Iron ore producer Cleveland Cliffs acquired AK Steel in a deal announced today.
It’s a seismic transaction that could have long-term implications for the Mesabi Iron Range. Cliffs will use its stock to buy $1.1 billion worth of AK Steel stock, assuming about 68 percent ownership of the Ohio-based company. Cliffs CEO Lourenco Goncalves will run the company while AK Steel’s CEO will retire.
Cleveland Cliffs, which owns taconite mines in Northern Minnesota and Michigan, focused on mining and transporting raw materials for most of its 162-year history.
However, in recent years the company expanded its profile. Soon, it will complete a new hot iron briquette (HBI) plant in Toledo, Ohio. That facility will process iron pellets produced at the Cliffs’ Northshore Mine in Babbitt and Silver Bay. HBI replaces scrap iron and other imported irons typically used in electric arc furnaces.
Adding value
By acquiring AK Steel, Cleveland Cliffs will now produce select raw and finished steel products. If the gambit works, it will ensure that an Iron Range ore producer maintains a consistent customer for value-added iron ore products.
The company also touts cost-savings from the consolidation of the Cliffs and AK Steel corporate infrastructure.
The steel industry continues to change, favoring smaller electric arc furnaces and specialized steel over big blast furnaces and large quantities of steel.
Most of the Mesabi Range produces iron ore for the older method of steelmaking. To survive, it will need to make the leap to new more efficient and technologically advanced methods. Cleveland Cliffs is now well ahead of other Iron Range mining companies in this regard.
Cleveland Cliffs owns Northshore Mine, United Taconite in Eveleth and is a minority owner of Hibbing Taconite. Cliffs also owns the Tilden Mine in the Upper Peninsula of Michigan. The company’s Empire Mine, also in the U.P., was shut down in 2016.
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