SSS XXXIII: Cleveland-Cliffs’ Toledo HBI plant ahead of schedule - CEO

Construction at Cleveland-Cliffs’ $700-million hot-briquetted iron (HBI) plant in Toledo, Ohio, is under way and ahead of schedule, the company’s top executive said on Wednesday June 27.

Cliffs expects to use the plant - slated to enter commercial production in July 2020 - to knock out the foreign raw materials that electric-arc furnace producers in the United States rely on today, according to chairman, president and chief executive officer Lourenco Goncalves.

“Imported pig iron, your days are numbered. Imported DRI [direct-reduced iron], your days are numbered,” he told American Metal Market on the sidelines of the Steel Success Strategies XXXIII conference in New York. He was a keynote speaker at the event, which is co-sponsored by American Metal Market and World Steel Dynamics Inc.

Cliffs’ Toledo HBI plant will have the capacity to produce 1.6 million tonnes per year. It will be fed with 2.4 million tpy of direct-reduced (DR)-grade pellets from Cliffs’ North Shore mining operations in Minnesota, Goncalves said, noting that the company has invested $90 million to upgrade the mine to make DR-grade pellets - the feedstock necessary to make scrap alternatives such as DRI and HBI.

Goncalves estimates the HBI market in the Midwest is approximately 3.5 million tonnes, and told American Metal Market that the company has the space and infrastructure to build a second HBI plant in Toledo should it choose to do so.

The Toledo site - near the mouth of the Maumee River on Lake Erie - has enough sewer, gas and power capacity to accommodate two plants. But a decision on whether to expand won’t be made until the first HBI unit is complete, he noted.

“Imagine that you built a 4,000-square foot house on a 20,000-square foot lot. Does this mean that you are going to double the size of the house to 8,000-square feet? No!” Goncalves asked, adding that Cliffs won’t necessarily build a second unit in Toledo; the company will also consider other sites in the Midwest.

One thing Cliffs won’t do is export DRI, given the high logistics costs associated with moving material across the Great Lakes and onto ocean-going vessels. The company also doesn’t expect to compete with Nucor’s DRI plants in Louisiana and Trinidad, which Goncalves said are in a better position to serve Nucor’s southern mills.

“Nucor is too big. So the Midwest is totally open. I assume that we are going to have Nucor in the Midwest as a client,” he said.

The Midwest market is, in any case, large enough that the Toledo project will remain viable even if Nucor is not a customer - although Goncalves noted that Cliffs already supplies DR-grade pellets to Nucor’s DRI plant in Trinidad.

Cliffs started out as a “marginal” supplier to the Trinidad plant, which is now “addicted” to Cliffs’ DR-grade pellets compared with those of other suppliers. “I knew that would happen. I never told [Nucor CEO] John [Ferriola] that,” he joked.

Nucor did not respond to American Metal Market's request on June 27 for confirmation of Cliffs' status as a supplier to the Trinidad facility.

One thing that should appeal to US mini-mill steelmakers, the target market for Cliffs' HBI plant, is that it will make product with a carbon content of 0.5-3%. Most of the company's output have a roughly 3% carbon content, a figure comparable to the 4% carbon content of pig iron exported from Russia or Ukraine, Goncalves said.

Imported pig iron is widely used by US mini-mill steelmakers that need more virgin iron units to make value-added products, such as special bar quality steels and advanced high-strength steels for the automotive sector.

That 4% carbon content should make the transition to US-made HBI from imported pig iron smooth for domestic mini-mills, Goncalves said. Also helping will be that Cliffs will be able to sell domestic mills a customized product versus the commercial-quality material they currently buy in bulk from abroad that is not always tailored to their needs.

Cliffs is targeting mini-mills because they now account for 68% of US steel production, up from 45% in 2000 and 37% in 1990. “The trend is our friend,” he said.

“No one has built a blast furnace in the US since the mid-'70s. And I personally don’t believe we will ever see a blast furnace built in the United States ever again,” Goncalves said, noting that it is already a struggle for integrated mills to decide whether to reline an old furnace when it comes to the end of its life.

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