Cleveland-Cliffs Inc. (NYSE: CLF) announced today that
two of its projects have been selected for award negotiations for
up to $575 million in total funding from the United States
Department of Energy (DOE) to pursue two decarbonization
investments at Middletown Works in Ohio and Butler Works in
Pennsylvania. Following successful negotiations, these projects
will allow for substantial reductions in greenhouse gas (GHG)
emissions across the Cliffs’ footprint and will also create
efficiencies that meaningfully drive down operating costs while
securing and growing good-paying Union jobs. This federal funding
is being made available through DOE’s Industrial Demonstrations
Program funded through the Infrastructure Investment and Jobs Act
and the Inflation Reduction Act.
Middletown Works DRI Plant and Electric Melting Furnaces (up
to $500 million grant)
If awarded, the Company would replace its existing blast furnace
at its Middletown Works Facility in Middletown, Ohio with a 2.5mtpa
Hydrogen-Ready Direct Reduced Iron (DRI) Plant and two 120 MW
Electric Melting Furnaces (EMF) to feed molten iron to the existing
infrastructure already on site, including the BOF, Caster, Hot
Strip Mill, and various finishing facilities. Middletown will
maintain its existing raw steel production capacity of
approximately 3 million net tons per year and will no longer use
coke for iron production. The EMF technology is well established
and, together with the injection of hydrogen in blast furnaces, is
a preferred route for meaningful reduction in carbon emissions for
integrated steelmakers worldwide.
The process will dramatically reduce carbon emissions intensity,
and will consolidate Middletown Works as the most advanced, lowest
GHG emitting integrated iron and steel facility in the world. The
facility will have the flexibility to be fueled by natural gas,
which would reduce current ironmaking carbon intensity by over 50%;
a mix of natural gas and clean Hydrogen; or clean Hydrogen, which
would reduce current ironmaking carbon intensity by over 90%.
Hydrogen demand from this “flex-fuel” DRI plant stands to
support DOE’s “Hydrogen Earthshot” and DOE’s Hydrogen hub
initiatives.
The new facility is expected to reduce production costs by
approximately $150 per net ton of liquid steel produced, or a $450
million annual savings relative to the existing configuration.
These savings do not consider any of the premiums expected to be
generated from sales of low-carbon steel, such as Cliffs H2™ and
Cliffs HMAX™.
This investment will secure 2,500 jobs at Middletown Works,
where the unionized workforce is represented by the International
Association of Machinists (IAM). The flex-fuel DRI plant and EMFs
will require 170 additional jobs. The project will result in 1,200
building trades jobs during peak construction.
As the DRI facility can be fed with standard, blast-furnace
grade pellets, the project will take full advantage of the
Company’s United Steelworkers (USW) represented iron ore mining and
pelletizing units. The new configuration also avoids the use of
significant amounts of prime scrap metal, which Cliffs anticipates
will become shorter in supply and higher in cost throughout the
rest of the decade. The process will also allow Cliffs to maintain
the level of quality of the steel produced, which would otherwise
be degraded with increased scrap usage, maintaining the Company’s
leading position in the automotive end market.
The net capital outlay for Cliffs will be approximately $1.3
billion, net of capital avoidance on the existing blast furnace and
coke plants, over a 5-year period primarily starting in 2025 and
expected to conclude by 2029. Cliffs’ portion will be funded using
liquidity on hand and its own free cash flow generation. The
Middletown site offers enough available space to construct the new
facility without encumbering the existing processes, effectively
eliminating interference risks during the construction and
commissioning phase. Cliffs thanks both Midrex and Hatch for their
collaboration in developing the initial planning for this
transformational project.
The Company does not anticipate any material capital spending
related to this project to occur in 2024 and maintains its current
capital expenditures outlook for this year, reiterating its capital
allocation priorities currently focused on executing more
aggressive share buybacks.
Butler Works Induction Reheat Furnaces (up to $75 million
grant)
If awarded, Cliffs would also replace two of its existing
natural-gas fired high-temperature slab reheat furnaces at Butler
Works in Butler, Pennsylvania with four Electrified Induction Slab
Reheat Furnaces, to bring optimum efficiency to its production of
electrical steels, a critical component of the electrification of
America and the greening of the electrical grid.
