ArcelorMittal Steel Mill in Indiana Harbor, Indiana. (PHOTO: David Wilson, Flickr CC-BY)
Cleveland Cliffs becomes North America’s largest producer of iron ore and flat-rolled steel after acquiring the assets of ArcelorMittal USA.
Reuters reported over the weekend that ArcelorMittal and Cleveland Cliffs were negotiating an asset merger that would dramatically affect the taconite industry on Minnesota’s Mesabi Iron Range.
The deal merges ArcelorMittal’s American operations with those of Cleveland Cliffs.
ArcelorMittal is the world’s largest steelmaker. Cliffs is a longtime player in the iron mining business. Late last year, Cliffs acquired AK Steel, making it a fully integrated steelmaker.
The Reuters report suggested that ArcelorMittal was looking to shed assets amid tumultuous global markets.
A deal like this would create uncertainty on the Mesabi Range. Consolidations often come with layoffs and cost control measures.
Cliffs operates United Taconite in Eveleth and Northshore Mining in Babbitt and Silver Bay. It also holds a minority stake at Hibbing Taconite.
ArcelorMittal fully owns the Minorca Mine in Virginia and owns and operates Hibbing Taconite.
The news means that Cliffs now controls more annual iron ore production than U.S. Steel. Once the world’s largest corporation, U.S. Steel owns and operates the state’s largest mine at Minntac in Mountain Iron and Keewatin Taconite, which remains idled.
Historically, U.S. Steel developed the Mesabi Iron Range mining industry. It controlled coal mines in Appalachia and steel mills around the world. In recent years, however, the company has downsized, focusing entirely on the domestic steel market.
More than any other company, U.S. Steel remains wedded to blast furnace technology in its mills. The industry has been gradually transitioning toward electric arc furnaces because of their more efficient process, smaller batches, and customizable outputs.
Taconite pellets feed blast furnaces, meaning that northern Minnesota’s vaunted mining industry remains tied to this older technology. More than any other company in the region, Cliffs has invested in direct-reduced iron production.
A Cliffs-driven future might mean new kinds of production capabilities for Range mines, a good thing. However, anytime a giant sells to a little guy, that little guy runs the risk of taking on enormous debts. Cliffs is making a huge bet on continued demand for iron ore and steel in North America.
The deal between ArcelorMittal and Cliffs happened quickly after the leak of the original report. Cliffs CEO Lorenco Goncalves now becomes a titan in the North American steel industry.
Change won’t happen all at once. But this merger will hold big implications over the next few years. Clearly, mighty forces are on the move.
While Cliffs is a good company, it does make one nervous with one company controlling so much of the region’s economy.
This all but guarantees no new taconite processing plant will be built on the range. This gives them control of Hibtac. Cliffs is either gonna partner or buy out us steels share of Hibtac when the ore dries up in 5 or so years. Then they will wait out whoever has the leases they don’t already control from the former essar site. The ore from there will go to hibtac for processing. This is what they have been looking for all along.