guarantor subsidiaries was excluded from the combined summarized financial information of the obligated group.

Each Guarantor subsidiary is consolidated by Cleveland-Cliffs Inc.

as of June 30, 2023.

Refer to Exhibit 22 , incorporated herein by reference, for the detailed list of entities included within the obligated group as of June 30, 2023.

As of June 30, 2023, 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, the 6.750% 2030 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:

as of September 30, 2023.

Refer to Exhibit 22 , incorporated herein by reference, for the detailed list of entities included within the obligated group as of September 30, 2023.

As of September 30, 2023, 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, the 6.750% 2030 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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The accompanying summarized combined financial information does not reflect investments of the obligated group in non-Guarantor subsidiaries.

The financial information of the obligated group is presented on a combined

The financial information of the obligated group is presented on a combined basis;

intercompany balances and transactions within the obligated group have been eliminated.

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

(In millions) June 30, 2023 December 31, 2022

(In millions) September 30, 2023 December 31, 2022

Current assets $ 6,867 $ 7,063

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

Six Months Ended

(In millions) June 30, 2023

Nine Months Ended

(In millions) September 30, 2023

Revenues $ 16,679

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The obligated group had the following balances with non-Guarantor subsidiaries and other related parties:

(In millions) June 30, 2023 December 31, 2022

(In millions) September 30, 2023 December 31, 2022

Balances with non-Guarantor subsidiaries:

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Accounts payable (12) (13)

Additionally, for the six months ended June 30, 2023, the obligated group had Revenues of $71 million and Cost of goods sold of $52 million, in each case, with other related parties.

Additionally, for the nine months ended September 30, 2023, the obligated group had Revenues of $95 million and Cost of goods sold of $70 million, in each case, with other related parties.

We are subject to a variety of risks, including those caused by changes in commodity prices and interest rates.

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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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However, since we do not typically hedge 100% of our exposure, abnormal price increases in any of these commodity markets might still negatively affect operating costs.

The following table summarizes the negative effect of a hypothetical change in the fair value of our derivative instruments outstanding as of June 30, 2023, due to a 10% and 25% change in the market price of each of the indicated commodities:

The following table summarizes the negative effect of a hypothetical change in the fair value of our derivative instruments outstanding as of September 30, 2023, due to a 10% and 25% change in the market price of each of the indicated commodities:

Commodity Derivative (In millions) 10% Change 25% Change

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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.

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.

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

Our Tooling and Stamping reporting unit fair value was not substantially in excess of its carrying values as of June 30, 2023.

Our Tooling and Stamping reporting unit fair value was not substantially in excess of its carrying values as of September 30, 2023.

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.

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

For the six months ended June 30, 2023, we concluded that there were no additional triggering events resulting in the need for an impairment assessment.

For the nine months ended September 30, 2023, we concluded that there were no additional triggering events resulting in the need for an impairment assessment.

INTEREST RATE RISK

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Interest payable under our ABL Facility is at a variable rate based upon the applicable base rate plus the applicable base rate margin depending on the excess availability.

As of June 30, 2023, we had $833 million outstanding under our ABL Facility.

As of September 30, 2023, we had $325 million outstanding under our ABL Facility.

An increase in prevailing interest rates would increase interest expense and interest paid for any outstanding borrowings under our ABL Facility.

For example, a 100 basis point change to interest rates under our ABL Facility at the June 30, 2023 borrowing level would result in a change of $8 million to interest expense on an annual basis.

For example, a 100 basis point change to interest rates under our ABL Facility at the September 30, 2023 borrowing level would result in a change of $3 million to interest expense on an annual basis.

SUPPLY CONCENTRATION RISKS

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• 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 supply chain disruptions, such as the semiconductor shortage, and higher consumer interest rates, which could result in lower steel volumes being demanded;

• 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, the UAW strike, and higher consumer interest rates, which could result in lower steel volumes being demanded;

• 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 inflationary pressures, infectious disease outbreaks, conflicts or otherwise;

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• 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;

• 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-related matters, 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;

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

• our ability to consummate any public or private acquisition transactions and to realize any or all of the anticipated benefits or estimated future synergies, as well as to successfully integrate any acquired businesses into our existing businesses;

• 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;

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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

Information regarding our market risk is presented under the caption "Market Risks," which is included in our Annual Report on Form 10-K for the year ended December 31, 2022, and Part I – Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations of this Quarterly Report on Form 10-Q.

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-Q

Item 2. Management’s Discussion and Analysis