Mesabi Trust (MSB): PESTLE Analysis [Nov-2025 Updated]

You own Mesabi Trust (MSB), so you know your income is a pure pass-through tied directly to iron ore prices and Northshore Mining Company's output. The core story right now is a powerful tug-of-war: Federal infrastructure spending and US steel mill capacity utilization holding above 80% are pushing demand, but rising environmental compliance costs and the technological shift toward 'green steel' pellets are defintely squeezing the lessee's margins. While the Q3 2025 distribution of approximately $1.50 per unit reflects strong near-term demand, the political and legal scrutiny on Minnesota mining permits remains a constant risk, so understanding these six macro-forces is crucial for anticipating your next distribution check.

Mesabi Trust (MSB) - PESTLE Analysis: Political factors

US trade protectionism supports domestic steel demand.

You need to pay attention to the new wave of trade protectionism because it directly inflates the price and demand for the iron ore pellets produced on Mesabi Trust lands. The Trump administration, in a major move, doubled the Section 232 tariffs on most steel and aluminum imports to a staggering 50%, effective June 4, 2025, for virtually all countries except the United Kingdom, which holds a temporary 25% rate. This is a massive cost shock to importers.

The quick math shows this tariff hike is estimated to add approximately $50 billion in tariff costs across the US economy, forcing manufacturers to pivot to domestic suppliers like Cleveland-Cliffs Inc. (Cleveland-Cliffs), the operator of the Peter Mitchell Mine. However, this policy isn't a silver bullet; the resulting higher input costs and economic uncertainty are projected to cause US steel demand to decline by about 5.0% in the second half of 2025 and the first half of 2026. Still, the domestic market share for US producers is defintely rising.

The tariff wall is higher than ever, pushing buyers to your lessee.

Minnesota legislative climate remains cautious on new mining permits.

The political climate in Minnesota, where Mesabi Trust's Peter Mitchell Mine is located, remains a tightrope walk between economic development and environmental protection. While the Trust's iron ore operations are established, the legislative process for new mining permits, particularly for non-ferrous minerals like copper-nickel, is intensely scrutinized. This cautious environment creates a high barrier to entry for potential competitors, which is a subtle advantage for existing, permitted operations.

The 2025 special legislative session did enact environmental permitting reforms, aiming for a more 'predictable, transparent and fair' process. This is good news for operational stability. The Minnesota Pollution Control Agency (MPCA) is now tasked with meeting decision goals of 90- and 150-day turnarounds for Tier 1 and Tier 2 permits, respectively. Still, the political fight is ongoing, with a strong push from the new administration to overturn the 20-year moratorium on non-ferrous mining in the Superior National Forest, a move that would signal a broader, more pro-extraction stance in the state.

• Permit reform goal: 90-day decision for Tier 1 permits.
• New competitor risk: High due to sustained environmental scrutiny.
• Political pressure: Strong push to overturn the 20-year non-ferrous mining moratorium.

Federal infrastructure spending (IRA) boosts demand for US-made steel.

The massive federal spending packages, specifically the Inflation Reduction Act (IRA) and the Infrastructure Investment and Jobs Act (IIJA), were supposed to be the definitive demand driver for US steel, and thus for Mesabi Trust's iron ore. The IIJA is still projected to generate demand for approximately 50 million tons of steel products over its lifespan, a huge tailwind for domestic producers like Cleveland-Cliffs.

However, the political reality of 2025 introduces a significant risk to this demand forecast. The Senate's passage of a $3.3 trillion tax-cut bill in July 2025 included provisions that gut some of the IRA's clean energy credits. Crucially, the bill eliminates the popular $7,500 electric vehicle tax credit and creates a sunset for the 45X Advanced Manufacturing Production Credit for critical minerals in 2034 (the House version proposed 2032). This rollback on clean energy incentives could dampen the expected surge in demand for the specialty steel used in EV and renewable infrastructure, which is a key market for domestic iron ore.

Regulatory risk from potential changes in federal mineral royalty rates.

While Mesabi Trust's royalty income is governed by its specific lease with Cleveland-Cliffs, the federal government's shifting stance on mineral royalty rates signals a significant political risk for the entire mining sector. The current administration has shown a willingness to both reduce and introduce new royalty structures across different minerals.

