CLEVELAND — Cleveland-Cliffs Inc. announced Monday that it will acquire Ferrous Processing and Trading Company in a $775 million deal, a company news release said.
Based in Detroit, FPT is among the largest processors and distributors of prime ferrous scrap in the United States, representing approximately 15% of the domestic merchant prime scrap market. FPT currently processes approximately three million tons of scrap per year, approximately half of which is prime grade.
FPT operates 22 scrap processing facilities, with approximately 90% of revenues originating from its Midwest locations, primarily in Michigan and Ohio.
“Cleveland-Cliffs is entering the scrap business as a major player through the acquisition of a large scrap company. Even more importantly, FPT has a very meaningful presence in prime scrap,’’ said Lourenco Goncalves, Cleveland-Cliffs’ Chairman, President and CEO. “With all the new flat-rolled EAF (electric arc furnace) capacity coming online in our market over the next four years, prime scrap will only become more and more scarce. As the largest supplier of flat rolled steel in North America, Cleveland-Cliffs is the main source of the steel that generates prime scrap in manufacturing facilities. Furthermore, throughout our entire footprint, Cleveland-Cliffs also consumes a very significant amount of scrap in our EAFs and BOFs (basic oxygen furnaces). The acquisition of FPT will enhance our ability to buy back prime scrap directly from our clients, cutting the middlemen and improving the margin contribution from scrap for both Cleveland-Cliffs and for the manufacturing and service center clients that will be able to sell scrap directly back to us.”
According to the transaction rationale provided by C-C, the acquisition:
• Allows Cliffs to optimize productivity at its existing EAFs and BOFs as the company has no current plans to add additional steelmaking capacity.
• Expands portfolio of high-quality ferrous raw materials to include iron ore pellets, direct-reduced iron, and now prime scrap.
• Immediately secures substantial access to prime scrap, where demand is expected to grow dramatically with limited to no growth in corresponding supply.
• Creates a platform for Cliffs to leverage long-standing flat-rolled automotive and other customer relationships into recycling partnerships to grow prime scrap presence.
• Furthers commitment to environmentally-friendly, low-carbon intensity steelmaking with cleaner materials mix.
The acquisition has been approved by the board of directors of Cleveland-Cliffs and is expected to close in the fourth quarter of 2021, subject to the receipt of regulatory approval and the satisfaction of other customary closing conditions.
The company will discuss the acquisition in further detail on its third-quarter 2021 earnings conference call on Oct. 22 at 9 a.m.
About Cleveland-Cliffs Inc.
Cleveland-Cliffs is the largest flat-rolled steel producer in North America. Founded in 1847 as a mine operator, Cliffs also is the largest manufacturer of iron ore pellets in North America. The Company is vertically integrated from mined raw materials and direct reduced iron to primary steelmaking and downstream finishing, stamping, tooling, and tubing. The Company serves a diverse range of markets due to its comprehensive offering of flat-rolled steel products and is the largest supplier of steel to the automotive industry in North America. Headquartered in Cleveland, Ohio, Cleveland-Cliffs employs approximately 25,000 people across its mining, steel and downstream manufacturing operations in the United States and Canada. For more information, visit www.clevelandcliffs.com.