Cleveland-Cliffs CEO Goncalves Joins SMU for Steel Summit Fireside Chat

Goncalves on decarbonization

As the economy shifts towards decarbonization, steel will be a big winner, Goncalves told the conference.

Tailpipe emissions from traditional internal combustion engine vehicles are the biggest contributors to pollution in the US, accounting for 29% of all CO2 emissions, much more than the overall steel industry, the executive pointed out. So the switch to electric vehicles will play a big part in decarbonization, and the move to EVs will be faster than people expect, he predicted.

The Inflation Reduction Act, with its cash incentives for buying EVs, will be a very good motivator for people to make the switch. “We’re going to see more and more of that [switch] happening, helping the entire steel industry, not just Cleveland-Cliffs,” Goncalves noted. But as the largest US supplier of steel to the automotive industry, Cliffs certainly stands to benefit from the transition.

And when it comes to the production of EVs, steel is the material of choice over aluminum, Goncalves said. “Electric vehicles are going all in with steel,” he stated, and Cleveland-Cliffs’ Research and Innovation Center in Middletown, Ohio, is working with all the major automakers to develop steels specially for them.

With a carbon footprint much higher than steel, “Aluminum from an environmental standpoint is a big loser. … If you want to decarbonize, going from steel aluminum is going just the opposite,” he said.

Water is the next precious commodity

When asked if scrap is the next precious metal, Goncalves said the next precious thing really is water. “Water is the one no one has recognized yet. There’s no steel without water,” he commented.

In Europe, a lack of water is already challenging electricity supplies with rivers beginning to dry up on the continent, “Europe won’t be able to produce anything at the extent they produce today due to the water crisis,” Goncalves said.

Europe is facing very real problems with not just a water crisis, but an energy crisis as well, as it’s been very dependent on natural gas from Russia, and relations with the nation have now become very strained due to Russia’s ongoing war against Ukraine.

Labor negotiations with the USW

Labor talks are “progressing the way they should progress” with the United Steelworkers union, Goncalves said. Some 20,000 employees of Cleveland-Cliffs are represented by the USW, and their current contracts are set to expire on September 1. “Organized labor, particularly at USW, I see them as partners to Cleveland-Cliffs,” Goncalves stated. Both sides believe strongly in the strength of the middle class, and so the steelmaker and the union “are exactly on the same page, as the way it should be.”

Next big thing for Cleveland-Cliffs

Cleveland-Cliffs has been investing heavily in its operations since becoming one of the country’s largest steelmakers with the acquisitions of AK Steel and ArcelorMittal USA in 2020. “We’ve made Cliffs a strong company. … We’re always in motion, we’re always doing things. There’s always things happening,” Goncalves commented, noting the company’s large investments in its Minnesota operations and an HBI plant in Toledo, Ohio.

When hydrogen becomes more available, Goncalves said his company will use it for its operations. “We can use hydrogen as soon as hydrogen is available.” But, he added: “I have no idea [when it will be available].”

Other integrated steelmakers around the world are starting to catch on to using HBI in their blast furnaces, a practice Cliffs started in 2020. South Korea’s POSCO and Europe’s ArcelorMittal, two large integrated suppliers to automotive, are two comparable examples, he said.

The 2022 SMU Steel Summit has two additional fireside chats coming up with Steel Dynamics Inc.’s president and CEO Mark Millett on Tuesday afternoon and Stelco’s CEO Alan Kestenbaum on Wednesday.

By Laura Miller, Laura@SteelMarketUpdate.com