For context, new legislation (The One Big Beautiful Bill Act) implemented a new, lower royalty rate for federal coal surface mines, reducing it from a previous 12.5% to not more than 7% from July 4, 2025, to September 30, 2034. Conversely, for hard rock minerals (which includes iron ore), there were recent congressional proposals to impose an 8% gross royalty on existing mines and a 4% rate on new ones, plus a 7 cent fee per ton of rock moved. The risk here is that Congress could eventually apply a similar new federal royalty structure to iron ore production on federal lands or pressure states to follow suit, which could impact the economic viability of new projects or the profitability of the lessee, Cleveland-Cliffs, even if Mesabi's current lease is protected. You need to monitor any legislation that attempts to supersede existing lease agreements or introduce a new federal fee structure on hard rock mining.

Mesabi Trust (MSB) - PESTLE Analysis: Economic factors

Iron ore pellet prices remain volatile, impacting royalty income directly.

The core economic factor for Mesabi Trust (MSB) is the extreme volatility in the iron ore market, which directly dictates the royalty payments received from Cleveland-Cliffs Inc. (Northshore Mining's parent company). Your income stream is fundamentally linked to the realized price of iron ore pellets.

As of late 2025, benchmark iron ore prices (62% Fe fines) have been hovering around the $100 to $103 per metric ton range, but the outlook is for a softening. For instance, Goldman Sachs revised its fourth-quarter 2025 iron ore price forecast downward to $95 per ton, and Scotiabank projected an average of $95 per tonne for the full year 2025. This downward pressure is a clear risk.

However, Northshore Mining produces high-quality iron ore pellets, which command a premium. Direct reduction-grade pellets, which are increasingly important for green steel initiatives, are seeing premiums of $45 to $60 per ton over standard fines, which helps buffer the impact of a weaker benchmark price. This quality differentiation is defintely a key component of the Trust's revenue stability.

US steel mill capacity utilization supports domestic demand.

The health of the domestic steel industry is a critical indicator of demand for Northshore's iron ore pellets. The American Iron and Steel Institute (AISI) considers a capacity utilization rate of 80% or above as optimal for industry profitability and sustained investment.

While the goal is 80%, the capacity utilization rate for domestic raw steel production was recorded at 76.9 percent in the week ending November 22, 2025. This rate is still healthy, showing a year-over-year increase of 9.2 percent compared to the same period in 2024, but it is not quite at the optimal threshold. This robust-but-not-perfect domestic demand is what keeps Northshore's operations running at a high volume, which is crucial for the Trust's base royalty.

Here's the quick math: a higher utilization rate means more steel production, which requires more iron ore pellets from domestic suppliers like Northshore.

Mesabi Trust's Q3 2025 distribution reflected lower royalty receipts.

The ultimate measure of economic impact for unitholders is the distribution. The Trustees declared a distribution of $0.34 per Unit payable on November 20, 2025, which corresponds to the third fiscal quarter of 2025. This distribution was based on total royalty payments of $5,300,287 received on July 30, 2025, from Cleveland-Cliffs Inc.

This $0.34 distribution was a notable sequential decline from the prior quarter, reflecting less favorable pricing and a smaller bonus royalty component, which is tied to the realized price of the pellets. It's a clear signal that the volatility in iron ore prices is translating directly into reduced payouts, despite Northshore crediting the Trust with a year-over-year volume uptick of 987,370 tons in Q3 2025.

Inflation and interest rates increase capital costs for Northshore Mining's operations.

The macroeconomic environment of persistent inflation and elevated interest rates in 2025 is a headwind for Northshore Mining, which indirectly affects the Trust's long-term viability. Rising inflation increases operational costs across the board, from energy and labor to equipment and logistics. This pressure shrinks profit margins for the operator.

The high-interest-rate environment, driven by the Federal Reserve's policy to combat inflation, raises the cost of capital (the discount rate used in financial models). This makes new capital investment in Northshore's operations-such as technology upgrades or expansion projects-more expensive to finance. This is a crucial point because delaying capital expenditure (CapEx) can impact future efficiency and production volume.

• Rising interest rates increase borrowing costs.
• Inflation pushes up labor and energy expenses.
• Higher CapEx costs may delay Northshore modernization.

Strong US dollar can make domestic ore less competitive globally.

The strengthening of the US dollar in late 2025 presents a competitive challenge. The US Dollar Index (DXY) breached the 100 level in November 2025, suggesting a shift toward durable dollar strength. Since iron ore is a dollar-denominated commodity globally, a stronger dollar makes US-produced ore more expensive for international buyers holding weaker currencies, such as the Chinese Yuan.

