Steel Mills

Buyers Ponder Merger of Major Integrated Mills

September 29, 2020

Cleveland-Cliffs’ purchase of ArcelorMittal USA took many steel buyers by surprise this week. Initial reactions from some Steel Market Update readers ranged from “a major development” to “business as usual.” Here are some of their comments:

“Quite surprised by this development. Initial reaction is this gives them an incredibly strong position with automotive. Not sure about other end-use markets. This additional consolidation does not guarantee pricing power as there is still plenty of competition in the North American market.”

“Consolidation should overall be a net positive for the market. We are curious to see if this will materially change Mittal’s approach to the market. Do they become more focused on higher-value products and less concerned about the core HR market and more specifically the service center customer base? Or is that simply a result of some capacity rationalization? With the auto companies seeing their buy consolidated, does this further open the door for Nucor, SDI and Big River to gain market share in the automotive segment? Does this materially change their cost structure and allow them to compete more effectively with the EAF mills? My personal belief is that integrated mills will continue to lose share over time. The service/performance of these mills leaves a fair amount to be desired (at least from a service center perspective) and proof will be in the pudding if that changes.”

“This was an expected consolidation. However, it potentially creates a monopoly issue and I’m hearing automotive companies may not be happy with it. Cliffs acquiring old technology is concerning and the deal leaves out Calvert, which is getting a new EAF. That doesn’t make sense to me.”

“Lourenco’s [Cliffs CEO Lourenco Goncalves’] MO is to dominate. AK’s MO was to dominate. AMUSA’s MO was to dominate. What changes except for the ownership and size of the predator?”

“Nothing like going all in on BOF technology. It creates a downstream customer for Cleveland-Cliffs. And we believe auto and appliance sectors will see some steep increases in cost for 2021 and beyond as this new venture was dominant in those areas. We expect the sales percentage to distribution to be less in 2021 with the new company.”

“It was a surprise to many. Kept under wraps very well. Can’t help but wonder if Goncalves had dialogue with USS also. I don’t think it’s ‘business as usual’ at the new company.”