NEW YORK/CHICAGO, Sept 5 (Reuters) - High
costs and environmental opposition have prevented the construction of blast
furnaces at steel mills in the United States since 1980. Cleveland-Cliffs Inc (CLF.N) CEO Lourenco
Goncalves is on a mission to snap up all that are left.
Since joining the U.S. steelmaker in 2014 as part of an activist
hedge fund's board takeover, Goncalves has made blast furnaces a hallmark of
his strategy, positioning Cliffs as an outlier in an industry shifting towards
cheaper and more environmentally friendly electric arc furnaces.
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A 65-year-old Brazilian metallurgical engineer, Goncalves
transformed Cliffs from an iron ore and coal miner into the largest supplier of
steel to the automotive industry in North America by acquiring companies that
own blast furnaces to smelt the pig iron it produces.
Now, he has his sights on acquiring U.S. Steel Corp (X.N), the other remaining U.S.
blast furnace operator, which has been gradually moving into electric arc
furnaces, known as mini-mills. Should his $7.3 billion cash-and-stock bid prevail,
Cliffs would break into the world's top 10 steel producers, which are mostly
from Asia.
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Interviews with six people close to the companies and industry
insiders, as well a review of regulatory filings, show Goncalves' bet on blast
furnaces has yet to pay off, and its success hinges on pulling off the deal
with U.S. Steel.
This is because blast furnaces operate around the clock and need
more workers. They are more expensive to run when they have to be stopped and
restarted to account for changes in demand, as often happens with the
automotive sector.
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