Iron ore and steel producer Cleveland-Cliffs, Inc. is getting into the scrap business.
An agreement to acquire Ferrous Processing and Trading Company (FPT), a Detroit, Mich., scrap processor for $775 million, allowing Cleveland-Cliffs to become a supplier to the nation's growing electric arc furnace market (EAF), was announced Monday by Cleveland-Cliffs.
“Cleveland-Cliffs is entering the scrap businesses as a major player through the acquisition of a large scrap company,” Lourenco Goncalves, Cleveland-Cliffs chairman, president, and chief executive officer said. “Even more importantly, FPT has a very meaningful presence in prime scrap. With all the new flat-rolled EAF capacity coming online in our market over the next four years, prime scrap will only become more and more scarce.”
The acquisition allows Cleveland-Cliffs to optimize productivity at its existing EAF and basic oxygen operations, expands its portfolio of high-quality ferrous raw materials, immediately secures substantial access to prime scrap, and creates a platform to leverage long-standing flat-rolled automotive and other customer relationships into recycling partnerships to grow prime scrap presence, according to the company.
“As the largest supplier of flat-rolled steel in North America, Cleveland-Cliffs is the main source of steel that generates prime scrap in manufacturing facilities,” said Goncalves. Furthermore, throughout our entire footprint, Cleveland-Cliffs also consumes a very significant amount of scrap in our EAF's and BOF's. The acquisition of FPT will enhance our ability to buy back prime scrap directly from our clients, cutting out the middlemen and improving the margin contribution from scrap for both Cleveland-Cliffs and for the manufacturing and service center clients that will be able to sell scrap directly back to us.”
FTP currently processes about three million tons of scrap per year, according to a Cleveland-Cliffs news release. About half of that is prime grade.
FTP operates 22 scrap processing facilities. About 90 percent of its revenues come from facilities in the Midwest, primarily in Michigan and Ohio, according to Cleveland-Cliffs.
The acquisition will be on a cash-free, debt-free basis, according to the company.
It will also further Cleveland-Cliffs commitment to environmentally-friendly, low-carbon intensity steelmaking with cleaner materials mix, said the company.
The acquisition has been approved by the Cleveland-Cliffs board of directors and is expected to close in the fourth quarter of 2021, according to the company.
EAF steel production, which uses scrap and high-quality iron additives to make steel, currently produces about 70 percent of the steel within the United States.
Iron ore pellets produced at the six taconite plants in northeastern Minnesota are also used to make steel. The pellets are fed into basic oxygen furnaces to produce steel.
In northeastern Minnesota, Cleveland-Cliffs operates four taconite plants, Hibbing Taconite Co., Minorca Mine, Northshore Mining Co., and United Taconite.