The $3.3b consists of $500m cash, $900m equity and $1.9b debt assumption. (I've seen figures between $3.3b and $3.5b with the variability in the debt part.)
Ryan MX Murphy
Some analysts are predicting the next decade will be favorable for commodity suppliers (ore mining, coke, etc.).
CCs vertical integration (V-I) model makes not only a manufacturer, but their size will also make customers out of their competitors...which could have the same upward pressure on prices IF CC nears monopoly power.
V-I is the model Putin explicitly uses in Russia and is the de facto management model used by the CCP as well (WEWS-TV aired a 2018 interview w/ Goncalves where he uses words to the effect of calling China an 'enemy in a war--not a just trade war...')
The buyout may make CC larger than USS, depending on if revenue or tonnage is the metric. The monopoly risk is that bad actors might only need to corrupt an even smaller number of people in order to take control of a vital national capital good industry.
Robert Brady: He kept his new state of the art mill in mexico. Calvert and the Canadian mills. With the new nafta. He is in a great position. My question is. Who got the patents of all the exotic high strength steel we are running and in trials with?
Jeff La Belle: Wait till the new company sees how poorly Arcelormittal has maintained there facilities. They will have to spend major money fixing and upgrading them.
Brian Olson: When you look at all of the facilities that will make up Cleveland Cliffs Steel the most likely candidate for closure is the Middletown's primary end and maybe Indiana Harbor West. The blast furnaces at these facilities are of a very old vintage. I have to believe that Cleveland Cliffs will eventually install an EAF shop at their Toledo DRI plant to supply slabs to the modern hot mill at Middletown. I seriously doubt that the minimills will want to buy HBI from their competitor.
[There are several interesting comments by Richard Allison concerning Dearborn, Middletown and Hennepin. And Brian confirms that US Steel transports coke from
Clairton to
Gary.]
David Butts: This gives them another tin mill and strong position in an area. Building 4 ethane cracker facilities. The ancillary business following that is in the 10s of billions. I don't think they are done in the acquisition phases either.
According to Cliffs' figures, the “big four” flat-rolled steelmakers following the deal - and based on 2019 flat-rolled shipments - will be:
- Cliffs: 16.5 million tons
- Nucor: 12.7 million tons
- U.S. Steel: 10.7 million tons
- Steel Dynamics Inc (SDI): 7.7 million tons
On the flat-rolled steelmaking side, Cliffs will acquire the following operations in the Great Lakes region:
- Indiana Harbor (Indiana): The largest integrated steelmaking complex in North America, with a steelmaking capacity of about 7.4 million tons per year
- Burns Harbor (Indiana): Capacity of approximately 5 million tpy
- Cleveland (Ohio): Capacity of approximately 3.8 million tpy
- Riverdale (Illinois): Compact strip mill with an annual capacity of about 1 million tpy
Cliffs will go from supplying approximately 18% of the US automotive sheet market to accounting for 41% of that supply once the deal for ArcelorMittal USA is closed. And it will control 61% of US blast furnace pellet capacity, with U.S. Steel accounting for the remaining 39%.
While Cliffs will remain primarily an integrated steelmaker, the transaction will more than double its EAF capacity with the acquisition of the following EAFs:- Coatesville (Pennsylvania): Steel plate mill, with a steelmaking capacity of about 1 million tpy
- Steelton (Pennsylvania): Steel rail mill, with a steelmaking capacity of about 1 million tpy
The deal also increases the possibility that Cliffs will produce merchant pig iron in the future. Cliffs said in a presentation about the acquisition that its Ashland Works facility in Kentucky could be used as “a potential pig iron plant.”The agreement will also provide Cliffs with a captive audience for production from its hot-briquetted iron (HBI) plant in Toledo, Ohio.
Robert Brady: The two plants in my opinion that are safe in this sale. Are Burns Harbor and Cleveland. Both make a profit. And Cleveland just got a big upgrade on their hdgl to run a exotic high strength steel.
Calum Learn: Coatesville has a safe spot too given their heavy plate capacity and government contracts.
Calum Learn: I was curious if the new merger will wander into monopoly territory for Cliffs? That is what happened when Mittal bought ISG they owned too much flat roll capacity and had to sell off Sparrows Point and look what happened there. It was a modern mill designed very similar to IH East and Burns Harbor. [I wondered why one of the largest blast furnaces in USA got torn down.]
Nathan Howe: Burns harbor isn’t going anywhere.
Richard Warner: Nathan Howe that’s what all the mill workers thought around Pittsburgh too. They’ll tell you the same thing I’m telling you. Fairless Hills shut down, Bethlehem shut down, Sparrows Point shut down, J&L and LTV shut down, Weirton shut down, Wheeling Pitt shut down, River Rouge shut down, how many more big plants do I need to name before you realize Burns Harbor is just another mill that will shut down?? Open your mind and your eyes before you end up like all the rest.
A
post that contains a link to a video of the CC CEO. I did not view the video. I trust upper management about as much as I trust politicians. I quit going to department meetings at Bell Labs during the second half of my career.
There are too many comments on this
post to extract. The density of information makes accessing the link worthwhile. A comment by Matt Cawley is worth noting because he says that Cleveland already uses natural gas instead of coke for energy. The hydrogen in the gas extracts more iron from the ore. And burning gas reduces the carbon footprint of the furnace.
I hope a duopoly doesn't give the USA steel industry so much power that they kill the USA auto industry and, consequently, themselves. I'm reminded that a tariff on sugar did not save the USA farmers because many of the candy companies moved to other countries. [
NWItimes post]
While mini-mills have taken over much of the construction business, integrated mills like those along the lakeshore in Northwest Indiana have survived because they make the higher grades of steel used by the automotive industry and the tin plate business. "There's less competition for the automobile industry, which has higher requirements for its steel," he said. "Electric arc furnaces have nitrogen and scrap contaminants. A lot of work has been done to improve them. But the mini-mills haven't been able to make that grade of steel."
