John Groves posted
[John describes the history of US Steel as well as C-C. The map is from Cliff's website.]
When Cleveland-Cliffs acquired most of the US assets of ArcelorMittal a year ago, I prepared these notes on the historical significance of the new steel conglomerate. Cleveland-Cliffs integrated steel plants in historical context On September 28th 2020 Cleveland-Cliffs Inc. acquired most of the assets of ArcelorMittal USA for $1.4 billion. The enterprise value of the transaction is approximately $3.3 billion, which takes into consideration the assumption by Cleveland-Cliffs of pension/OPEB liabilities and working capital. In March 2020 Cleveland-Cliffs acquired AK Steel for $1.1 billion, equating to an enterprise value of $3 billion for AK Steel. Cleveland-Cliffs is now America's largest iron ore miner (capacity 28 million long tons per annum) and has been mining in the upper Great Lakes regions since 1850. The acquisitions of AK Steel and ArcelorMittal USA have formed the largest flat products steelmaker in the USA with an annual shipment capacity of 19 Mtpa (shipments of 17 Mtpa in 2019). But in terms of steel industry history, Cliffs now combines the surviving integrated steel plants of seven of the ten largest and most famous American integrated steelmakers of the 20th Century. AK Steel includes the 3 Mtpa Middletown integrated works, the flagship plant of Armco Steel, which dates back to 1901. It also operates the 2.8 Mtpa Dearborn integrated works, established by Ford Motor Company in 1920. Rouge Steel became independent from Ford in 1989, filed for Chapter 11 bankruptcy in 2003 then became part of Severstal USA for $345 million in 2004. Severstal invested $1.7 billion between 2007 and 2014 to completely rebuild the blast furnace ($350M) upgrade the LD shop, casters and hot strip mill (about $200M), adding a $450M state-of-the-art coupled pickle line/cold tandem mill (2.1 Mtpa, 72” wide) and a $285M hot dip galvanising line. AK Steel acquired the Dearborn integrated works in 2014 for $707 million. In 2020 AK Steel closed the 3.8 Mtpa Dearborn 68” hot strip mill (built 1974 and modernised 2008) and now ships Dearborn slabs to the world-class Middletown 5.4 Mtpa 86” hot strip mill (built 1969, modernised and expanded 1991). With the acquisition of the ArcelorMittal plants, Cliffs might look at other options for supplying slabs to Middletown and hot band to Dearborn’s cold mill and coating lines. ArcelorMittal USA includes three major integrated works. Burns Harbor was Bethlehem Steel's flagship plant, established near Chicago in the late 1960s. The 5 Mtpa capacity Burns Harbor plant is the newest integrated works in the USA, but it has already been operating for more than 50 years. Bethlehem Steel (including Sparrows Point and scrap-based Steelton and Lukens) was acquired for $1.3 billion by International Steel Group in 2003. In 2005 ISG was acquired for $4.5 billion by Mittal Steel, which became ArcelorMittal in 2006. Nearby on the lakefront is the 7.5 Mtpa Indiana Harbor integrated complex, which is a combination of two separate integrated plants now operated as a single unit. Inland Steel established its Indiana Harbor plant in 1901. At its peak in the 1970s Inland had an annual steelmaking capacity of 9.3 Mtpa. Inland was acquired for $1.43 billion by Ispat International in 1998, Ispat became Mittal Steel in 2004 and ArcelorMittal in 2006. The Mark Works was established in 1922 on the opposite side of the Indiana Harbor ship channel, and merged into Youngstown Sheet & Tube Co. in 1924. At its peak in the 1970s, the plant had an annual capacity of 4.1 Mtpa. YS&T was merged into J&L Steel in 1978. J&L acquired Republic Steel to become LTV Steel in 1984. International Steel Group acquired LTV Steel for bargain basement $325 million in 2002, and then merged into Mittal Steel in 2004, becoming ArcelorMittal in 2006. The two Indiana Harbor plants have been operated as a single unit since 2004. IH East is the former Inland plant. IH West is the former J&L plant. There is a similar pattern at ArcelorMittal's Cleveland complex. What is now the Cleveland East plant was established by Corrigan McKinney Steel in 1910 and it was acquired by Republic Steel in 1935. It soon became Republic's flagship plant. Steelmaking capacity peaked at 4.2 Mtpa in the 1970s. The Cleveland West plant was established by Otis Steel in 1913 on the opposite side of the Cuyahoga River. Otis Steel was acquired by Jones and Laughlin Steel in 1942. Steelmaking capacity peaked at 3.1 Mtpa in the 1970s. In 1978 J&L acquired YS&T, and in 1984 acquired Republic Steel to form LTV Steel. The two adjacent plants have been operated as a single unit since 1984. Ownership moved from LTV Steel to ISG in 2002, then Mittal Steel in 2004, ArcelorMittal in 2006 