The primary benefits of this project are lower carbon emissions,
substantially reduced energy costs and improvements in slab
quality, allowing for approximately 25,000 tons of additional
production capacity from improved process yield. This investment
will secure 1,300 jobs at Butler Works, where employees are
represented by the United Auto Workers (UAW). The project will
require 220 building trades jobs at peak construction.
The company also expects to generate approximately $80 million
in annual cost savings and yield improvements following the
installation of the new equipment. The net cost of this facility to
Cliffs is expected to be $100 million spent over a 4-year
period.
Lourenco Goncalves, Cliffs’ Chairman, President, and Chief
Executive Officer said: “Completion of our $1 billion clean
hydrogen-ready Toledo DR Plant through the depths of COVID stood as
strong evidence of Cliffs’ expertise and resolve to drive down
emissions. We are grateful for the support of the Department of
Energy and their recognition of Cleveland-Cliffs’ strong leadership
in steel decarbonization. Through these selections, DOE recognized
and rewarded Cleveland-Cliffs’ track record of successfully
executing large capital projects that result in operational
efficiencies and lower GHG emissions.”
Mr. Goncalves added: “The investment at Middletown Works is
confirmation that Cleveland-Cliffs is the benchmark for iron and
steelmaking technology in the world, ahead of Japan, Korea, Europe,
and China. Our experience in using natural gas has seamlessly
catalyzed our transition into using hydrogen. Middletown and Butler
Works are both critically important to the success of
Cleveland-Cliffs and the industrial might of the United States.
Both plants support good-paying, middle-class union jobs. We
appreciate the Biden Administration’s shared belief that union jobs
are essential for continued success of manufacturing, supply
chains, infrastructure, and defense in the United States. In
addition, these projects have remarkably strong IRR’s and short
payback periods. The Department of Energy has facilitated a perfect
situation for our union workforce, our decarbonization endeavors,
our communities in Ohio and Pennsylvania, and our
shareholders.”
U.S. Senator Sherrod Brown stated, “This partnership will ensure
that IAM steelworkers in Middletown remain at the forefront of the
global steel industry. This is why we passed the Bipartisan
Infrastructure Law and the Inflation Reduction Act – to ensure Ohio
manufacturing continues to lead the world in the technologies that
will drive our economy for decades to come.” Brown continued, “The
Cleveland-Cliffs Middletown Works plant will support growing
industries in Ohio while creating good-paying jobs, and ensuring
that Ohio remains a national leader in manufacturing and
innovation.”
About Cleveland-Cliffs Inc.
Cleveland-Cliffs is the largest flat-rolled steel producer in
North America. Founded in 1847 as a mine operator, Cliffs also is
the largest manufacturer of iron ore pellets in North America. The
Company is vertically integrated from mined raw materials, direct
reduced iron, and ferrous scrap to primary steelmaking and
downstream finishing, stamping, tooling, and tubing.
Cleveland-Cliffs is the largest supplier of steel to the automotive
industry in North America and serves a diverse range of other
markets due to its comprehensive offering of flat-rolled steel
products. Headquartered in Cleveland, Ohio, Cleveland-Cliffs
employs approximately 28,000 people across its operations in the
United States and Canada.
