Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

Cleveland Cliffs has agreed to acquire 100pc of ArcelorMittal USA’s operations for $3.4bn under an agreement that was announced by both the companies on Monday.


The total consideration also covers around $2bn of long-term liabilities of ArcelorMittal USA which will be assumed by Cliffs.


The companies will operate separately until the transaction closes sometime during Q4 2020, depending on regulatory approvals. Once final, the combined entity will form the largest vertically integrated flat-rolled steelmaker in North America, with a resource base that will be arranged for the continued benefit of customers and stakeholders. 


Once the transaction is complete, Cliff’s combined steel shipments for 2019 will stand at about 17mn nt (15.42mt). The company will also become the largest North American producer of iron ore pellets through 28mn gt of its yearly capacity. The deal is also projected to boost options regarding merchant pig iron and HBI production.


Lakshmi Mittal, chairman and chief operating officer of ArcelorMittal referred to Cliffs as its most valuable supplier and said that he believes there will be significant benefits from iron ore integration as well as collaboration opportunities with AK Steel, which was bought by Cliffs in late 2019.


Lourenco Goncalves, chairman, president and chief executive officer of Cliffs cited production volumes, operational modification, fixed cost reduction, and technical proficiency as most important in steelmaking, also to be achieved by the transaction.


The acquisition strengthens the company’s position in the automotive market, Goncalves continued and expands its standing in vital US markets such as construction, appliance, infrastructure, machinery, and equipment. It also furthers the company’s strong raw material characterization and expands its finishing capabilities by facilitating a more effective fully integrated steel structure.


ArcelorMittal will retain a shareholding in Cliffs, but employee retention and status regarding the integration process has not been disclosed at this time. Sources have expressed to Davis Index that the announcement is fresh and therefore, too early to know if or how employment may be affected.


The acquired assets include six steelmaking plants, eight finishing centers, two iron ore mining and pelletizing operations, and three coal and coke making operations. ArcelorMittal’s research and development unit in East Chicago, AM/NS Calvert, ArcelorMittal tailored blanks, ArcelorMittal tubular products, and ArcelorMittal international are not involved in the contract.

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