WEIRTON - Cleveland-Cliffs Inc. (NYSE: NYSE:CLF), a major North American steel producer, announced the establishment of a new $150 million electrical distribution transformer production plant in Weirton, West Virginia. This move aims to address the nation's critical shortage of distribution transformers, which are essential for electrical power distribution systems.
The company's Chairman, President, and CEO, Lourenco Goncalves, along with West Virginia Governor Jim Justice and other officials, unveiled the plans today, stating the plant will begin operations in the first half of 2026. The state of West Virginia is supporting the project with a $50 million forgivable loan.
The investment is expected to revive employment for 600 workers represented by the United Steelworkers (USW) from the Weirton tinplate mill, which is currently idle. Additionally, the demand for American-made Grain Oriented Electrical Steel (GOES), exclusively produced by Cleveland-Cliffs at its Butler Works steel mill in Pennsylvania, is anticipated to rise. This could lead to employment expansion for the United Auto Workers (UAW)-represented workforce in Butler.
The new facility will not only utilize GOES but also consume stainless and carbon steel produced by Cleveland-Cliffs at its other plants in Ohio, Michigan, and Indiana. The efficiency standards for distribution transformers, recently set by the U.S. Department of Energy, back the long-term use of highly efficient American-made steel, bolstering the viability of the Weirton investment.
Goncalves highlighted the importance of distribution transformers in the maintenance and expansion of America's electric grid and emphasized the stifling effect their shortage has on economic growth. He also noted that the widespread adoption of Artificial Intelligence, which increases electricity consumption, underscores the need for transformers.
Mark Glyptis, President of USW Local 2911, expressed gratitude for the investment, which he said builds on Weirton's steelmaking legacy and establishes the region as a manufacturing hub for transformers critical to the country's economic and national security.
The announcement was made at a press conference in Weirton.
In other recent news, Cleveland-Cliffs has announced the acquisition of Canadian steelmaker Stelco Holdings Inc. for $2.8 billion. This strategic move is expected to enhance Cleveland-Cliffs' position in the industry and has been met with support from analysts at Jefferies. The acquisition, which is expected to close in the fourth quarter, will immediately contribute to Cleveland-Cliffs' per-share profit for 2024 and 2025.
In related developments, Jefferies has maintained a Buy rating on Cleveland-Cliffs stock, while B.Riley has revised the price target for the company's shares to $23.00. However, JPMorgan (NYSE:JPM) has downgraded Cleveland-Cliffs from Overweight to Neutral, reducing the price target to $17.
On the board level, Cleveland-Cliffs announced the resignation of Janet L. Miller, a decision not linked to any internal conflicts. Additionally, Congressman Mike Kelly made a substantial purchase of Cleveland-Cliffs shares, valued between $50,001 and $100,000.
The company has also initiated a new $1.5 billion share repurchase program, underlining its ongoing financial activities and strategic positioning in the steel industry.
These are among the recent developments shaping the trajectory of Cleveland-Cliffs.
InvestingPro Insights
Cleveland-Cliffs Inc. (NYSE: CLF) has made a strategic move with its latest investment in a new electrical distribution transformer production plant. This initiative aligns with the company's robust financial metrics and strategic positioning in the market. According to InvestingPro data, Cleveland-Cliffs boasts a strong market capitalization of $7.21 billion. The company's P/E ratio stands at 19.79, reflecting investor confidence in its earnings potential.
InvestingPro Tips indicate that the company is a prominent player in the Metals & Mining industry and has been implementing aggressive share buyback programs, signaling management's confidence in the company's value. Additionally, the high shareholder yield is a testament to the company's commitment to returning value to its shareholders. These factors, combined with the anticipation that Cleveland-Cliffs will be profitable this year, suggest a solid financial foundation that supports the company’s expansion plans.
Despite the recent volatility in stock price, with a significant drop over the last three months, the company's valuation implies a strong free cash flow yield, which is a positive indicator for future growth. Moreover, the company's focus on American-made steel for distribution transformers is likely to benefit from the efficiency standards set by the U.S. Department of Energy, further enhancing the investment's long-term prospects.
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