Cleveland-Cliffs Explores Acquisition of US Plants from Russia’s NLMK
Cleveland-Cliffs Inc. is currently in discussions to purchase the US Midwest assets of Novolipetsk Steel PJSC, the largest steelmaker in Russia. Sources familiar with the matter revealed that Cleveland-Cliffs has shown interest in acquiring NLMK’s steel-mill facilities in Indiana and Pennsylvania, with a potential valuation exceeding $500 million.
If negotiations prove successful, this deal would mark Cleveland-Cliffs’ first significant move in dealmaking since its failed attempt to acquire United States Steel Corp. in December, which was later bought by Japan’s Nippon Steel Corp. Discussions are ongoing between the two parties, but there is a possibility of delays or the deal falling through.
Cleveland-Cliffs, led by CEO Lourenco Goncalves, has been actively pursuing acquisitions, having previously acquired AK Steel Holding Corp. and the US assets of ArcelorMittal SA in 2020. Goncalves has expressed interest in engaging in another deal for US Steel should the Nippon Steel transaction face regulatory challenges. The United Steelworkers union has also voiced support for Cleveland-Cliffs, opposing the Japanese steelmaker’s acquisition of US Steel.
NLMK’s Pennsylvania plant, the company’s largest US facility, produces a variety of steel products and has been in operation since 1899. The Indiana site focuses on converting slabs into coils and serves various industries including energy, construction, and automotive. Despite the current geopolitical tensions surrounding Russia and Ukraine, neither NLMK nor its owner Vladimir Lisin are subject to sanctions from the US, UK, or the EU.
Cleveland-Cliffs’ shares have seen a 19% increase in the past year, while NLMK’s shares were valued at 218.30 rubles as of the latest trading session. The potential acquisition of NLMK’s US plants represents a significant strategic move for Cleveland-Cliffs in the steel industry landscape.
Cleveland-Cliffs’ Expansion Strategy in the Steel Industry
Cleveland-Cliffs Inc.’s pursuit of NLMK’s US assets showcases the company’s ambitious growth strategy in the steel industry. CEO Lourenco Goncalves has been vocal about his intentions to expand Cleveland-Cliffs’ footprint through strategic acquisitions, following the successful integration of previous purchases like AK Steel Holding Corp. and ArcelorMittal SA’s US operations.
The potential acquisition of NLMK’s Pennsylvania and Indiana plants would further solidify Cleveland-Cliffs’ position as a key player in the US steel market. By diversifying its portfolio and enhancing its production capabilities, Cleveland-Cliffs aims to capitalize on the growing demand for steel products across various sectors.
Geopolitical Impact on Steel Industry Mergers and Acquisitions
The geopolitical landscape, particularly in light of the conflict between Russia and Ukraine, has added a layer of complexity to mergers and acquisitions in the steel industry. The absence of sanctions on NLMK and its owner Vladimir Lisin by Western countries indicates a nuanced approach to dealing with Russian entities amidst escalating tensions.
As Cleveland-Cliffs navigates the regulatory and political environment surrounding the potential acquisition of NLMK’s US plants, the company must carefully assess the risks and opportunities associated with the deal. The outcome of these discussions could have far-reaching implications for the steel industry and highlight the interconnectedness of global markets in times of geopolitical turmoil.
