Cliffs Middletown EAF hinges on EV growth

Integrated steelmaker Cleveland-Cliffs will build a new electrical steel-oriented electric arc furnace (EAF) at its Middletown, Ohio, integrated mill if US electrical vehicle (EV) production materializes.

Chief executive Lourenco Goncalves said his company is producing electrical steel at maximum capacity, and that a future EAF at Middletown would be built to meet growing EV motor demand.

"Let's see how many of my clients will be really doing what they are saying they are going to do with electric vehicles," Goncalves said in an earnings call. "If they are very successful, all of them, and we need a lot more non-oriented electrical steels to supply the engines of electric vehicles, then the electric arc furnace will materialize."

Cleveland-Cliffs filed an air permit for a new EAF at its Middletown mill in early April.

US EV production capacity is expected to surpass 2mn vehicles annually by 2025 and approach 3mn annually by 2028. The US produced nearly 1mn full EVs in 2021, according to automakers. Legacy US automakers all plan to shift production to EVs, with General Motors to be 100pc EV by 2035 and Ford eying 50pc EV by 2030.

Cleveland-Cliffs and integrated competitor US Steel are the two US steelmakers who are able to melt and produce electrical steel grades, which are used in EV motors.

If electrical vehicle production begins to meet expectations "we are going to be the first ones to jump in," Goncalves said.

For 2022, the steelmaker increased its price expectations by $200/short ton to $1,445/st on higher fixed price contracts, higher steel futures levels, and widening spreads between hot rolled coil (HRC) and cold rolled coil (CRC). The Argus US HRC Midwest ex-works assessment has been flat at $1,500/st for three weeks, and CRC has a $400/st premium to HRC.

Cleveland-Cliffs' automotive sales volumes in the first quarter rose by 200,000st from the fourth quarter, marking the best quarter of automotive shipments since the beginning of semiconductor shortages in early 2021. The company expects sales volumes to continue to increase on a quarterly basis.

Cleveland-Cliffs' steel product sales totaled 3.64mn st in the first quarter, down by 12pc from a year earlier. Of that amount, 34pc was hot-dipped galvanized (HDG) coil, a quarter was HRC, 18pc was CRC and 6pc was plate. The remainder was stainless and electrical, slabs and rail products.

The average selling price jumped to $1,446/st, up by 61pc from a year earlier.

Cleveland-Cliffs boost its first-quarter profit to $801mn from $41mn a year earlier.

By Rye Druzin