Cleveland-Cliffs Stock

Cleveland-Cliffs Inc. operates as a flat-rolled steel producer in North America.

The company is also a manufacturer of iron ore pellets in North America. The company is vertically integrated from mined raw materials, direct reduced iron, and ferrous scrap to primary steelmaking and downstream finishing, stamping, tooling and tubing.

The company is the largest supplier of steel to the automotive industry in North America and serves a diverse range of other markets due to the company’s comprehensive offering of flat-rolled steel products.

The company offers the most comprehensive flat-rolled steel product selection in the industry, along with several complementary products and services. A sampling of the company’s offering includes AHSS, hot-dipped galvanized, aluminized, galvalume, electrogalvanized, galvanneal, HRC, cold-rolled coil, plate, tinplate, GOES, NOES, stainless steels, tool and die, stamped components, rail, slab and cast ingot. Across the quality spectrum and the supply chain, the company’s customers can frequently find the solutions they need from its product selection.

The company is a leading producer of electrical steels referred to as GOES and NOES in the U.S. In November 2021, the Infrastructure and Jobs Act was passed in the U.S., which provides funding to be used for the modernization of the electrical grid and the infrastructure needed to allow for increased EV adoption, both of which require electrical steels. The company’s electrical steel business is expected to continue achieving strong profitability in the coming years. During the second half of 2023, the company commissioned its NOES expansion at its Zanesville facility, which increased the company’s annual capacity by approximately 70,000 net tons.

The company is the first and the only producer of HBI in the Great Lakes region. Construction of the company’s Toledo direct reduction plant was completed in the fourth quarter of 2020 and reached full run-rate nameplate annual capacity of 1.9 million metric tons during the middle of 2021. From this modern plant, the company produces a low-carbon intensive HBI product that can be used in its blast furnaces as a productivity enhancer, or in the company’s BOFs and EAFs as a premium scrap alternative. The company uses HBI to stretch its hot metal production, lowering carbon intensity and reliance on coke.

Strategy

The company’s strategies are to maximize its commercial strengths; take advantage of the company’s U.S.-centric, internally sourced supply chain; optimize the company’s fully-integrated steelmaking footprint; advance its participation in the green economy; and enhance the company’s environmental sustainability.

Business Operations

The company has a vertically integrated portfolio, which begins at the mining stage and goes all the way through the manufacturing of steel products, including stamping, tooling and tubing. The company has the unique advantage as a steel producer of being fully or partially self-sufficient with the company’s production of raw materials for steel manufacturing, which includes iron ore pellets, HBI, scrap and coking coal. The company is organized into four operating segments based on the differentiated products – Steelmaking, Tubular, Tooling and Stamping and European Operations. The company primarily operates through one reportable segment – the Steelmaking segment.

The company’s primary steel producing and finishing facilities are located across Illinois, Indiana, Michigan, Ohio, Pennsylvania and West Virginia. The company operates seven blast furnaces and five EAFs with the configured capability of producing approximately 20.5 million tons of raw steel annually. Raw steel is generally cast into slabs and finished based on customer specifications. Finishing is completed on site at the company’s integrated operations or at one of its standalone finishing facilities.

Ferrous raw materials for the production of steel are internally sourced from the company’s iron ore mines in Michigan and Minnesota, the company’s direct reduction plant in Ohio and the company’s scrap facilities in Michigan, Ohio, Tennessee, Florida and Ontario. The company also operates a coal mining complex in West Virginia and produces coke from its facilities in Indiana, Ohio, and Pennsylvania.

The company’s Other Businesses primarily includes the Tubular Components and Tooling and Stamping operating segments that provide customer solutions with carbon and stainless steel tubing products, advanced-engineered solutions, tool design and build, hot- and cold-stamped steel components, and complex assemblies.

Products and Markets

As a fully integrated steel enterprise, the company has a comprehensive portfolio of steel solutions. The company primarily sells its products to customers in four broad market categories.

The company sells its products principally to customers in North America. Approximately 40-45% of the company’s flat-rolled steel shipments are sold under fixed base price contracts. These contracts are typically one year in duration and expire at various times throughout the year.

Automotive Market

The company specializes in manufacturing difficult-to-produce and high-quality steel products with demanding delivery performance and first-class customer technical support. Through the company’s collaborative relationships with automotive producers, the company develops breakthrough steel solutions that help its customers meet their product requirements.

The largest end user for the company’s steel products is the automotive industry in North America, which makes light vehicle production a key driver of demand.

The company benefits from intentionally targeting larger vehicle platforms to take advantage of consumer preferences, and the company has focused on and has been successful in supplying sizeable portions of numerous large vehicle platforms. As a result, a significant portion of the automotive steel that the company sells is used to produce these popular larger vehicles. In addition to benefiting from the company’s exposure to consumers’ strong demand for larger vehicles, these vehicles also typically contain a higher volume of steel than smaller sedans and compact cars, providing the company the opportunity to sell a higher volume of its steel products.

The company collaborates with its automotive customers and their suppliers to develop innovative solutions using the company’s developments in light weighting, efficiency, and material strength and formability across its extensive product portfolio, in combination with the company’s automotive stamping and tube-making capabilities. During 2023, the company introduced an all steel battery box design utilizing various grades of AHSS for improved use for lower GHG emissions, to maintain light-weighting targets, and to gain cost benefits when compared to using alternative materials. The company offers steel products that are stronger, less expensive, have competitive weight savings, are easier to repair and are more environmentally friendly than alternative materials.

