Cliffs still seeks US Steel, pledges no closures

: Metals
25/01/13

Cleveland-Cliffs chief executive Lourenco Goncalves said today that he remains open to buying US Steel, promising to keep all of the acquired assets open.

Goncalves said Ohio-based Cliffs still wants to buy Pennsylvania-based US Steel and would invest in the company's assets.

"Of course, we are going to keep [US Steel mills] open," Goncalves told reporters on Monday. "We are going to make them bigger, we are going to make them better, we are going to produce more."

His comments come 10 days after President Joe Biden blocked Japan-based Nippon Steel's agreement to buy US Steel for $15bn, citing national security concerns. Nippon had committed to invest $1.3bn in US Steel's mills and to not cut any of US Steel's production for 10 years without government approval.

Cliffs tried to buy US Steel for $54/share with half paid in cash and half in company stock before US Steel agreed to go with Nippon's $55/share all-cash offer.

Goncalves promise to not close any acquired assets comes as the US steel market remains oversupplied, according to market sources.

Goncalves said he cannot make a bid for US Steel until the company and Nippon cancel their merger agreement. He also dismissed antitrust concerns over Cliffs owning all US iron ore mines and all US blast furnace capacity. A combined company would have Cliffs running the mining side of the business and US Steel running the steelmaking operations, he said.

A US Steel-Cliffs merger would have 32.1mn short tons (st)/yr of flat rolled raw steel capacity, in addition to plate making and seamless tube production.

Goncalves did not say how he would finance such a purchase. Cliffs had $3.8bn in liquidity as of 30 September, including $39mn of cash, according to a third-quarter presentation. US Steel had $4.05bn in liquidity in the same period, of which $1.77bn was cash.

Nippon is trying to buy US Steel. Both companies have sued Biden and others in the government over the denial, and filed a separate lawsuit against Cliffs, Goncalves and United Steelworkers (USW) International president David McCall, who endorsed a takeover by Cliffs.

By Rye Druzchetta

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