The
Region's Big Two steelmakers could soon become one, leaving Cleveland-Cliffs as
the only game in town.
Waves of consolidations have put the Calumet Region's steel
mills into the hands of just two companies: U.S. Steel and Cleveland-Cliffs, a
longtime iron ore mining company that didn't even make steel three years ago
but could soon become the last remaining integrated steelmaker in the United
States.
It wasn't always that way. U.S. Steel has long run its flagship
Gary Works steel mill on the shores of Lake Michigan but it acquired the
Midwest Plant in Portage from the now-defunct National Steel Company.
It also bought the now-idled East Chicago Tin for no cash, just
the assumption of debt, from LTV. Also now defunct, LTV used to run the steel
mill on the west side of Indiana Harbor Works that's been merged with the east
side of Indiana Harbor Works, which was long operated by Inland Steel.
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Cleveland-Cliffs now runs both the neighboring steel mills in
East Chicago as a single operation. The Cleveland-based steelmaker also now
runs Burns Harbor Works, which the now-defunct Bethlehem Steel built as the
newest integrated mill constructed in the United States back in 1964.
The Illinois side of the Calumet Region is a graveyard of bygone
steel mills: South Works, Wisconsin Steel, Republic Steel, Acme Steel and
Iroquois Steel. They didn't survive an industry contraction that followed an
onslaught of cheap foreign steel that started flooding the market in the 1970s.
That industry consolidation left Northwest Indiana with half of
the nation's blast furnace capacity as it had a low-cost strategic location
near Lake Michigan and major railroad lines that made it easy to get iron ore
and other raw materials and ship coils of steel to Detroit automakers,
appliance manufacturers and other customers.
Production has been cut back in places. Finishing lines have
been mothballed. Blast furnaces have been shut down and sold as scrap.
But all of Northwest Indiana's major steel mills continue to
operate, albeit in far fewer hands than they did historically.
Soon a single company could lord over the Calumet Region's steelmaking
capacity, which has been heralded as "the workshop of the world" and
compared to Germany's Ruhr Valley.
Cleveland-Cliffs has bid $7.3 billion for U.S. Steel and has the
backing of the United Steelworkers union. Pittsburgh-based U.S. Steel is exploring
its options.
Ohio-based Cleveland-Cliffs said it would save $500 million in
synergies through a merger, which through a reduction of corporate costs like
white-collar management, public company expenses and procurement savings
on healthcare, raw materials, supplies and freight.
Cleveland-Cliffs said it would also save from asset and capex
optimization that could potentially result in more Northwest Indiana steel
operations being taken offline and less spending on capital projects in the
Region, potentially resulting in fewer jobs from skilled union tradesmen.
It would nearly double Cleveland-Cliffs' revenue, making it one
of the 10 largest steelmakers in the world and vaulting it past Nucor to become
the largest steelmaker in the United States. Cleveland-Cliffs pulled in $2
billion in revenue as an iron ore supplier in 2019. Then after acquiring two of
its biggest customers, AK Steel and ArcelorMittal USA, it pulled in $23 billion
in revenue last year. It's poised to rope in $44 billion in revenue if it
succeeds in swallowing up U.S. Steel