Posted on 30 May 2022
Domestic steel producers play a vital role for vehicle electrification and overall carbon emissions reduction in the US as they are able to provide the necessary grades of metal using more sustainable methods when compared with foreign industries, according to Cleveland-Cliffs CEO Lourenco Goncalves.
"Who can really promote and support this very meaningful and very important transformation from combustion engine vehicles to electric vehicles? The steel industry. Nobody else," Goncalves said in an interview with S&P Global Commodity Insights on the sidelines of the annual joint meeting held by the American Iron and Steel Institute and the Steel Manufacturers Association in Washington.
"We are working with [the automotive industry] and starting to deliver the steels that they need to use [for electric vehicles]," he added.
Goncalves said automakers were now looking to bring their EV engine manufacturing into the US, rather than producing overseas for importation, and working with Cliffs to secure supplies of the necessary steel products to support this transition.
"That was one thing that they never considered before, but now with the very stressed supply chains, they are coming to work with us," he added. "Cleveland-Cliffs will absolutely benefit from that since we are the sole suppliers of the electrical steels that go into the engines of the electric vehicles."
Cliffs produces electrical steel at its Butler, Pennsylvania, facility. The plant operates an electric arc furnace and has a 1 million st/year raw steel capacity, according to the company's website.
Goncalves said Cliffs is "maxing out" electrical steel output at Butler and is also beginning to produce the specialty metal at its 600,000 st/year Mansfield Works facility in Mansfield, Ohio.
Goncalves said the US steel industry only accounts for 1% of the country's CO2 emissions, while the transportation sector and power generation contribute 29% and 25%, respectively, of US emissions.
"We're not hard to decarbonize because we already did that here," he said. "We are the ones that can [help to lower overall emissions] by supporting the effort of the automotive industry to go from combustion engine vehicles to electric vehicles and to continue to emphasize the use of steel in renewable energy infrastructure like wind and solar and put nuclear back in the conversation."
"If the automotive industry replaces half of the fleet with electrical vehicles in the US by 2030, instead of having 29% [contribution to overall emissions], we are down to 14% or 15%," Goncalves added. "That's meaningful."
In power generation, Goncalves said it is important to transition fuel sources away from coal and move towards natural gas and nuclear, both of which can be used to power steel operations.
About 70% of steel in the US is produced through EAFs that use about 90% to 95% of recycled scrap materials on average in their raw material mix and yield twice the amount of metal with 75% less greenhouse gas emissions when compared with traditional blast furnace production, according to the Steel Manufacturers Association.
Cliffs has also been able to lower the carbon emission intensity associated with its blast furnace-based operations by increasing its use of prime scrap and direct-reduced iron for steel production.
The US automotive industry has increasingly relied on global supply chains over the last several decades, and the consequences have become apparent in recent years, according to Goncalves.
"The previous effort toward globalization created a lot of weaknesses in the supply chains that we are now paying the price for," he said.
Goncalves said reliance on railways, ships, and congested seaports all represent points of weakness for domestic manufacturers that impact production and contribute to more emissions generated by the transportation of supply.
"With all these efforts toward clean air and reducing emissions, long supply chains that depend on transportation is a bad idea, and you don't have access on time for materials," he added. "Whatever they saved in the automotive industry throughout the years by paying less for something produced overseas, they lost based on the fact that they have demand for 18 million vehicles but are only producing 13 million."
Goncalves said the automotive industry has notably contended with semiconductor chip supply issues since early 2021 that have restricted production, but the situation would be much worse if the sector relied on foreign-produced steel in an era of disrupted global supply chains.
"You don't build a car without steel," he said. "Even without microchips, you can make a car that was fully built and put aside waiting for the arrival of more microchips, or they deliver the car and give the client an allowance so as soon as the microchip arrives, they go to the dealership to have it installed."
The same solution cannot be offered, however, if the steel is unavailable for vehicle production, which highlights the importance of regional supply and domestic steel producers.
"That's when reality prevails, and the reality is that you need steel right away and just in time, and there is only one way to get it," Goncalves said. "Get the steel from the one that has the technical capability, cut a deal that's fair for both sides and count on that guy next door to deliver to you right away."
Source:Platts
