Cleveland-Cliffs selected to receive up to $575M in DOE investments

Cleveland-Cliffs announced that two of its projects have been selected for award negotiations for up to $575 million in total funding from the United States Department of Energy to pursue two decarbonization investments at Middletown Works in Ohio and Butler Works in Pennsylvania. Following successful negotiations, these projects will allow for substantial reductions in greenhouse gas emissions across the Cliffs’ footprint and will also create efficiencies that meaningfully drive down operating costs while securing and growing good-paying Union jobs. This federal funding is being made available through DOE’s Industrial Demonstrations Program funded through the Infrastructure Investment and Jobs Act and the Inflation Reduction Act. Middletown Works DRI Plant and Electric Melting Furnaces: If awarded, the Company would replace its existing blast furnace at its Middletown Works Facility in Middletown, Ohio with a 2.5mtpa Hydrogen-Ready Direct Reduced Iron Plant and two 120 MW Electric Melting Furnaces to feed molten iron to the existing infrastructure already on site, including the BOF, Caster, Hot Strip Mill, and various finishing facilities. Middletown will maintain its existing raw steel production capacity of approximately 3 million net tons per year and will no longer use coke for iron production. The EMF technology is well established and, together with the injection of hydrogen in blast furnaces, is a preferred route for meaningful reduction in carbon emissions for integrated steelmakers worldwide. The process will dramatically reduce carbon emissions intensity, and will consolidate Middletown Works as the most advanced, lowest GHG emitting integrated iron and steel facility in the world. The facility will have the flexibility to be fueled by natural gas, which would reduce current ironmaking carbon intensity by over 50%; a mix of natural gas and clean Hydrogen; or clean Hydrogen, which would reduce current ironmaking carbon intensity by over 90%. The new facility is expected to reduce production costs by approximately $150 per net ton of liquid steel produced, or a $450 million annual savings relative to the existing configuration. These savings do not consider any of the premiums expected to be generated from sales of low-carbon steel, such as Cliffs H2 and Cliffs HMAX. This investment will secure 2,500 jobs at Middletown Works, where the unionized workforce is represented by the International Association of Machinists. The flex-fuel DRI plant and EMFs will require 170 additional jobs. The project will result in 1,200 building trades jobs during peak construction. As the DRI facility can be fed with standard, blast-furnace grade pellets, the project will take full advantage of the Company’s United Steelworkers represented iron ore mining and pelletizing units. The new configuration also avoids the use of significant amounts of prime scrap metal, which Cliffs anticipates will become shorter in supply and higher in cost throughout the rest of the decade. The process will also allow Cliffs to maintain the level of quality of the steel produced, which would otherwise be degraded with increased scrap usage, maintaining the Company’s leading position in the automotive end market. The net capital outlay for Cliffs will be approximately $1.3 billion, net of capital avoidance on the existing blast furnace and coke plants, over a 5-year period primarily starting in 2025 and expected to conclude by 2029. Cliffs’ portion will be funded using liquidity on hand and its own free cash flow generation. The Middletown site offers enough available space to construct the new facility without encumbering the existing processes, effectively eliminating interference risks during the construction and commissioning phase. Cliffs thanks both Midrex and Hatch for their collaboration in developing the initial planning for this transformational project. The Company does not anticipate any material capital spending related to this project to occur in 2024 and maintains its current capital expenditures outlook for this year, reiterating its capital allocation priorities currently focused on executing more aggressive share buybacks. Butler Works Induction Reheat Furnaces: If awarded, Cliffs would also replace two of its existing natural-gas fired high-temperature slab reheat furnaces at Butler Works in Butler, Pennsylvania with four Electrified Induction Slab Reheat Furnaces, to bring optimum efficiency to its production of electrical steels, a critical component of the electrification of America and the greening of the electrical grid. The primary benefits of this project are lower carbon emissions, substantially reduced energy costs and improvements in slab quality, allowing for approximately 25,000 tons of additional production capacity from improved process yield. This investment will secure 1,300 jobs at Butler Works, where employees are represented by the United Auto Workers. The project will require 220 building trades jobs at peak construction. The company also expects to generate approximately $80 million in annual cost savings and yield improvements following the installation of the new equipment. The net cost of this facility to Cliffs is expected to be $100 million spent over a 4-year period.