Steel Giant ArcelorMittal to Sell U.S. Business to Cleveland-Cliffs -- 4th Update
By Bob Tita and Alistair McDonald
Steelmaker ArcelorMittal SA plans to sell its U.S. plants to
mining company Cleveland-Cliffs Inc. for $1.4 billion, retreating
from older mills in the industrial heartland that underpinned its
expansion into becoming America's second-largest steel
The deal would put more than a dozen plants and mines under the
ownership of Cleveland-based Cliffs and elevate its profile as a
steel producer. President Trump has made the revitalization of the
domestic steel industry a priority for his administration,
fortifying struggling mills in political battleground states with
tariffs in 2018 to raise steel prices.
For ArcelorMittal, the deal further diminishes its position as
the world's largest steelmaker as it grapples with the fallout from
the coronavirus pandemic. China Baowu Steel Group Corp. was already
expected to succeed ArcelorMittal as the industry's biggest
competitor, not least because Chinese production continues to grow
even as production stalls elsewhere.
Steel making has been hit hard by the coronavirus pandemic, as
demand and prices plunged after factories and automotive assembly
plants were idled this spring. U.S. production of steel is down 20%
this year compared with last year, as mills operate at slightly
more than two-thirds capacity. In Europe, ArcelorMittal's biggest
market, production fell by double-digit percentages, including a
31% decline in France.
Production in China is up 8.4% this year, allowing the country's
steelmakers to increase the proportion of the world's steel being
made in their mills.
ArcelorMittal entered the U.S. steel market in the late 1990s
and became a significant competitor with its $4.5 billion purchase
of International Steel Group in 2004. That company was assembled by
Wilbur Ross, now the U.S. Commerce secretary, from dozens of steel
companies that fell into bankruptcy in the early 2000s.
Most of the plants were decades old and operated by unionized
workforces in traditional steelmaking hubs in Indiana, Ohio and
Pennsylvania. They supplied steel to auto and appliance
manufacturers in the Midwest. Manufacturing and steelmaking have
since steadily shifted to Sun Belt states. North Carolina-based
Nucor Corp. and other steelmakers with newer, more efficient plants
can produce steel more inexpensively than ArcelorMittal and other
legacy steelmakers. They now account for a majority of the steel
produced in the U.S.
Luxembourg-based ArcelorMittal was the second-largest producer
of steel in the U.S. last year, behind Nucor. The U.S. accounted
for 14% of ArcelorMittal's global steel production and generated
$9.9 billion in revenue last year. After the sale, ArcelorMittal
will operate just one plant in the U.S., a steel-finishing mill
near Mobile, Ala., that it plans to upgrade to produce steel.
Cliffs has been supplying iron ore to ArcelorMittal and other
steelmakers. The company acquired steelmaker AK Steel in Ohio last
year to preserve a large customer that had struggled to earn a
profit for years. Cliffs's acquisition of ArcelorMittal's U.S.
plants would be a significant shift in focus toward steel
production. The company is set to obtain 14 plants that make steel
or roll and coat it; three coal-coking plants; and two iron-ore
mining operations. The deal would merge high-volume steel
production with Cliffs's large reserves of iron-ore feedstock under
a single company that would employ about 25,000 workers.
"With the acquisition of ArcelorMittal USA, Cleveland-Cliffs
will complete the transformation into a fully integrated,
high-value steel enterprise," Cliffs Chief Executive Lourenco
Goncalves said on a conference call.
Shares in Cliffs were up 10% at $6.48 early Monday
Cliffs said it would pay about one-third of the $1.4 billion
purchase price in cash up front. The remaining two-thirds would be
in Cliffs stock. ArcelorMittal would hold a 16% stake in Cliffs as
result of the deal. ArcelorMittal said it would hand $500 million
back to investors in share buybacks.
"This is a strategic repositioning of our assets, but not a
strategic repositioning of our market presence. We remain a strong
regional player, " ArcelorMittal President Aditya Mittal said
during a call with analysts.
Founder and Chief Executive Lakshmi Mittal created the world's
largest steelmaker during two decades of aggressive deal making. He
said in an interview the sale of the U.S. mills has been under
consideration since last year, after executives concluded that the
inability of the mills to use company-owned iron ore put them at a
permanent disadvantage to U.S. competitors with their own ore
Despite the plan to sell the majority of its U.S. operations,
ArcelorMittal said it would still service clients in North America
through its mills in Canada, Mexico and Alabama. Analysts consider
the company's Dofasco mill in Ontario to be one of the best in
The transaction is expected to close within the fourth quarter
of 2020, subject to regulatory approvals and customary closing
Write to Bob Tita at email@example.com
(END) Dow Jones Newswires
September 28, 2020 13:39 ET (17:39 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
Grafico Azioni ArcelorMittal (EU:MT)
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