What this estimate hides is that Northshore's primary market is domestic, selling to Cleveland-Cliffs' US steel mills, which are protected by tariffs on imported steel. Still, a strong dollar can make US steel (and therefore the iron ore used to make it) less competitive in global markets, and it generally adds to the global price pressure on all dollar-denominated commodities. This dynamic is a risk if domestic demand were to falter, forcing Northshore to seek more export opportunities.

Mesabi Trust (MSB) - PESTLE Analysis: Social factors

You need to understand that social factors for Mesabi Trust are a double-edged sword: labor stability is locked in for the near-term, but environmental sensitivity in the Iron Range community creates a significant operational overhang. The core risk here is that local opposition to environmental issues can directly translate into production delays, which immediately hits your royalty income.

Labor stability is critical, tied to the United Steelworkers (USW) agreement with Cleveland-Cliffs.

The stability of Mesabi Trust's primary asset, the Peter Mitchell Mine, is directly tied to the labor contract between its operator, Cleveland-Cliffs Inc., and the United Steelworkers (USW) union. This relationship is currently secure, which is a major operational plus. The four-year master labor agreement, ratified in October 2022, remains in effect through September 2026, covering approximately 14,000 USW-represented employees across Cleveland-Cliffs' operations, including the Northshore Mining facilities in Minnesota.

The contract provides a strong foundation for labor peace, which is defintely a key factor for continuous taconite pellet production. You can see the tangible value of this stability in the wage structure. The agreement includes a total wage improvement of more than 20 percent over its term. For a worker in Labor Grade 1, the hourly wage is scheduled to reach $28.51 in 2025. Cleveland-Cliffs' commitment to invest $4 billion in USW-represented facilities over the contract term further solidifies the union's buy-in and job security.

Community support in the Iron Range is strong but sensitive to environmental incidents.

While the Iron Range community generally supports mining jobs-which are high-paying, multi-generational union roles-that support is conditional on environmental stewardship. The Northshore Mining operation, which generates the Trust's royalty income, faces heightened scrutiny over its Mile Post 7 tailings basin expansion near Silver Bay, Minnesota. This site is less than 3 miles from Lake Superior.

In February 2025, the Minnesota Court of Appeals ruled that the Department of Natural Resources (DNR) must re-evaluate the need for a full Environmental Impact Statement (EIS) for the expansion, a win for environmental groups like WaterLegacy. This legal pressure, which drew comments from over 1,300 individuals, is a clear signal that the community and its advocates will use the legal system to enforce environmental protection. This is not a theoretical risk; an environmental incident, such as the April 2024 pipe rupture at the Silver Bay plant that spilled approximately 21,000 gallons of process water, immediately triggers public backlash and regulatory investigation.

Workforce availability and skill gaps pose a long-term challenge for mining operations.

The mining industry is grappling with a significant demographic shift, often called the 'grey tsunami,' which presents a structural challenge to all Iron Range operations. The average age of a US mine worker is around 46 years, but for skilled professionals, that average has climbed to 54 years in the last decade. This aging workforce means a massive loss of institutional knowledge is imminent.

The numbers are stark and point to a clear talent pipeline issue:

• Retirement Risk: Nearly 50% of mining engineers are expected to reach retirement age within the next decade.
• Projected Shortage: The US mining sector is projected to face a shortage of 27,000 skilled workers in the next five years.
• Skill Gap: 72% of mining companies report difficulty finding candidates with specialized technical skills, and 63% of applicants lack the skills needed for the increasing automation in mining.

Here's the quick math: you have a highly experienced, older workforce leaving, and a majority of new applicants lack the digital and technical skills required for modern, automated operations. This forces Cleveland-Cliffs to invest more heavily in automation-60% of mining firms plan to increase automation-but that only exacerbates the need for a new, digitally-literate workforce. This is a multi-year, multi-million-dollar training problem.

Public demand for domestically sourced materials is rising.

The demand for domestically sourced iron ore pellets is a powerful tailwind for Mesabi Trust's operator, Cleveland-Cliffs, which is the largest manufacturer of iron ore pellets in North America. Policy is driving this demand. Federal legislation like the Infrastructure Investment and Jobs Act and the Inflation Reduction Act have created a strong, protected market for US-made steel and its raw materials. This trend, coupled with global resource nationalism and geopolitical tensions, is pushing US steelmakers to prioritize a secure, domestic supply chain over volatile seaborne imports. For Mesabi Trust, this means that even when global iron ore prices are soft, the domestic market for Cleveland-Cliffs' pellets remains relatively robust, creating a floor for demand and, critically, for royalty payments.

