X
<

Cliffs Natural Resources' Prospects after the New HBI Plant

PART:
1 2 3 4 5
Part 2
Cliffs Natural Resources' Prospects after the New HBI Plant PART 2 OF 5

Will Cliffs’ New HBI Plant Generate Real Growth?

New HBI plant

Cliffs Natural Resources (CLF) issued a press release on June 15, 2017, to announce Toledo, Ohio, as the site for its first HBI (hot briquetted iron) production plant. The plant will have a nominal capacity of 1.6 million tons of HBI annually.

Will Cliffs&#8217; New HBI Plant Generate Real Growth?

Interested in XLB? Don't miss the next report.

Receive e-mail alerts for new research on XLB

Success! You are now receiving e-mail alerts for new research. A temporary password for your new Market Realist account has been sent to your e-mail address.

Success! has been added to your Ticker Alerts.

Success! has been added to your Ticker Alerts. Subscriptions can be managed in your user profile.

Cliffs’ Chairman Lourenco Goncalves stated: “Today’s announcement marks a very important strategic milestone for Cliffs as we begin to implement our plans to be the sole producer of high-quality HBI for the EAF steel market in the Great Lakes region. We look forward to the strong margin and earnings potential this new product will generate for Cliffs shareholders.”

Ambitions in the DRI market

Cliffs has been talking about entering the EAF (electric arc furnace) market for a long time. Its CEO (chief executive officer) mentioned during the 1Q17 earnings call that the company is in the process of evaluating the best course for entering the DRI (direct reduced iron) market. HBI is a premium form of DRI that has been compacted for ease of handling and storage.

This venture, Cliffs believes, is the next leg of growth for the company. Mini-mills using EAF technology produce ~60% of US steel. They use scrap metal to make steel, and on average, this method has performed better than blast furnace operators.

Steelmakers using EAFs

Steel Dynamics (STLD) and Nucor (NUE) use EAFs to produce steel, while U.S. Steel (X) and ArcelorMittal (MT) mainly use iron ore for steel production. Notably, Nucor makes up about 2.6% of the Materials Select Sector SPDR ETF (XLB).

In the next part, we’ll discuss Cliffs’ HBI plant and the funds required to finance it in more detail.

X

Please select a profession that best describes you: