In a statement Sunday, Aug. 13, the U.S. Steel board said it has hired investment bankers and attorneys to help them look over those offers as well as others expected to follow now that the company, which is on track to ring up $20 billion in sales this year, is formally on the market, or “exploring strategic alternatives” in corporate speak. Shortly after U.S. Steel’s statement, the leaders of Cleveland-Cliffs went public with their cash-and-stock offer, which they said they first submitted July 28 but which was rejected Aug. 13 as “unreasonable.”

“U.S. Steel has been on a strategic journey executing a compelling transformation,” President, CEO and Director Dave Burritt said in the company’s statement. “The interest demonstrated by the unsolicited proposals received to date is a validation of U. S. Steel’s strategy and successful track record of execution.”

Burritt and his executive team recently reported second-quarter profits of $477 million, less than half those from the same period of 2022, on sales of $5.0 billion versus $6.3 billion. Year-over-year price drops of about 20% for both its flat-rolled and mini-mill products accounted for much of the profits drop and Burritt at the time called out “healthy sequential growth” in the mini-mill segment.

“Our strategic process is accelerating with favorable external megatrends and setting up a period of tremendous opportunity for U.S. Steel and for our stockholders,” Burritt said on a conference call after reporting those Q2 numbers. “Broadly speaking, those external factors are decarbonization, deglobalization and digitization.”

Cleveland-Cliffs Chairman, President and CEO Lourenco Goncalves said in a statement of his own that he is open to continuing a conversation with U.S. Steel leaders despite their rejection of his bid, which includes plans for Cleveland-Cliffs to return more capital to shareholders and relaunch the dividend it suspended during the early days of the COVID-19 pandemic.

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Ownership of Big River’s Osceola, Ark., mill will give U.S. Steel access to the same production process used by competitors Nucor Corp. and Steel Dynamics Inc., two of the most profitable companies in the domestic steel industry. The company has said the acquisition is the centerpiece of its drive to raise profit by investing in electric furnaces that melt scrap, which are known in the steel industry as minimills.

U.S. Steel bought a 49.9 percent stake in Big River in October 2019 with an option to acquire the rest of the company. Higher steel prices in recent months have helped U.S. Steel raise the cash to complete the purchase sooner than expected, a person familiar with the matter said.

More than two-thirds of the steel produced in the U.S. is now made in electric furnaces. Electric furnaces are easier to turn up or down and require fewer workers to operate them. As a result, they are able to operate profitably even when steel prices are low.

But U.S. Steel still mostly makes its steel from iron ore melted in giant blast furnaces fueled by coal. It is a more expensive, labor-intensive process that is difficult to throttle back when demand for steel wanes.

U.S. Steel expects to close on the purchase in early 2021.

In other industry news, Cleveland-Cliffs Inc. has completed its purchase of ArcelorMittal USA.

Completion of the deal means that Cleveland-Cliffs now controls ArcelorMittal USA’s six steel-making facilities, eight finishing facilities, two iron ore mining and pelletizing operations, and three coal and coke-making operations.

In addition to the ArcelorMittal deal, Cleveland-Cliffs also said it had acquired full ownership of two New Carlisle, Indiana steel plants, I/N Tek and I/N Kote. Cleveland-Cliffs previously shared part ownership of the plants with Nippon Steel.

CEO Lourenco Goncalves of Cleveland-Cliffs said the slew of deals “opens a new chapter in the history of the steel business in the United States.”
The company’s new, wider footprint, Goncalves said, would allow Cleveland-Cliffs to be “a major player in supporting American manufacturing, American future investments in infrastructure, and the prosperity of the American people through good paying middle-class jobs.”

Sources: Global News Archive, Industry Week