and now Cleveland-Cliffs in 2020. Effective raw steel capacity of the two plants may now be around 3.5 Mtpa, limited by the two remaining blast furnaces. So in a historical context, Cleveland-Cliffs now operates five integrated plants that were once the key components of Bethlehem Steel, LTV Steel (incorporating J&L, YS&T and Republic), Inland Steel, Armco Steel and Ford Motor Co. Cleveland-Cliffs now has only one integrated steel competitor, US Steel Corp. In 1974 US Steel had a total raw steelmaking capacity of more than 43 Mtpa and operated ten integrated steel plants. Only two of these remain. Gary and Mon Valley (Edgar Thomson) are still operating, plus the Great Lakes and Granite City integrated plants acquired in 2002 from the bankrupt National Intergroup (formerly National Steel). Gary was established in 1908 and had 12 blast furnaces and four open hearth shops by 1918. Peak steelmaking capacity at Gary was above 8 Mtpa, and is still 7.5 Mtpa today. Through much of its history, Gary works had a complex line-up of hot and cold-rolled strip mills, with galvanising and tinning lines, augmented in 1962 by the world’s largest 160/210” wide plate mill (upgraded 1990). But through most of its first eight decades Gary also had a huge rail mill (built 1909) and up to ten bar mills. By 1990 all of the long products mills had been closed. The plate mill was sold off to ISG in 2003 (actually traded for a pickle line). Ownership transferred to Mittal Steel in 2004 then ArcelorMittal in 2006. Most of Gary’s 100% continuously cast slab output now goes to its world-class hot strip mill (+6 Mtpa). Edgar Thomson was established in 1875 as Andrew Carnegie's flagship plant. ET still has 2.9 Mtpa raw steel capacity, compared to 2.4 Mtpa in the 1970s. It is the only remaining integrated steel plant in the Pittsburgh Region, once the world’s steel capital. Great Lakes plant was established in 1929 (steelmaking and mills added to an existing blast furnace plant operating since 1904) and merged into National Steel in 1930. Granite City began making steel in 1895 and acquired an adjacent independent iron and coke works in 1951 (two blast furnaces originally built in 1921 and 1926). Granite City Steel was acquired by National Steel in 1971. Capacity at Great Lakes peaked at 6.5 Mtpa in the 1970s and is now 3.8 Mtpa. Iron and steelmaking at Great Lakes was put on indefinite idle from April 2020. The hot strip mill was to follow by end-2020. Only cold rolling and galvanizing will continue in operation. Although it has not been officially abandonned, it seems unlikely Great Lakes will ever resume iron and steelmaking. Granite City capacity is now 2.8 Mtpa, but is operating at around 1.5 Mtpa, using only one of the two blast furnaces. America has only nine remaining integrated steel plants. Only one of these was established after WWII. The other eight plants have been operating between 91 to 125 years, including seven at least 100 years! If the surviving plants are so old, maybe that helps explain why 35 other integrated plants in American have been abandoned in recent decades, under intense market pressure from imports and the growth of mini mills, as well as the surging costs of plant modernisation, environmental costs and pension liability costs. If these nine plants are the only survivors, maybe that suggests that the others were less well located, had less competitive product ranges and less efficient production facilities. In the peak USA steel production year 1974, the ten biggest steel companies had a raw steel capacity of almost 145 Mtpa. US Steel 43.8 Mtpa (10 integrated plants) Bethlehem Steel 28.25 Mtpa (5 integrated plants) Republic Steel 14.15 Mtpa (5 integrated plants) National Steel 11.80 Mtpa (3 integrated plants) Jones & Laughlin Steel 9.56 Mtpa (3 integrated plants) Armco Steel 9.53 Mtpa (3 integrated plants) Youngstown Sheet & Tube 9.50 Mtpa (3 integrated plants) Inland Steel 9.30 Mtpa (1 integrated plant) Wheeling Pittsburgh 5.14 Mtpa (2 integrated plant) Ford Motor Co. 3.75 Mtpa (1 integrated plant) These ten companies in 1974 had a total of 36 integrated steel plants, out of the total 44 integrated plants in USA. Now only US Steel still exists under its original ownership. US Steel’s four integrated plants now have a combined raw steelmaking capacity of 17 Mtpa (or effectively about 13 Mtpa without Great Lakes). The five integrated plants now reassembled into Cleveland-Cliffs have a combined capacity of about 22 Mtpa. Both companies have some additional non-integrated steelmaking plants using electric arc steelmaking. All tons above are US short or net tons of 2000 lbs, except Cleveland-Cliffs iron ore mining capacity, which is still reported in gross tons of 2240 lbs.
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