Benzinga - by Stjepan Kalinic, Benzinga Staff Writer.
Cleveland-Cliffs (NYSE:CLF), a major domestic steel producer, is set to undergo a green transformation courtesy of the U.S. Department of Energy (DOE). The company stands to receive up to $575 million for two significant decarbonization projects at its facilities in Ohio and Pennsylvania, marking a pivotal step towards more steel production powered by renewable energies.
“The investment at Middletown Works is confirmation that Cleveland-Cliffs is the benchmark for iron and steelmaking technology in the world, ahead of Japan, Korea, Europe, and China. Our experience in using natural gas has seamlessly catalyzed our transition into using hydrogen. Middletown and Butler Works are both critically important to the success of Cleveland-Cliffs and the industrial might of the United States," said Cliffs' CEO Lourenco Goncalves.
The flagship project at Cleveland-Cliffs’ Middletown Works in Ohio involves replacing the existing blast furnace with a state-of-the-art Hydrogen-Ready Direct Reduced Iron (DRI) plant and Electric Melting Furnaces (EMF). This transition promises to slash the site’s ironmaking carbon intensity by more than 50% when fueled by natural gas and by over 90% with clean hydrogen.
Multiple global players are currently undergoing a transformation of renewable energy steelmaking, including China Bawou Steel Group. This largest global steel producer has committed billions to Rio Tinto's (NYSE:RIO) Simandou project, with the goal of decarbonization.
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Meanwhile, Cleveland-Cliffs stands not only to maintain current steel production capacity but also to achieve substantial cost savings, potentially amounting to $450 million annually in production costs. Furthermore, the initiative should preserve 2,500 jobs while creating an additional 170 positions, with around 1,200 building trades jobs generated during construction.
Sen. Sherrod Brown (D-Ohio) offered his perspective, stating: “This partnership will ensure that IAM steelworkers in Middletown remain at the forefront of the global steel industry. This is why we passed the Bipartisan Infrastructure Law and the Inflation Reduction Act – to ensure Ohio manufacturing continues to lead the world in the technologies that will drive our economy for decades to come.”
This decarbonization effort comes during an important year for the domestic steel sector. With Nippon Steel‘s (OTCPK: NISTF) ongoing acquisition of U.S. Steel (NYSE:X), a positive sentiment fueled by strong government support could help Cleveland-Cliffs emerge as a prime domestic contender for the merger.
Both President Joe Biden and his opponent, former President Donald Trump, are courting union support in Ohio, expressing their opposition to a foreign takeover. As elections draw closer, the market can expect more support for the domestic industry in the Buckeye State, which is one of the best predictors of presidential election winners.
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