Mesabi Trust (MSB) - PESTLE Analysis: Technological Factors

The technological landscape for Mesabi Trust (MSB) is defined by the capital-intensive need to produce premium iron ore, which is essential for the steel industry's decarbonization push. The core technological advantage is already in place with the Direct Reduced Iron (DRI) pellet capability, but the operator, Cleveland-Cliffs Inc., faces near-term pressure to adopt advanced automation and new processing methods to control costs and meet increasingly strict environmental compliance in 2025.

Shift to high-grade pellets is driven by 'green steel' initiatives and new furnace technology.

The most significant technological shift impacting Mesabi Trust's royalty stream is the global pivot toward 'green steel' production, which relies on Direct Reduced Iron (DRI) technology and Electric Arc Furnaces (EAFs) rather than traditional, high-emission blast furnaces. This trend requires a purer iron ore feedstock: low-silica Direct Reduced (DR)-grade pellets.

Northshore Mining is the only U.S.-based iron ore processing facility capable of commercially producing these low-silica DR-grade pellets, a capability secured through a $100 million capital upgrade completed in 2019. This technology positions the Mesabi Trust's underlying asset to serve the growing EAF market, which already accounts for nearly 70% of American steel production. The primary domestic customer is Cleveland-Cliffs Inc.'s own $830 million Hot Briquetted Iron (HBI) plant in Toledo, Ohio, which converts these pellets into a premium metallic product for EAFs. This is a defintely a strategic moat.

Automation and AI implementation in taconite processing is slow but necessary for cost control.

While the broader mining industry is accelerating its digital transformation-with over 60% of new global mining sites expected to deploy AI-driven predictive maintenance systems by 2025-the adoption pace at Northshore Mining appears slower, as evidenced by the lack of specific recent public announcements since the 2019 pellet upgrade. This slow pace is a risk, as technological laggards sacrifice efficiency gains.

AI and automation are no longer optional; they are critical for cost control in a volatile commodity market. Industry data for 2025 shows that AI-powered systems can reduce equipment downtime by up to 15% and cut energy costs by 15-20% in typical operations. For Northshore, whose operator is focused on streamlining operations following a first-quarter 2025 net loss of $495 million for Cleveland-Cliffs Inc., leveraging these technologies is the clearest path to improving the cost-per-ton metric and maximizing royalty revenue for Mesabi Trust.

Northshore Mining must invest in technology to meet stricter environmental compliance.

The pressure to upgrade environmental technology is immediate, driven by the Minnesota Pollution Control Agency (MPCA)'s draft industrial wastewater permit issued in April 2025. This permit imposes stricter discharge limits, which necessitates new or upgraded technology beyond the existing water treatment plant and fluoride treatment system.

The new requirements include:

• A revised fluoride limit to align with the primary drinking water standard.
• New monitoring for dissolved mercury in accordance with the MPCA's mercury strategy.
• Monitoring for nitrogen as part of the MPCA's nutrient strategy.

Meeting these limits requires investment in advanced filtration or chemical treatment systems. Failure to invest in the necessary technology to meet the new compliance standards risks operational disruptions and significant fines, directly impacting the royalty payments to Mesabi Trust.

New processing techniques could reduce waste and improve recovery rates.

The greatest technological opportunity for Mesabi Trust's long-term value lies in the potential to turn waste into a new revenue stream. In late October 2025, Cleveland-Cliffs Inc. announced it is exploring the commercial viability of extracting Rare Earth Elements (REEs) from two potential deposits in Michigan and Minnesota, which includes a comprehensive review of their existing ore bodies and tailings basins. The Northshore facility's Mile Post 7 tailings basin, already a focus of environmental compliance, is a prime candidate for this waste-to-value technology.

If commercially viable, reprocessing tailings for REEs would:

• Create a new, high-value product line, diversifying revenue beyond iron ore.
• Significantly reduce the volume of stored tailings, addressing a major environmental liability.
• Improve overall resource recovery from the existing mine footprint.

This strategic pivot into critical materials mining, leveraging existing infrastructure, represents a true technological step-change for the asset.

Mesabi Trust (MSB) - PESTLE Analysis: Legal factors

For a trust like Mesabi Trust, the legal landscape is less about direct operational regulation and more about the complex intersection of contract law, environmental permitting for its lessee, and specialized federal and state tax compliance. The biggest near-term legal risk is currently the ongoing arbitration with its operator, Cleveland-Cliffs Inc.

