Final Thoughts

The combination of the previously acquired AK Steel, along with the new purchase of most of the U.S. steel mills and finishing facilities, will make Cliffs the largest flat rolled steel producer in North America. According to the company statistics, the combined entities will control 16.5 million net tons compared to 12.7 million tons for Nucor and 10.7 million tons for U.S. Steel.

Assuming the purchase is not blocked by the U.S. government, there would only be two integrated steel producers in the United States – Cliffs (AK Steel/ArcelorMittal USA) and U.S. Steel. The two mills would control 27.2 million tons of flat rolled.

According to Cliffs’ information, the combined companies would control approximately 7 million tons of automotive contracts.

I discussed the purchase with Ryan Smith, the CRU Mill Costing Analyst who has spoken at the SMU Steel Summit Conference over the past two years. Smith told me, “It’s a big deal with a lot of pieces and there’s a lot of info to process. From the cost perspective, my initial thoughts are that there could be cost synergies on the raw material side and that production costs for a large portion of U.S. flat-rolled capacity could drop if Cleveland-Cliffs decides to begin transporting raw materials at cost like what USS does. I don’t know yet if they’re planning to do this.”

SMU in combination with our parent company (CRU) will examine the cost competitiveness and other issues related to the Cliffs’ purchase of AMUSA. On paper, Cliffs got a lot of assets for $1.4 billion and they will control a large portion of supply. Look for us to delve deeper into this subject in one of our Premium issues soon.

My personal opinion is this could be good for the steel industry. Time will tell.

I found it interesting U.S. Steel went outside of the company, and outside of the steel industry, as they announced Kenneth Jaycox as their new Senior Vice President and Chief Commercial Officer. Mr. Jaycox will begin his duties in January 2021. He joins USS from Sysco Corp. where he held roles in transformation, sales development and support, and revenue management for the approximately $50 billion business.

SSAB, ArcelorMittal and Nucor have announced plate price increases. Scrap continues to be forecast at sideways to up $20 per gross ton in October. The purchase of AMUSA by Cliffs is not going to hurt the mill pricing momentum, which we have as being higher on flat rolled and plate steels.

As I mentioned above, we are moving into more analysis and have hired a new employee to assist in that project. Much of the new content will be found in our Premium product. If you would like to learn more about upgrading to Premium, expanding the number of readers you have now, or becoming a new subscriber, please contact Paige Mayhair at Paige@SteelMarketUpdate.com or by phone at 724-720-1012.

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John Packard, President & CEO