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

US flat-rolled steelmaker, Cleveland-Cliffs plans to resume steelmaking operations in Cleveland at its 1.5mn nt (1.36mn mt) per year No. 6 blast furnace to correspond with its Ohio output in light of the scheduled outage at its 2.4mn nt annual capacity Middletown Works No. 3 furnace. 


The company said it had finished 2020 in a positive manner with hot-briquetted iron (HBI) upgrades on target and believes it has moved into 2021 with the desired scope, product offering, and varied customer base appropriate for its business operations.


HBI and prime grades output and shipments

The company’s HBI production commenced in December 2020 after its DRI plant in Toledo, Ohio began operations a month earlier. Moreover, Cliffs projects that it will begin HBI shipments to third-party consumers in late Q1 2021 and may attain full production by Q2. These shipments will impact prices and trades of HBI, DRI, and prime grades including pig iron.


The production in Toledo joins existing HBI production in Corpus Christi and Nucor’s DRI plant in Louisiana, which in-turn will provide more metallics supply for electric arc furnaces (EAFs). 


The company noted that the demand for prime grades such as #1 busheling may temper and reduce some price value for the grade because of the rise in metallics supply. As a result, a new pricing model for scrap alternatives may be on the horizon as new competition brews in HBI markets, which may spill into iron ore price dynamics as the raw material is relied upon for the production of these scrap replacement grades. 


For Cliffs, however, its facilities now include the ability to join HBI and iron ore pellets along with steel making proficiencies.


Acquisitions propel business

The producer reiterated in its preliminary Q4 2020 results that the launch of its eco-friendly direct reduced iron (DRI) plant and its acquisition of ArcelorMittal USA propelled the company to North America’s largest flat-rolled steelmaker in 2020. 


The company views its strong Q4 results as a guide towards fully achieving its 2021 targets as the inputs from the recent, December 9, 2020, ArcelorMittal USA purchase and outside customer HBI sales will be included in the results. 


As steel prices recover and an increasing number of steel producers contend with tight scrap supply, Cliffs hopes that it will benefit from its evolving business model along with internal reliance on iron ore pellet and HBI production.


Cliffs’ steel sales volume reached 1.9mn nt (1.72mn mt) in Q4 2020, which includes sales of Cleveland-Cliffs Steel (formerly ArcelorMittal USA) from Dec 9-31, also covering the full Q4 2020 performance for AK Steel and legacy Cleveland-Cliffs operations.


The company’s consolidated revenue was close to $2.2-2.3bn in Q4 2020, representing a 320pc increase compared to Q4 2019. Adjusted EBITDA was around $280-290mn in Q4 2020, a 150pc increase from the same quarter a year ago and represents the highest in six years.

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