Existing Northshore Mining permits face continuous scrutiny and potential legal challenges.

The core of Mesabi Trust's revenue-royalty payments-is fundamentally tied to the operational continuity of the Northshore Mining Company, which is run by Cleveland-Cliffs Inc. This operation is a constant target for environmental and contractual scrutiny. The most significant legal challenge in 2025 is the arbitration Mesabi Trust initiated against Cleveland-Cliffs Inc. and Northshore Mining Company on September 26, 2025. This action seeks damages and declaratory relief related to two critical issues:

• The operator's idling of Northshore's operations from May 2022 to April 2023.
• The alleged underpayment of royalties on intercompany shipments from 2023 through the present.

This is a defintely a high-stakes legal battle, as a previous arbitration award in September 2024 resulted in a payment of $71,185,029 (including pre-award interest) to the Trust for underpaid royalties from 2020 through early 2022.

Water quality standards and discharge permits are a constant compliance burden.

The regulatory environment for taconite mining in Minnesota is tightening, making permit compliance a continuous, high-cost burden for the operator, Northshore Mining. The Minnesota Pollution Control Agency (MPCA) sought public comment on a draft industrial wastewater permit for the Northshore facility in Silver Bay, Minnesota, with the comment period opening in March 2025. This draft permit introduces stricter standards that directly impact the cost of operations and, indirectly, the royalty income stream.

Key compliance burdens in the draft permit include:

• A revised fluoride limit to align with the primary drinking water standard.
• New monitoring requirements for dissolved mercury, in line with the MPCA's mercury strategy.
• Monitoring for nitrogen, consistent with the MPCA's nutrient strategy.

Also, a major federal legal trend is the U.S. Supreme Court's March 4, 2025, ruling that limits the EPA's authority to include non-quantifiable, 'end-result' requirements in National Pollutant Discharge Elimination System (NPDES) permits. This means future permits will likely focus on clearer, more specific numerical effluent limitations, which should, in theory, create a more precise, though not necessarily easier, compliance path for the operator.

Trust structure requires strict adherence to IRS regulations for pass-through income.

Mesabi Trust is structured as a grantor trust, which is treated as a pass-through entity for tax purposes, similar to a partnership. This means the Trust itself pays no federal income tax, but the unit holders report their pro rata share of the Trust's income and deductions on their own tax returns. This structure mandates strict adherence to complex Internal Revenue Service (IRS) rules, which is critical for maintaining its tax status and investor appeal.

Here's the quick math on the pass-through figures for the 2024 calendar year (reported in 2025):

The complexity of reporting royalty income as either ordinary income or long-term capital gain (Section 1231 gain) based on the unit holding period is a constant administrative and legal compliance challenge for the Trust and its investors. One clean one-liner: The tax status hinges entirely on precise compliance.

Potential changes to Minnesota's mining tax structure (e.g., net proceeds tax).

The state tax structure is a persistent legal risk, as legislative proposals can shift the financial burden on the mining industry. While the 2025 legislative session saw tax law changes, the immediate, concrete impact on Mesabi Trust is the indexed increase in the Production Tax rate. This tax is a major revenue source for the Taconite Assistance Area.

• The 2025 Production Tax base rate is $3.427 per taxable ton.
• This represents an increase from the 2024 base rate of $3.345 per taxable ton.
• The tax also includes an additional 3 cents per ton for each 1% the iron content exceeds 72%.

The state also imposes an Occupation Tax on both ferrous and nonferrous mining, and a Gross Proceeds Tax equal to 0.4% of the gross proceeds from mining, which applies to nonferrous operations but sets a precedent for proceeds-based taxation. The threat of a new or expanded net proceeds tax on taconite remains a political and legislative risk that could directly reduce the operator's profitability and, consequently, the bonus royalty payments to the Trust.

Mesabi Trust (MSB) - PESTLE Analysis: Environmental factors

The environmental landscape for Mesabi Trust (MSB) is a complex mix of escalating regulatory pressure on its operator, Cleveland-Cliffs, and a simultaneous market opportunity driven by the demand for cleaner steel inputs. Since the Trust is a passive royalty entity, its financial health is defintely a direct function of the operator's ability to manage these risks without significant operational disruption or prohibitive capital costs.

Pressure to reduce carbon emissions from pelletizing furnaces is increasing.

While the immediate financial sting of a major federal air quality rule has been deferred, the underlying pressure to decarbonize the taconite pelletizing process is immense. Taconite operations, including the Northshore Mining Company's facilities that process ore from the Peter Mitchell Mine, are energy-intensive, primarily due to the indurating (pelletizing) furnaces.