As a leading producer in North America of high-efficiency NOES, which is a critical component of EV motors, the company is positioned to potentially benefit from the growth of EVs going forward. During 2023, the company introduced its C-STAR protection design, which was developed for the purpose of providing EV battery protection for improved safety purposes, but can be used in any type of light vehicle. In 2022, the company introduced its MOTOR-MAX product line of NOES for high frequency motors and generators. The company’s strong foundation in electrical steels and long-standing relationships with automotive manufacturers and their suppliers will provide the company with an advantage in this market as it continues to grow and mature. Likewise, the growing customer adoption of EVs may also increase demand for improvements in the electric grid to support higher demand for more extensive battery charging, which the company’s GOES could support.

Infrastructure and Manufacturing Market

The company sells a variety of its steel products, including hot-rolled, cold-rolled, galvanized, plate, stainless, electrical, tinplate and rail, to the infrastructure and manufacturing market. This market includes sales to manufacturers of HVAC, appliances, power transmission and distribution transformers, storage tanks, ships, railcars, wind towers, machinery parts, heavy equipment, military armor, food preservation and railway lines. Domestic construction activity and the replacement of aging infrastructure directly affect sales of steel to this market. Recent government legislation, including the Infrastructure and Jobs Act, the CHIPS Act and the Inflation Reduction Act, is expected to keep demand elevated for steel products related to renewable energy, as well as the modernization of the U.S. electrical grid. The company’s plate products can be used in windmills, which the company estimates contain 130 metric tons of steel per megawatt of electrical generating capacity. Additionally, the company estimates solar panels consume 40 metric tons of steel per megawatt of electrical generating capacity. The company should also continue to benefit from a tax credit provided by the Inflation Reduction Act for consumers who buy new EVs, which should increase the demand for the company’s electrical steel used in charging stations.

Distributors and Converters Market

Virtually all of the grades of steel the company produces are sold to the steel distributors and converters market. This market generally represents downstream steel service centers, which source various types of steel from the company and fabricate it according to their customers' needs.

Steel Producers Market

The steel producers market represents third-party sales to other steel producers, including those who operate blast furnaces and EAFs. It includes sales of raw materials and semi-finished and finished goods, including iron ore pellets, coal, coke, HBI, scrap, slab and other steel products.

FPT is one of the largest processors of prime scrap in the country. The company’s scrap presence has developed further since acquiring FPT as the company has leveraged its long-standing flat-rolled automotive and other customer relationships into recycling partnerships. The company’s steelmaking operations consume a large portion of the ferrous scrap processed by FPT. The company also has third-party sales of ferrous and non-ferrous scrap.

Production from the company’s iron ore mines is predominantly consumed by its steelmaking operations. During 2023, the company sold 4 million long tons of iron ore products to third parties from its share of production from the company’s iron ore mines. The merchant portion of the company’s iron ore pellet production is sold pursuant to long-term supply agreements and through spot contracts.

Applied Technology, Research and Development

The company’s research and innovation spend totaled $30 million in 2023.

During 2023, the company introduced its C-STAR protection design, which was developed for the purpose of providing EV battery protection for improved safety purposes, but can be used in any type of light vehicle. The company also introduced an all steel battery box design utilizing various grades of AHSS for improved use for lower GHG emissions, to maintain light-weighting targets, and to gain cost benefits when compared to using alternative materials. The company is also a leading producer in North America of high-efficiency NOES, which is a critical component of EV motors. The company’s MOTOR-MAX NOES product line is used for high frequency motors and generators. The company’s strong foundation in electrical steels and long-standing relationships with automotive manufacturers and their suppliers will provide the company with an advantage in this market as it continues to grow and mature.

Regulatory Developments

In 2022, the U.S. Environmental Protection Agency (EPA) proposed to impose new standards for nitrogen oxide (an ozone precursor) on various industries (including the steel and iron ore sectors) that operate in specific states, including numerous states where the company operates (Illinois, Indiana, Michigan, Minnesota, Ohio, Pennsylvania, and West Virginia).

The rules apply to all of the company’s Minnesota iron ore mining and pelletizing operations and required submittal of a Mercury Reduction Plan to the Minnesota Pollution Control Agency in 2018 with plan implementation requirements becoming effective on January 1, 2025.

Raw Materials and Energy

Iron Ore

The company owns or co-owns five active iron ore mines in Minnesota and Michigan. Based on the company’s ownership in these mines, the company’s share of annual rated iron ore production capacity is approximately 28 million long tons, which supplies all of the iron ore needed for the company’s steelmaking operations.

HBI

The company’s investment into HBI production provides the company access, when needed, to clean iron units in order to make advanced steel and stainless products. The company has an annual capacity of 1.9 million metric tons of HBI per year.

Coke and Coal

The company owns three active cokemaking facilities, including one coke plant located within the company’s Burns Harbor facility. These facilities provide approximately half of the coke requirements for the company’s steelmaking operations and have an annual rated capacity of 2.6 million net tons. Additionally, the company has coke supply agreements with suppliers that provide the company’s remaining requirements.

The company has annual rated metallurgical coal production capacity of 1.8 million net tons from its Princeton mine, which supplies a portion of the company’s metallurgical coal needs.

Steel Scrap

The company owns the assets of FPT, which provides the company sourcing and processing capabilities for both prime and obsolete scrap. FPT includes 22 facilities that are primarily located in the Midwest near the company’s steel facilities. Additionally, the company’s access to scrap furthers its commitment to being an environmentally-friendly, low-carbon intensity steelmaker with a cleaner materials mix as the company is able to better optimize productivity at its existing EAFs and BOFs.

The majority of the company’s scrap requirements can be generated or processed from internal sources, including scrap generated at the company’s steel production facilities.

History

The company was founded in 1847. It was formerly known as Cliffs Natural Resources Inc. and changed its name to Cleveland-Cliffs Inc. in 2017.