Cleveland-Cliffs CEO Lourenco Goncalves provided an update on the company’s acquisition of AK Steel on Thursday, and the outlook is rather bleak regarding Ashland’s blast furnace.
While the overall progress of the acquisition is ahead of schedule, Goncalves mentioned Ashland, specifically, about halfway into the fourth-quarter and full-year 2019 earnings conference call during the question-and-answer portion.
When the press release referred to Ashland in initial plans back in December, it pointed to the potential start-up of pig iron manufacturing at the Amanda furnace, which idled in December 2015. The release stated it would create more opportunities for pellet demand and more metallics products without significant additional capital expenditures.
Less than three months later, Ashland doesn’t appear as attractive in the grand plan.
“Will Ashland happen? At this point, I don’t know,” Goncalves said Thursday. “I don’t believe so because we are going to, first and foremost, maximize AK Steel capabilities. ... Ashland, at this point, is on the backburner. I don’t believe the market needs Ashland. The market definitely needs our HBI (hot briquetted iron), but I’m not sure if they need Ashland. I’m going to do everything I can for the market not to need Ashland.”
Overall, Goncalves is “very excited with this unique transaction and looking forward to all of the benefits.”
The CEO said Cliffs has “come away captivated by the untapped potential that clearly exists for AK Steel assets,” and he’s “very impressed by the quality of the people on the ground.
“The opportunity ahead of us is actually bigger than what we first envisioned,” he added.
Goncalves said Cliffs is progressing remarkably well on closing the transaction. It has received American and Canadian approval, and it expects to receive Mexican approval next week.
The completed acquisition of AK Steel, Goncalves said, will set Cleveland-Cliffs apart from all others because of its penetration into the automotive market.
He said “based on actual ongoing commercial activity,” Cliffs HBI will be sold in Mississippi and Arkansas in addition to Great Lakes states.
Between Northshore Mining in Minnesota (in 2019) and the ongoing HBI plant in Toledo, Ohio, there has been significant economic benefit to both Minnesota and Ohio, Goncalves said. He said there are 150 full-time, high-paying jobs in Toledo with that plant, and between those two aforementioned establishments, there have been 1,650 construction jobs.
“We’re excited that we’re just a few months away from replacing Russian and Ukrainian pig iron with made-in-USA HBI,” Goncalves said.
Cliffs Chief Financial Officer Keith Koci reported fourth-quarter 2019 consolidated revenues of $534 million. The company recorded a net income of $63 million over the final three months of 2019.
Ashland’s blast furnace, while it’s capable of firing back up, doesn’t seem to factor into 2020 plans for Cleveland-Cliffs. And it may not factor in at all.
“I started to be interested in Ashland because of the high level of interest in HBI,” Goncalves said. He wanted to develop Ashland as a producer of pig iron for the marketplace. After a thorough market analysis, Goncalves doesn’t see the benefit he once envisioned with Ashland.
AK Steel’s Ashland Works coated its final coil in November 2019. The coating line was the last existing operational aspect of the once-flourishing mill. Armco had existed in Ashland since 1921. It became AK Steel in 1994.
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