Forward-Looking Statements
This release contains statements that constitute
“forward-looking statements” within the meaning of the federal
securities laws. All statements other than historical facts,
including, without limitation, statements regarding our current
expectations, estimates and projections about our industry or our
businesses, are forward-looking statements. We caution investors
that any forward-looking statements are subject to risks and
uncertainties that may cause actual results and future trends to
differ materially from those matters expressed in or implied by
such forward-looking statements. Investors are cautioned not to
place undue reliance on forward-looking statements. Among the risks
and uncertainties that could cause actual results to differ from
those described in forward-looking statements are the following:
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;
potential weaknesses and uncertainties in global economic
conditions, excess global steelmaking capacity, oversupply of iron
ore, prevalence of steel imports and reduced market demand; severe
financial hardship, bankruptcy, temporary or permanent shutdowns or
operational challenges of one or more of our major customers, key
suppliers or contractors, which, among other adverse effects, could
disrupt our operations or lead to reduced demand for our products,
increased difficulty collecting receivables, and customers and/or
suppliers asserting force majeure or other reasons for not
performing their contractual obligations to us; risks related to
U.S. government actions with respect to Section 232 of the Trade
Expansion Act of 1962 (as amended by the Trade Act of 1974), the
United States-Mexico-Canada Agreement and/or other trade
agreements, tariffs, treaties or policies, as well as the
uncertainty of obtaining and maintaining effective antidumping and
countervailing duty orders to counteract the harmful effects of
unfairly traded imports; impacts of existing and increasing
governmental regulation, including potential environmental
regulations relating to climate change and carbon emissions, and
related costs and liabilities, including failure to receive or
maintain required operating and environmental permits, approvals,
modifications or other authorizations of, or from, any governmental
or regulatory authority and costs related to implementing
improvements to ensure compliance with regulatory changes,
including potential financial assurance requirements, and
reclamation and remediation obligations; potential impacts to the
environment or exposure to hazardous substances resulting from our
operations; our ability to maintain adequate liquidity, our level
of indebtedness and the availability of capital could limit our
financial flexibility and cash flow necessary to fund working
capital, planned capital expenditures, acquisitions, and other
general corporate purposes or ongoing needs of our business, or to
repurchase our common shares; our ability to reduce our
indebtedness or return capital to shareholders within the currently
expected timeframes or at all; adverse changes in credit ratings,
interest rates, foreign currency rates and tax laws; the outcome
of, and costs incurred in connection with, lawsuits, claims,
arbitrations or governmental proceedings relating to commercial and
business disputes, 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; supply chain
disruptions or changes in the cost, quality or availability of
energy sources, including electricity, natural gas and diesel fuel,
critical raw materials and supplies, including iron ore, industrial
gases, graphite electrodes, scrap metal, chrome, zinc, other
alloys, coke and metallurgical coal, and critical manufacturing
equipment and spare parts; problems or disruptions associated with
transporting products to our customers, moving manufacturing inputs
or products internally among our facilities, or suppliers
transporting raw materials to us; the risk that the cost or time to
implement a strategic or sustaining capital project may prove to be
greater than originally anticipated; 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; cybersecurity incidents relating to, disruptions in, or
failures of, information technology systems that are managed by us
or third parties that host or have access to our data or systems,
including the loss, theft or corruption of sensitive or essential
business or personal information and the inability to access or
control systems; liabilities and costs arising in connection with
any business decisions to temporarily or indefinitely idle or
permanently close an operating facility or mine, which could
adversely impact the carrying value of associated assets and give
rise to impairment charges or closure and reclamation obligations,
as well as uncertainties associated with restarting any previously
idled operating facility or mine; our level of self-insurance and
our ability to obtain sufficient third-party insurance to
adequately cover potential adverse events and business risks;
uncertainties associated with our ability to meet customers’ and
suppliers’ decarbonization goals and reduce our greenhouse gas
emissions in alignment with our own announced targets; challenges
to maintaining our social license to operate with our stakeholders,
including the impacts of our operations on local communities,
reputational impacts of operating in a carbon-intensive industry
that produces greenhouse gas emissions, and our ability to foster a
consistent operational and safety track record; our actual economic
mineral reserves or reductions in current mineral reserve
estimates, and any title defect or loss of any lease, license,
easement or other possessory interest for any mining property; our
ability to maintain satisfactory labor relations with unions and
employees; unanticipated or higher costs associated with pension
and other post-employment benefit obligations resulting from
changes in the value of plan assets or contribution increases
required for unfunded obligations; uncertain availability or cost
of skilled workers to fill critical operational positions and
potential labor shortages caused by experienced employee attrition
or otherwise, as well as our ability to attract, hire, develop and
retain key personnel; the amount and timing of any repurchases of
our common shares; and potential significant deficiencies or
material weaknesses in our internal control over financial
reporting.
For additional factors affecting the business of Cliffs, refer
to Part I – Item 1A. Risk Factors of our Annual Report on Form 10-K
for the year ended December 31, 2023, and other filings with the
U.S. Securities and Exchange Commission.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240325479918/en/
MEDIA CONTACT: Patricia Persico Senior Director,
Corporate Communications (216) 694-5316
INVESTOR CONTACT: James Kerr Director, Investor Relations
(216) 694-7719
Cleveland Cliffs (NYSE:CLF)
Historical Stock Chart
From Apr 2024 to May 2024
Cleveland Cliffs (NYSE:CLF)
Historical Stock Chart
From May 2023 to May 2024