Cleveland-Cliffs formally opens innovative new HBI plant in Toledo
WASHINGTON – Boring (to the layman) yet exciting news from Ohio Wednesday morning. Although it’s been open for business for 6 months, the brand new Direct Reduction hot briquetted iron (HBI) plant built by Cleveland-Cliffs (NYSE:CLF) in Toledo, Ohio, formally celebrated its Grand Opening today. The ribbon-cutting ceremony was broadcast live via CLF’s YouTube Channel. For those interested, the broadcast is supposed to be available later today via the following links.
Cleveland-Cliffs’ YouTube channel: https://www.youtube.com/c/ClevelandCliffsInc;
or via a link that should be available at the company’s website: www.clevelandcliffs.com.
For those who don’t follow heavy industry, or don’t even think the US has any heavy industry anymore, Cliffs is a longtime Cleveland, Ohio-based iron ore mining company. But it’s emerging successfully from a lengthy near-death experience, becoming a notable American industrial success story as a result.
A bit more about Cleveland-Cliffs
Earlier in this century, Cliffs had expanded significantly into coal mining, including costly international mining operations in Canada and Australia as well. Meanwhile, the company’s taconite operations continued shipping massive amounts of taconite pellets – a partially-refined form of iron ore – primarily to domestic steel mills, exporting some ore to China as well.
Unfortunately, with the onset of the Great Recession, the company was nearly wiped out by its over-commitments, particularly to coal, a fossil fuel the extreme-environmentalists seem determined to wipe out. Subsequently, the company struggled for years, selling off its international mines at huge losses. But it did manage to survive.
More recently, with its domestic mining activities recovering, it acquired a pair of steel companies. Its 2020 annual report noted that currently, the “company operates many fully-integrated steel mills and finishing facilities in Kentucky, Indiana, Illinois, Ohio, Michigan, Pennsylvania, West Virginia, and North Carolina.” It now has annual production capacity of approximately 23 million net tons of raw steel. And, more intriguingly, the company raised funds and built, in its Ohio backyard, a new, state-of-the-art plant to convert iron ore to an even more highly-refined product that effectively helps make steel even cheaper to create. And that’s the plant that got its formal opening today.
Drilling down on iron ore, steel and HBI technology
Excerpts from a Business Wire (no link) piece on today’s event explain some of the particulars.
“Cleveland-Cliffs Inc. (NYSE: CLF) is celebrating today the initial six months of continued operation and production of hot-briquetted iron (HBI) at the Company’s state-of-the art Direct Reduction plant in Toledo, Ohio. Cliffs’ Chairman, President and Chief Executive Officer Lourenco Goncalves will host Ohio Governor Mike DeWine for a ribbon cutting ceremony on site. The plant employs nearly 160 employees.
“Lourenco Goncalves, Chairman, President and Chief Executive Officer, said, ‘Today we are celebrating a new era for the iron and steel industry in the United States. This event formally marks the culmination of our $1 billion investment to build and operate the world’s most modern and environmentally friendly Direct Reduction plant, and the first plant of its kind constructed for the present and for the future.’
“Mr. Goncalves added, ‘Natural gas based iron reduction is the future of our industry. The production and use of HBI [hot briqueted iron] within our operations has catalyzed what has been a phenomenal year for us and, very importantly, has supercharged our greenhouse emissions reduction program. It has also boosted our profitability through enhanced productivity in our blast furnaces and the avoidance of prime scrap purchases from third parties for use in our EAFs [electric arc furnaces] and BOFs [basic oxygen furnaces].’
“‘I’m happy to be part of the celebration of Cleveland-Cliffs’ new Direct Reduction plant in Toledo,’ said Governor DeWine. ‘This plant is bringing new life to a site that is now producing domestically a much-needed product for the steel industry using an environmentally friendly process, and providing jobs and opportunities for workers in Northwest Ohio,’ said Governor Mike DeWine.
Cleveland-Cliff continues to recover in a post-Covid world
Cleveland-Cliffs has the nominal capacity to produce 1.9 million metric tons per year of customized high-quality HBI using natural gas based iron reduction. HBI can be used in blast furnaces to improve productivity and reduce GHG [greenhouse gases] by lowering the amount of coke needed for steel production. HBI can also be used … to replace foreign-sourced pig iron and prime scrap, thereby lowering costs and reducing the higher … emissions associated with pig iron production and transportation.”
Why should anyone care about all this activity happening in an allegedly obsolete American industry? Simple. In a post-Covid world, where supply chains and materials are still being disrupted due to shutdowns and transportation issues, it’s a good idea to move the production of our most basic industries back to America, at least in part. It was a key part of the Trump economic recovery plan, which, of course, the media never bothered to point out.
But almost by default, it continues today, as our current computer chip shortage and other shortages continue to plague supply chains, encouraging the construction of more production plants back here in the US. Given a recent string of supply chain crises, this movement is likely to continue, even though it’s almost certainly against the interests of wealthy globalists.
Thus far, the new CLF plant seems to be up and running, providing much needed employment opportunities for workers in yet another fading Rust Belt city. It marks the beginning of a newer, cleaner steel-making technology, which should make environmental extremists at least marginally happy. (Aside from the fact the process uses clean natural gas, which is amazingly abundant in Ohio.)
Will results from the new HBI plant make Cleveland-Cliffs investors happy?
Well, there are no guarantees on Wall Street. But stock market-wise, today’s positive news should make CLF stockholders (like this writer) happy. Volatile CLF shares have risen from the single-digit dead in recent months. And they’re up a whopping $2.67 per share today, a 13.17% gain over Tuesday’s closing numbers. Short sellers still abound in this issue.
But Cliffs is starting to score major successes as its new HBI plant continues to make a big contribution, and today’s big move in the stock, which now stands at $22.94 per share, may be at least in part due to another short squeeze occurring in conjunction with today’s news. Trading nearly 50 million shares as of 2:30 p.m. ET, today’s volume in this stock is way above its average daily volume, indicating a big technical move may be at hand. Who knows where the shares will go next? Wednesday’s closing bell may give us a tell.
Typically, when CLF shares make a big move like this one, persistent shorts may very well come in and try to sell it off again. With some analysts opining the shares could reach $28 by year’s end, however, any reactionary downdraft in these shares might present yet another buying opportunity. That would prove an even better bet if Cliffs begins to restore its dividend, which the company terminated in 2020 to conserve cash during the Covid overreaction.
In any event, since Ohio is our home state, we’re happy for Ohio workers, happy for long-beleaguered Toledo, and happy for Cleveland-Cliffs. A success for a Rust Belt company is a success for us all.