The operator, Cleveland-Cliffs, has a corporate goal to reduce combined Scope 1 (direct) and Scope 2 (indirect) Greenhouse Gas (GHG) emissions by 25% by 2030 from 2017 baseline levels. This commitment is costly, but necessary. For its full-year 2025, Cleveland-Cliffs updated its Capital Expenditures (CapEx) guidance to approximately \$525 million, a figure that includes investments in environmental compliance and efficiency.

A more immediate concern in 2025 is mercury emissions. The EPA's Taconite Rule, finalized in 2024, was projected to cost the industry over \$500 million over a decade for compliance, with an estimated \$106 million in upfront capital costs and \$68 million in annual operating costs for the industry as a whole. However, a Presidential Proclamation in July 2025 delayed the compliance deadline until 2029. This delay provides a critical, near-term financial reprieve but does not eliminate the eventual capital requirement. The state of Minnesota, meanwhile, still has a goal of a 72% reduction in mercury emissions from the ferrous mining sector by January 1, 2025, a target it anticipates failing to meet without significant taconite industry reductions.

Compliance costs for managing tailings basins and water runoff are rising.

The most significant near-term regulatory risk for Northshore Mining's operations is centered on the Mile Post 7 tailings basin near Silver Bay, Minnesota, which is only three miles from Lake Superior. The operator's plan to use the remaining capacity of the 2,150-acre basin, which could increase the volume of taconite-polluted runoff six-fold, has drawn intense scrutiny. This is a high-stakes issue.

In February 2025, the Minnesota Court of Appeals ruled that the state's Department of Natural Resources (DNR) must reconsider whether an Environmental Impact Statement (EIS) is necessary for the expansion, rejecting the operator's claim that it was exempt. This legal victory for environmental groups translates directly into higher compliance costs and permitting delays for Northshore Mining. What this estimate hides is the potential for a court-mandated requirement for significant financial assurance to protect against a tailings dam failure, a cost that could run into the hundreds of millions of dollars.

• The Mile Post 7 tailings basin expansion is a major 2025 legal and regulatory focal point.
• The expansion could accommodate a six-fold increase in taconite waste volume.
• The Grand Portage Band of Ojibwe has formally requested the operator provide financial assurance to protect against dam failure.

Climate change impacts (e.g., severe weather) pose operational risks to mining and shipping.

The operational efficiency of Mesabi Trust's royalty stream is highly dependent on the stability of the Great Lakes shipping route. Severe weather events, an increasing consequence of climate change, pose a direct risk to the movement of taconite pellets from the Silver Bay plant to the steel mills.

While specific 2025 severe weather delays for Northshore Mining are not published, the overall iron ore trade on the Great Lakes has shown volatility. For the first five months of 2025, iron ore shipments on the Great Lakes totaled 11.7 million tons, a decrease of 18.6% compared to the same period in 2024. Though this decline is primarily driven by market/demand factors, it shows the vulnerability of the supply chain to any disruption. The mining industry globally is already experiencing significant productivity losses, with studies showing annual production reductions of 5-15% at affected sites due to extreme weather events like floods, droughts, or heat waves. For a royalty trust, any weather-related delay in shipping directly delays royalty payments.

Demand for high-quality taconite reduces the environmental footprint of steelmaking elsewhere.

The environmental factor is not purely a risk; it presents a major market opportunity. The global iron ore pellets market is projected to reach \$70.6 billion in 2025, with a Compound Annual Growth Rate (CAGR) of 6.1% through 2035, driven by the shift toward 'green steel' production.

High-quality taconite pellets, particularly Direct Reduction (DR)-grade pellets, are essential for Electric Arc Furnaces (EAFs) and Direct Reduced Iron (DRI) plants, which have a significantly lower carbon footprint than traditional Blast Furnace (BF) steelmaking. The operator has made strategic investments to capitalize on this trend:

• The Northshore Mining facility has been upgraded to produce DR-grade pellets.
• Cleveland-Cliffs invested \$75 million at its United Taconite operation to produce a new superflux iron ore pellet.
• This superflux pellet contains increased calcium oxide, which directly reduces energy usage and GHG emissions for downstream steel production.

This market tailwind for cleaner, higher-quality pellets provides a long-term hedge against the rising environmental costs of production. The demand for these premium products helps justify the CapEx required for environmental compliance.