Cleveland-Cliffs Rides Major Acquisitions Into 2021
Researched by Industrial Info Resources (Sugar Land, Texas)--Cleveland-Cliffs Incorporated (NYSE:CLF) (Cleveland, Ohio) transformed in a big way last year, following its acquisitions of AK Steel and ArcelorMittal USA. With a wide swath of new and existing assets -- from iron ore extraction through automotive production and manufacturing -- the company's targeted 2021 capital expenditures (capex) are in the range of $600 million to $650 million, up from $500 million spent in 2020.
"One year ago, Cleveland-Cliffs was producing fairly zero tons of steel. And we are now, one year later, the largest flat-rolled steel company in North America," Chief Executive Officer Lourenco Goncalves said during the company's fourth-quarter and full-year 2020 earnings conference call.
For more information, see February 26, 2020, article - Cleveland-Cliffs Looks to AK Steel Acquisition, New HBI Plant for Positive Outlook in 2020, and September 28, 2020, article - The Iron Giant: Cleveland-Cliffs Strives for Bigger, Better Things with ArcelorMittal USA Acquisition.
Cleveland-Cliffs' 2021 capex includes sustaining capital of about $500 million, including $147 million in fourth-quarter spending from ArcelorMittal, and $60 million held over after completing construction of the hot-briquetted iron (HBI) plant in Toledo, Ohio. The remaining amount is expected to go toward minor growth projects.
Goncalves also expects to play catch-up with maintenance at some of ArcelorMittal's existing assets that saw reduced spending over the past one to two years.
Industrial Info is tracking project activity by Cleveland-Cliffs and its subsidiaries worldwide, worth $2.61 billion, including $283.86 million worth in the U.S. that are planned to kick off construction in 2021.
2021 Project Kickoffs
Industrial Info is tracking six project kickoffs for Cleveland-Cliffs at its steel works plant in Cleveland, Ohio, which produces 3.8 million tons per year, including three already under construction:
- A $10 million 2021 maintenance shutdown, to be performed throughout the year; see project report.
- A $100 million C5 blast furnace rebuild/reline, in order to return the 4,350-ton-per-day furnace to optimal performance. Completion is expected in April; see Industrial Info's project report.
- An $8 million cooling water pipe replacement, to upgrade 70- to-80-year-old pipes and support the C5 blast furnace reline. Completion is expected in April; see Industrial Info's project report.
Projects still to kick off later this quarter at the Cleveland facility include 1-month basic oxygen furnace rebuilds in April, a 1- to-2-week boiler maintenance shutdown in June, and a C6 blast furnace restart, from April to June. The latter two projects have a medium probability (70-80%) of moving forward as scheduled. For more information, see Industrial Info's reports on the oxygen furnace rebuilds, boiler maintenance, and C6 furnace restart projects.
Meanwhile, subsidiary AK Steel is proceeding with $3 million of basic oxygen furnace rebuilds at its steel works plant in Dearborn, Michigan, as part of a capital improvement program that occurs every two years. Completion is expected in late October. For more information, see Industrial Info's project report.
Steelmaking revenue in fourth-quarter 2020 was about $2.2 billion, compared with just $534 million year-over-year. About $859 million, or 41%, of that came from the automotive market.
"We feel extremely comfortable that our leadership position in automotive is very solid," Goncalves said. And after automotive steel production of 3 million tons per year, "the acquisition of [ArcelorMittal USA] elevated our participation in automotive to 5 million tons per year."
Fourth-quarter earnings of $74 million were up from $63 million year-over-year. However, Cleveland-Cliffs suffered a full-year net loss of $81 million, compared with earnings of $293 million in 2019.