Cleveland-Cliffs plans to idle its Northshore Mining operations in the Iron Range in northern Minnesota this spring and permanently close its Mountain State Carbon coke plant as it continues to adjust its business operations.
The Ohio-based company long operated as an iron ore supplier but became North America's largest flat-rolled steel producer after acquiring ArcelorMittal USA and AK Steel in late 2020, becoming one of the Region's biggest steel companies overnight. Now it's looking at getting out of the business of supplying iron ore to competing steelmakers.
"Going forward, we will be limiting the tonnage of iron ore pellets we sell to third parties," CEO Lourenco Goncalves said in a conference call with investors. "Iron ore is a finite resource and the time and cost it takes to get permits and extend life of mine is incredibly cumbersome."
The company posted a record profit last year but hot-rolled steel prices have been falling from record highs. Cleveland-Cliffs also is looking to reduce its carbon footprint to meet emissions reduction targets and get out of royalty payments it deems "ridiculous." It paid Mesabi Trust $20.9 million in the fourth quarter.
"In addition, iron ore pellets are Scope 1 emission for Cleveland-Cliffs, but they are Scope 3 emissions for the clients we sell them to," Goncalves said in the conference call. "Unfortunately, the Scope 3 emissions are not accounted for, not counted in anyone's reduction targets and surprisingly, at least for now, no one really seems to care about Scope 3 emissions, therefore, producing fewer tons of pellets automatically reduce our Scope 1 emissions. And that's good enough for us, at least until Scope 3 becomes a topic of concern. Also, with the use of additional scrap in our BOFs, our iron ore needs are not as high as before, and we no longer need to run our mines full out. When determining where to adjust production, our first look is at our cost structure because we are now able to produce DR-grade pellets at Minorca and mainly due to the ridiculous royalty structure we have in place with the Mesabi Trust."
The mines in Minnesota employ 500 workers, some of whom will be transferred to Cleveland-Cliffs' other operations in Minnesota.
"We will be idling all production at our Northshore mine, starting in the spring, carrying through at least to the fall period and maybe beyond," Goncalves said. "At Northshore, there will be no production, no shipments and no royalty payments. We also acknowledge that our strategy to stretch hot metal by adding increased amounts of scrap to the basic oxygen furnaces is working extremely well. With more scrap in the BOFs, we need fewer tons of hot metal to produce the same tonnage of liquid steel. As a consequence, the Northshore idle could go longer than currently planned."
Cleveland-Cliffs is pursuing a strategy of hot metal stretching that will lower its needs for coke and coal.
"We already announced last quarter that we idled our coke battery at Middletown. Now that our coke needs have been reduced even more, in the second quarter of 2022, we will also permanently close our Mountain State Carbon coke plant," Goncalves said. "This action will not only further improve our carbon footprint but will also save us approximately $400 million in capex originally planned for this facility over the next few years. Even though jobs are going to be eliminated at Mountain State Carbon, we have enough job openings at other nearby Cleveland-Cliffs facilities. And we can ensure all good employees will have other employment opportunities within our company."
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