DISTINGUISHED LECTURE.

• Author: Goncalves, Lourenco
• Position: Proceedings of the 42nd Canada-United States Law Institute Annual Conference: Back to the Future: The Canada-United States Relationship at a Crossroads

MR. PETRAS: All right. Everyone, welcome back for our keynote speech at lunch today. I am going to introduce the person who is going to introduce our keynote speaker. So it is my honor to introduce James Graham, Senior Vice President and General Counsel and Secretary of Cleveland Cliffs, a long standing company here in Cleveland. James and this Institute go way back. He has been involved for many years, and he is one of our new members of our Executive Committee. He is also a grad, a fellow grad of Case Western Reserve School of Law, and he is the chairman of the LLM International Advisory Board. So James, the floor is yours.

MR. GRAHAM: Good afternoon, everybody. I have a privilege of introducing Lourenco Goncalves. I met him first in August of 2014, when he single-handedly won a proxy fight and took over the board of Cleveland Cliffs. In fact, I was the first person that he met with at the company, and we had a discussion in a not very subtle way about how I was going to cut cost and staff in the legal department. Fortunately, I survived along with some of my best people who are here.

Starting that day, I got to know Lourenco well, and I appreciate his experience and expertise as an operator, innovator, salesperson, and visionary in the metal and mining industry.

Mr. Goncalves has been a vocal leader for the domestic battle against unfairly traded steel in the United States and a champion for the mine and steelworkers. Currently, he is an advocate for the industry on Capitol Hill with the U.S. Administration, with the media on a national and international level.

Since joining Cleveland Cliffs, Mr. Goncalves has implemented a strategy designed to strengthen the company's position as a major supplier of iron ore pellets to the U.S. steel industry, fix its previously overleveraged balance sheet, and cleanly exit from non-ore and unprofitable operations.

With these goals complete, Cleveland Cliffs is now positioned for growth. In 2017, Mr. Goncalves announced plans to make the company the sole producer of hot briquetted iron ore, HBI, in the Great Lakes region. The groundbreaking for this $700 million project in Toledo, Ohio, took place last week, and through Mr. Goncalves' leadership, we have begun construction ahead of schedule. The future of the company is here. Please welcome my boss, mentor, and friend, Lourenco Goncalves, Chairman, President and CEO of Cleveland Cliffs.

(Applause.)

MR. GONCALVES: Thank you, James. Good afternoon, everyone. It is a big pleasure to be here, to be talking about things that are affecting us here, particularly here in Cleveland in the Great Lakes, which have two countries on both sides, United States and Canada.

We are well positioned as a business to affect this region, which straddles both sides of the border. We have been talking a lot about trade, trade restrictions, trade wars, things like that. Just to make abundantly clear, we don't have a tariff on iron ore. We don't need a tariff on iron ore. We are not going to see foreign iron ore here in the United States because we produce the type of products, taconite pellets, that feed the blast furnaces, that produce steel both in the United States and in Canada in a way that people can replicate, particularly the big producers of iron ore, particularly Australia, the biggest producer.

Australia produces more than one billion tons of iron ore, one billion a year. We produce 20 million, million. And they still can't come here. They still can't compete here. They still can't deliver here because the iron ore that they produce in Australia and feed mainly China, is highly polluting.

We can't use it in the First World. As China becomes a First World country, China will one day, and that day will come a lot faster than people believe, China will no longer use Australian iron ore they use today. It is coming, and it is coming fast, and not a lot of people are seeing that. We are.

And they are very well positioned. So I will not talk about problems in the iron ore. We are doing good. We are fine. The problem is with the perception around the steel business because there is a big perception still out there that the Chinese steel is better or more competitive, or we should allow the Chinese to do whatever they want because it is cheaper, and we don't ask the right questions.

The right questions are so obvious that it defies my understanding why we don't ask the simple question. The most simple question that we should be asking all the time--and you see guys all the time, a guy like Fareed Zakaria, the other day on his show on CNN said, look, China is just 2 percent of the trade in the United States. Why people talk so badly about China. They are so competitive. They are so good. They are so cheap. But he didn't ask the right question. He needs to ask, why Chinese steel is so much cheaper than anyone else?

A few reasons: Number one, there are absolutely no environmental controls in China. That's just another day in paradise; anywhere in China, could be Beijing; could be Shanghai; could be Harbin close to Siberia; could be Shenyang close to Korea. Anywhere in China, that's what you see. You never know if it is a sunny day or not a sunny day.

Second, China consumes products from Australia, Brazil, and others. These are the guys that are feeding the beast. I don't think that Australians or Brazilians or other countries that supply iron ore can even call themselves environmentalists because what they are doing there is destroying the environment.

Actually, South Korea and Japan produce steel the same way. The air in South Korea is a lot worse than the air in Japan. The only reason for that is the wind. The pollution coming from China hits South Korea very badly.

And when it gets to the reason--the reason is that the Chinese workers are paid very low wages. I would say they are paid lower wages, and I am talking about low wages, period. They creased a lot in the last two or three years.

They are now at $2 an hour. A steelworker in China makes $2 an hour. Let's do quick math, $2 an hour times eight hours a day, times six days a week because they work Saturdays times 52 weeks, less than $5,000 a year. I will let you think about that. That's the type of competition that we are facing.

And they don't pay that just to the steelworkers. It goes to everything that they produce in China. And on top of that, the Chinese government helps them a lot to export what people use. So government subsidies to export massive amounts of steel are the rule, are the way it works. Let's talk about the massive amounts.

Let's put numbers. I like numbers. I like facts, so I am not just going to give you my speech here and my points--and by the end, at the end, feel free to disagree and ask questions, and bother me with different points of view because that's what makes the thing fun.

So let's go back to numbers in 1980. In 1980, that was the picture of the steel world. The world produced 717 million metric tons in 1980. Why do I use 1980? Very simple. Because it was 35 years after the end of World War II.

So the...