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Cleveland-Cliffs to Buy Canadian Steelmaker for $2.8 Billion

Steel giant Cleveland-Cliffs announced Monday that it will buy Canada’s Stelco Holdings for C$3.85 billion ($2.8 billion).

Photo of a steel factory
Photo by Ant Rozetsky via Unsplash

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If at first you don’t succeed, try Canada?

In its first acquisition since it failed to acquire rival US Steel last year, steel giant Cleveland-Cliffs announced Monday that it will buy Canada’s Stelco Holdings for C$3.85 billion ($2.8 billion).

Consolation Prize

Cleveland-Cliffs — which is, would you believe it, headquartered in Cleveland — is the second-largest steelmaker in North America, behind only North Carolina’s Nucor. Where the company comes in at No. 1 is in the US auto industry, where it’s the top metal mover: In its 2023 fiscal year, Cleveland-Cliffs made $7.4 billion in sales, or 35% of its $21.3 billion total, to direct auto industry customers.

Most steel sales to the auto industry are made through annual, negotiated contracts, which the Stelco deal would help offset by adding two steel mills in Canada that sell on the open market and ship 2.6 million net tons of flat-rolled steel per year. Cleveland-Cliffs CEO Lourenco Goncalves said the acquisition would lead to $120 million in annual cost savings and immediately boost 2024 and 2025 per-share earnings. It will also add major intrigue to the fate of US Steel:

  • Cleveland-Cliffs made an unsolicited $7.3 billion offer to take over its rival in August 2023, but US Steel opted for a $14.9 billion merger with Japanese steel giant Nippon Steel. The Nippon deal, however, is in legal and political limbo: an antitrust review by the US Department of Justice is pending, and both major party presidential candidates have indicated they will block the merger.
  • Goncalves reiterated on an investor call that Cleveland-Cliffs is still interested, but indicated urgency has waned, stating, “My plate is full right now, my focus is on Stelco.”

Uncritical Mass: Stelco used to be owned by US Steel, but was taken public in Canada in 2017, a year after it was bought by resource investment firm Bedrock Industries. It also happens that Canada’s government said last week that, going forward, it would only approve foreign takeovers of critical minerals companies in “the most exceptional circumstances” — luckily for Cleveland-Cliffs, steel does not fall under the classification.